Stellar Bancorp : Reports Third Quarter 2024 Results Earnings Release

STEL

PRESS RELEASE

STELLAR BANCORP, INC. REPORTS

THIRD QUARTER 2024 RESULTS

HOUSTON, October 25, 2024 - Stellar Bancorp, Inc. (the "Company" or "Stellar") (NYSE: STEL) today reported net income of $33.9 million, or diluted earnings per share of $0.63, for the third quarter of 2024 compared to net income of $29.8 million, or diluted earnings per share of $0.56, for the second quarter of 2024.

"We are pleased to announce our third quarter 2024 financial results that reflect our work as we mark the second anniversary of our transformational merger completed on October 1, 2022," said Robert R. Franklin, Jr., Stellar's Chief Executive Officer. "Since the merger, we have focused on building the foundation of Stellar Bank. Those efforts include constructing the scalable infrastructure to support an institution with more than $10 billion of assets while we have built a strong capital base, significantly increased our liquidity position and maintained a disciplined focus on credit. We have also significantly reduced our exposure to commercial real estate and invested in assets to help us grow a more balanced loan portfolio through additional commercial and industrial lending experience and leadership."

"Stellar Bank is positioned for success as the economic and political environment becomes clearer. Although we can't predict timing of interest rate changes, we feel comfortable with our revenue outlook. The election cycle will soon be complete and some of the elevated stress and uncertainty around the process will abate," Mr. Franklin continued.

"Our markets remain resilient. We have positioned the Bank for quality growth and we look forward to furthering the Stellar brand in our markets," concluded Mr. Franklin.

Third Quarter 2024 Financial Highlights

Third Quarter 2024 Results

Net interest income in the third quarter of 2024 increased $97 thousand, or 0.1%, to $101.5 million from $101.4 million for the second quarter of 2024. The net interest margin on a tax equivalent basis decreased 5 basis points to 4.19% for the third quarter of 2024 from 4.24% for the second quarter of 2024. The decrease in the net interest margin from the prior quarter was primarily due to the impact of decreased interest rates on interest earning assets, partially offset by decreased rates on interest-bearing liabilities. Net interest income for the third quarter of 2024 benefited from $6.8 million of income from purchase accounting accretion compared to $10.1 million in the second quarter of

_____________________

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2024. Excluding purchase accounting accretion, net interest income (tax equivalent) for the third quarter of 2024 would have been $94.8 million(1) and the tax equivalent net interest margin would have been 3.91%(1).

Noninterest income for the third quarter of 2024 was $6.3 million, an increase of $886 thousand, or 16.4%, compared to $5.4 million for the second quarter of 2024. Noninterest income increased in the third quarter of 2024 compared to the second quarter of 2024 primarily due to an increase in gains on sales of assets and Small Business Investment Company income recognized in the third quarter of 2024 compared to the second quarter of 2024.

Noninterest expense for the third quarter of 2024 decreased $150 thousand, or 0.2%, to $71.1 million compared to $71.2 million for the second quarter of 2024. The decrease in noninterest expense in the third quarter of 2024 compared to the second quarter of 2024 was primarily due to a $2.0 million decrease in other noninterest expense and a $520 thousand decrease in regulatory assessments, partially offset by a $2.1 million increase in salaries and employee benefits.

The efficiency ratio was 66.18% for the third quarter of 2024 compared to 66.63% for the second quarter of 2024. Annualized returns on average assets, average equity and average tangible equity were 1.27%, 8.49% and 13.63%(1) for the third quarter of 2024, respectively, compared to 1.13%, 7.78% and 12.82%(1), respectively, for the second quarter of 2024.

Financial Condition

Total assets at September 30, 2024 were $10.63 billion, a decrease of $93.9 million, compared to $10.72 billion at June 30, 2024.

Total loans at September 30, 2024 decreased $162.8 million to $7.55 billion compared to $7.71 billion at June 30, 2024. At September 30, 2024, the remaining balance of the purchase accounting accretion on loans was $81.4 million.

Total deposits at September 30, 2024 increased $17.3 million to $8.74 billion compared to $8.73 billion at June 30, 2024, due to increases in interest-bearing demand deposits and money market and savings deposits, partially offset by decreases in certificates and other time deposits and noninterest-bearing deposits. Shifts in the deposit mix were primarily driven by the current interest rate environment and an intensely competitive market for deposits.

During the third quarter 2024, the Company repurchased 108,984 shares at an average price per share of $26.10 under its share repurchase program.

Asset Quality

Nonperforming assets totaled $35.1 million, or 0.33% of total assets, at September 30, 2024, compared to $53.5 million, or 0.50% of total assets, at June 30, 2024. The allowance for credit losses on loans as a percentage of total loans was 1.12% at September 30, 2024 and 1.23% at June 30, 2024.

The third quarter of 2024 included a reversal of provision for credit losses of $6.0 million compared to a reversal of provision for credit losses of $1.9 million recorded during the second quarter of 2024. Net charge-offs for the third quarter of 2024 were $3.9 million, or 0.21% (annualized) of average loans, compared to net recoveries of $1 thousand, or 0.00% (annualized) of average loans, for the second 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, October 25, 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/Q4I635867 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/992487934. 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.

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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

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)

2024

2023

September 30

June 30

March 31

December 31

September 30

(Dollars in thousands)

ASSETS

Cash and due from banks

$

103,735

$

110,341

$

74,663

$

121,004

$

94,970

Interest-bearing deposits at other financial institutions

412,482

379,909

325,079

278,233

207,302

Total cash and cash equivalents

516,217

490,250

399,742

399,237

302,272

Available for sale securities, at fair value

1,691,752

1,630,971

1,523,100

1,395,680

1,414,952

Loans held for investment

7,551,124

7,713,897

7,908,111

7,925,133

8,004,528

Less: allowance for credit losses on loans

(84,501)

(94,772)

(96,285)

(91,684)

(93,575)

Loans, net

7,466,623

7,619,125

7,811,826

7,833,449

7,910,953

Accrued interest receivable

39,473

43,348

45,466

44,244

43,536

Premises and equipment, net

113,742

113,984

115,698

118,683

119,332

Federal Home Loan Bank stock

20,123

15,089

16,050

25,051

29,022

Bank-owned life insurance

106,876

106,262

105,671

105,084

104,699

Goodwill

497,318

497,318

497,318

497,318

497,318

Core deposit intangibles, net

98,116

104,315

110,513

116,712

122,944

Other assets

79,537

103,001

103,838

111,681

120,432

Total assets

$

10,629,777

$

10,723,663

$

10,729,222

$

10,647,139

$

10,665,460

LIABILITIES AND SHAREHOLDERS' EQUITY

LIABILITIES:

Deposits:

Noninterest-bearing

$

3,303,048

$

3,308,441

$

3,323,149

$

3,546,815

$

3,656,288

Interest-bearing

Demand

1,571,504

1,564,405

1,576,261

1,659,999

1,397,492

Money market and savings

2,280,651

2,213,031

2,203,767

2,136,777

2,128,950

Certificates and other time

1,587,398

1,639,426

1,691,539

1,529,876

1,503,891

Total interest-bearing deposits

5,439,553

5,416,862

5,471,567

5,326,652

5,030,333

Total deposits

8,742,601

8,725,303

8,794,716

8,873,467

8,686,621

Accrued interest payable

16,915

12,327

12,227

11,288

7,612

Borrowed funds

60,000

240,000

215,000

50,000

323,981

Subordinated debt

110,064

109,964

109,864

109,765

109,665

Other liabilities

74,074

70,274

66,717

81,601

76,735

Total liabilities

9,003,654

9,157,868

9,198,524

9,126,121

9,204,614

SHAREHOLDERS' EQUITY:

Common stock

535

536

536

533

533

Capital surplus

1,238,619

1,238,477

1,235,221

1,232,627

1,231,686

Retained earnings

474,905

447,948

425,130

405,945

385,600

Accumulated other comprehensive loss

(87,936)

(121,166)

(130,189)

(118,087)

(156,973)

Total shareholders' equity

1,626,123

1,565,795

1,530,698

1,521,018

1,460,846

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

$

10,629,777

$

10,723,663

$

10,729,222

$

10,647,139

$

10,665,460

4

Stellar Bancorp, Inc.

Financial Highlights

(Unaudited)

Three Months Ended

Nine Months Ended

2024

2023

2024

2023

September 30

June 30

March 31

December 31

September 30

September 30

September 30

INTEREST INCOME:

Loans, including fees

$

132,372

$

135,885

$

134,685

$

139,114

$

138,948

$

402,942

$

398,608

Securities:

Taxable

13,898

11,923

9,293

9,622

9,493

35,114

28,872

Tax-exempt

814

816

818

418

437

2,448

2,135

Deposits in other financial institutions

4,692

3,555

3,627

3,021

2,391

11,874

9,027

Total interest income

151,776

152,179

148,423

152,175

151,269

452,378

438,642

INTEREST EXPENSE:

Demand, money market and savings

deposits

29,440

28,399

27,530

25,033

23,557

85,369

62,302

Certificates and other time deposits

18,073

18,758

15,084

15,075

13,282

51,915

26,211

Borrowed funds

840

1,700

1,774

4,154

5,801

4,314

13,653

Subordinated debt

1,916

1,912

1,917

1,983

1,908

5,745

5,647

Total interest expense

50,269

50,769

46,305

46,245

44,548

147,343

107,813

NET INTEREST INCOME

101,507

101,410

102,118

105,930

106,721

305,035

330,829

(Reversal of) provision for credit losses

(5,985)

(1,935)

4,098

1,047

2,315

(3,822)

7,896

Net interest income after provision for

credit losses

107,492

103,345

98,020

104,883

104,406

308,857

322,933

NONINTEREST INCOME:

Service charges on deposit accounts

1,594

1,648

1,598

1,520

1,620

4,840

4,544

Gain (loss) on sale of assets

432

(64)

513

198

-

881

192

Bank-owned life insurance

614

591

587

573

551

1,792

1,605

Debit card and ATM income

551

543

527

542

935

1,621

4,454

Other

3,111

2,698

3,071

4,053

1,589

8,880

6,881

Total noninterest income

6,302

5,416

6,296

6,886

4,695

18,014

17,676

NONINTEREST EXPENSE:

Salaries and employee benefits

41,123

39,061

41,376

40,464

39,495

121,560

116,570

Net occupancy and equipment

4,570

4,503

4,390

4,572

4,455

13,463

12,360

Depreciation

1,911

1,948

1,964

1,955

1,952

5,823

5,629

Data processing and software

amortization

5,706

5,501

4,894

5,000

4,798

16,101

14,526

Professional fees

1,714

1,620

2,662

3,867

997

5,996

4,088

Regulatory assessments and FDIC

insurance

1,779

2,299

1,854

5,169

1,814

5,932

5,863

Amortization of intangibles

6,212

6,215

6,212

6,247

6,876

18,639

20,636

Communications

827

847

937

743

663

2,611

2,053

Advertising

878

891

765

1,004

877

2,534

2,623

Acquisition and merger-related expenses

-

-

-

3,072

3,421

-

12,483

Other

6,346

8,331

6,356

5,848

5,400

21,033

15,722

Total noninterest expense

71,066

71,216

71,410

77,941

70,748

213,692

212,553

INCOME BEFORE INCOME TAXES

42,728

37,545

32,906

33,828

38,353

113,179

128,056

Provision for income taxes

8,837

7,792

6,759

6,562

7,445

23,388

24,825

NET INCOME

$

33,891

$

29,753

$

26,147

$

27,266

$

30,908

$

89,791

$

103,231

EARNINGS PER SHARE

Basic

$

0.63

$

0.56

$

0.49

$

0.51

$

0.58

$

1.68

$

1.94

Diluted

$

0.63

$

0.56

$

0.49

$

0.51

$

0.58

$

1.68

$

1.94

5

Stellar Bancorp, Inc.

Financial Highlights

(Unaudited)

Three Months Ended

Nine Months Ended

2024

2023

2024

2023

September 30

June 30

March 31

December 31

September 30

September 30

September 30

(Dollars and share amounts in thousands, except per share data)

Net income

$

33,891

$

29,753

$

26,147

$

27,266

$

30,908

$

89,791

$

103,231

Earnings per share, basic

$

0.63

$

0.56

$

0.49

$

0.51

$

0.58

$

1.68

$

1.94

Earnings per share, diluted

$

0.63

$

0.56

$

0.49

$

0.51

$

0.58

$

1.68

$

1.94

Dividends per share

$

0.13

$

0.13

$

0.13

$

0.13

$

0.13

$

0.39

$

0.39

Return on average assets(A)

1.27 %

1.13 %

0.98 %

1.02 %

1.14 %

1.13 %

1.28 %

Return on average equity(A)

8.49 %

7.78 %

6.88 %

7.33 %

8.34 %

7.73 %

9.52 %

Return on average tangible equity(A)(B)

13.63 %

12.82 %

11.47 %

12.61 %

14.47 %

12.67 %

16.86 %

Net interest margin (tax equivalent)(A)(C)

4.19 %

4.24 %

4.26 %

4.40 %

4.37 %

4.23 %

4.55 %

Net interest margin (tax equivalent)

excluding PAA(A)(B)(C)

3.91 %

3.82 %

3.91 %

3.91 %

3.87 %

3.88 %

4.07 %

Efficiency ratio(D)

66.18 %

66.63 %

66.18 %

69.21 %

63.50 %

66.33 %

61.02 %

Capital Ratios

Stellar Bancorp, Inc. (Consolidated)

Equity to assets

15.30 %

14.60 %

14.27 %

14.29 %

13.70 %

15.30 %

13.70 %

Tangible equity to tangible assets(B)

10.27 %

9.53 %

9.12 %

9.04 %

8.37 %

10.27 %

8.37 %

Estimated Total capital ratio (to risk-

weighted assets)

15.91 %

15.34 %

14.62 %

14.02 %

13.61 %

15.91 %

13.61 %

Estimated Common equity Tier 1

capital (to risk weighted assets)

13.62 %

12.98 %

12.29 %

11.77 %

11.30 %

13.62 %

11.30 %

Estimated Tier 1 capital (to risk-

weighted assets)

13.74 %

13.10 %

12.41 %

11.89 %

11.41 %

13.74 %

11.41 %

Estimated Tier 1 leverage (to average

tangible assets)

11.25 %

10.93 %

10.55 %

10.18 %

9.82 %

11.25 %

9.82 %

Stellar Bank

Estimated Total capital ratio (to risk-

weighted assets)

15.07 %

14.65 %

14.13 %

13.65 %

13.32 %

15.07 %

13.32 %

Estimated Common equity Tier 1

capital (to risk-weighted assets)

13.63 %

13.12 %

12.61 %

12.20 %

11.80 %

13.63 %

11.80 %

Estimated Tier 1 capital (to risk-

weighted assets)

13.63 %

13.12 %

12.61 %

12.20 %

11.80 %

13.63 %

11.80 %

Estimated Tier 1 leverage (to average

tangible assets)

11.16 %

10.94 %

10.72 %

10.44 %

10.15 %

11.16 %

10.15 %

Other Data

Weighted average shares:

Basic

53,541

53,572

53,343

53,282

53,313

53,485

53,211

Diluted

53,580

53,608

53,406

53,350

53,380

53,531

53,300

Period end shares outstanding

53,446

53,564

53,551

53,291

53,322

53,446

53,322

Book value per share

$

30.43

$

29.23

$

28.58

$

28.54

$

27.40

$

30.43

$

27.40

Tangible book value per share(B)

$

19.28

$

18.00

$

17.23

$

17.02

$

15.76

$

19.28

$

15.76

Employees - full-time equivalents

1,040

1,045

1,007

998

1,008

1,040

1,008

6

Stellar Bancorp, Inc.

Financial Highlights

(Unaudited)

Assets

Interest-Earning Assets: Loans

Securities

Deposits in other financial institutions Total interest-earning assets Allowance for credit losses on loans

Noninterest-earning assets Total assets

Liabilities and Shareholders' Equity

Interest-Bearing Liabilities: Interest-bearing demand deposits Money market and savings deposits Certificates and other time deposits Borrowed funds

Subordinated debt

Total interest-bearing liabilities

Noninterest-Bearing Liabilities: Noninterest-bearing demand deposits Other liabilities

Total liabilities Shareholders' equity

Total liabilities and shareholders' equity

Net interest rate spread

Net interest income and margin

Net interest income and net interest margin (tax equivalent)

Cost of funds

Cost of deposits

Three Months Ended

September 30, 2024

June 30, 2024

September 30, 2023

Interest

Interest

Interest

Average

Earned/

Average

Average

Earned/

Average

Average

Earned/

Average

Interest

Interest

Interest

Balance

Paid

Yield/Rate

Balance

Paid

Yield/Rate

Balance

Paid

Yield/Rate

(Dollars in thousands)

$ 7,627,522

$

132,372

6.90 %

$ 7,808,320

$

135,885

7.00 %

$ 8,043,706

$

138,948

6.85 %

1,676,614

14,712

3.49 %

1,549,638

12,739

3.31 %

1,471,916

9,930

2.68 %

339,493

4,692

5.50 %

258,916

3,555

5.52 %

181,931

2,391

5.21 %

9,643,629

$

151,776

6.26 %

9,616,874

$

152,179

6.36 %

9,697,553

$

151,269

6.19 %

(94,785)

(96,306)

(99,892)

1,077,422

1,103,297

1,143,634

$10,626,266

$10,623,865

$10,741,295

$ 1,606,736

$

12,458

3.08 %

$ 1,545,096

$

12,213

3.18 %

$ 1,400,508

$

10,415

2.95 %

2,254,767

16,982

3.00 %

2,227,393

16,186

2.92 %

2,166,610

13,142

2.41 %

1,620,908

18,073

4.44 %

1,694,536

18,758

4.45 %

1,400,367

13,282

3.76 %

49,077

840

6.81 %

112,187

1,700

6.09 %

411,212

5,801

5.60 %

110,007

1,916

6.93 %

109,910

1,912

7.00 %

109,608

1,908

6.91 %

5,641,495

$

50,269

3.54 %

5,689,122

$

50,769

3.59 %

5,488,305

$

44,548

3.22 %

3,303,726

3,308,633

3,695,592

93,127

87,986

86,389

9,038,348

9,085,741

9,270,286

1,587,918

1,538,124

1,471,009

$10,626,266

$10,623,865

$10,741,295

2.72 %

2.77 %

2.97 %

$

101,507

4.19 %

$

101,410

4.24 %

$

106,721

4.37 %

$

101,578

4.19 %

$

101,482

4.24 %

$

106,919

4.37 %

2.24 %

2.27 %

1.92 %

2.15 %

2.16 %

1.69 %

7

Assets

Interest-Earning Assets: Loans

Securities

Deposits in other financial institutions Total interest-earning assets Allowance for credit losses on loans

Noninterest-earning assets Total assets

Liabilities and Shareholders' Equity

Interest-Bearing Liabilities: Interest-bearing demand deposits Money market and savings deposits Certificates and other time deposits Borrowed funds

Subordinated debt

Total interest-bearing liabilities

Noninterest-Bearing Liabilities: Noninterest-bearing demand deposits Other liabilities

Total liabilities Shareholders' equity

Total liabilities and shareholders' equity

Net interest rate spread

Net interest income and margin

Net interest income and net interest margin (tax equivalent)

Cost of funds

Cost of deposits

Stellar Bancorp, Inc.

Financial Highlights

(Unaudited)

Nine Months Ended September 30,

2024

2023

Interest

Interest

Average

Earned/

Average

Average

Earned/

Average

Interest

Interest

Balance

Paid

Yield/Rate

Balance

Paid

Yield/Rate

(Dollars in thousands)

$

7,790,957

$

402,942

6.91 %

$

7,957,911

$

398,608

6.70 %

1,556,462

37,562

3.22 %

1,525,808

31,007

2.72 %

287,960

11,874

5.51 %

251,475

9,027

4.80 %

9,635,379

$

452,378

6.27 %

9,735,194

$

438,642

6.02 %

(94,236)

(96,570)

1,104,426

1,148,847

$

10,645,569

$

10,787,471

$

1,616,313

$

36,949

3.05 %

$

1,478,547

$

28,141

2.54 %

2,211,148

48,420

2.93 %

2,291,588

34,161

1.99 %

1,586,623

51,915

4.37 %

1,164,572

26,211

3.01 %

98,374

4,314

5.86 %

333,220

13,653

5.48 %

109,909

5,745

6.98 %

109,508

5,647

6.89 %

5,622,367

$

147,343

3.50 %

5,377,435

$

107,813

2.68 %

3,379,096

3,878,760

92,527

81,894

9,093,990

9,338,089

1,551,579

1,449,382

$

10,645,569

$

10,787,471

2.77 %

3.34 %

$

305,035

4.23 %

$

330,829

4.54 %

$

305,266

4.23 %

$

331,549

4.55 %

2.19 %

1.56 %

2.09 %

1.34 %

8

Stellar Bancorp, Inc.

Financial Highlights

(Unaudited)

Three Months Ended

2024

2023

September 30

June 30

March 31

December 31

September 30

(Dollars in thousands)

Period-end Loan Portfolio:

Commercial and industrial

$

1,347,876

$

1,392,435

$

1,451,462

$

1,409,002

$

1,474,600

Paycheck Protection Program (PPP)

2,877

3,629

4,293

5,100

5,968

Real estate:

Commercial real estate (including multi-family residential)

3,976,296

4,029,671

4,049,885

4,071,807

4,076,606

Commercial real estate construction and land development

890,316

922,805

1,039,443

1,060,406

1,078,265

1-4 family residential (including home equity)

1,112,235

1,098,681

1,049,316

1,047,174

1,024,945

Residential construction

161,494

200,134

252,573

267,357

289,553

Consumer and other

60,030

66,542

61,139

64,287

54,591

Total loans held for investment

$

7,551,124

$

7,713,897

$

7,908,111

$

7,925,133

$

8,004,528

Deposits:

Noninterest-bearing

$

3,303,048

$

3,308,441

$

3,323,149

$

3,546,815

$

3,656,288

Interest-bearing

Demand

1,571,504

1,564,405

1,576,261

1,659,999

1,397,492

Money market and savings

2,280,651

2,213,031

2,203,767

2,136,777

2,128,950

Certificates and other time

1,587,398

1,639,426

1,691,539

1,529,876

1,503,891

Total interest-bearing deposits

5,439,553

5,416,862

5,471,567

5,326,652

5,030,333

Total deposits

$

8,742,601

$

8,725,303

$

8,794,716

$

8,873,467

$

8,686,621

Asset Quality:

Nonaccrual loans

$

32,140

$

50,906

$

57,129

$

39,191

$

38,291

Accruing loans 90 or more days past due

-

-

-

-

-

Total nonperforming loans

32,140

50,906

57,129

39,191

38,291

Other real estate

2,984

2,548

-

-

-

Total nonperforming assets

$

35,124

$

53,454

$

57,129

$

39,191

$

38,291

Net charge-offs (recoveries)

$

3,933

$

(1)

$

714

$

2,577

$

8,116

Nonaccrual loans:

Commercial and industrial

$

9,718

$

18,451

$

15,465

$

5,048

$

14,991

Real estate:

Commercial real estate (including multi-family residential)

10,695

18,094

21,268

16,699

13,563

Commercial real estate construction and land development

4,183

1,641

8,406

5,043

170

1-4 family residential (including home equity)

7,259

12,454

10,368

8,874

8,442

Residential construction

121

155

1,410

3,288

635

Consumer and other

164

111

212

239

490

Total nonaccrual loans

$

32,140

$

50,906

$

57,129

$

39,191

$

38,291

Asset Quality Ratios:

Nonperforming assets to total assets

0.33 %

0.50 %

0.53 %

0.37 %

0.36 %

Nonperforming loans to total loans

0.43 %

0.66 %

0.72 %

0.49 %

0.48 %

Allowance for credit losses on loans to nonperforming loans

262.92 %

186.17 %

168.54 %

233.94 %

244.38 %

Allowance for credit losses on loans to total loans

1.12 %

1.23 %

1.22 %

1.16 %

1.17 %

Net charge-offs to average loans (annualized)

0.21 %

0.00 %

0.04 %

0.13 %

0.40 %

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-taxpre-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

Nine Months Ended

2024

2023

2024

2023

September 30

June 30

March 31

December 31

September 30

September 30

September 30

(Dollars and share amounts in thousands, except per share data)

Net income

$

33,891

$

29,753

$

26,147

$

27,266

$

30,908

$

89,791

$

103,231

Add: Provision for credit losses

(5,985)

(1,935)

4,098

1,047

2,315

(3,822)

7,896

Add: Provision for income taxes

8,837

7,792

6,759

6,562

7,445

23,388

24,825

Pre-tax,pre-provision income

$

36,743

$

35,610

$

37,004

$

34,875

$

40,668

$

109,357

$

135,952

Total average assets

$

10,626,266

$

10,623,865

$

10,686,789

$

10,626,373

$

10,741,295

$

10,645,569

$

10,787,471

Pre-tax,pre-provision return on

1.38 %

1.35 %

1.39 %

1.30 %

1.50 %

1.37 %

1.68 %

average assets(B)

Total shareholders' equity

$

1,626,123

$

1,565,795

$

1,530,698

$

1,521,018

$

1,460,846

$

1,626,123

$

1,460,846

Less: Goodwill and core deposit

intangibles, net

595,434

601,633

607,831

614,030

620,262

595,434

620,262

Tangible shareholders' equity

$

1,030,689

$

964,162

$

922,867

$

906,988

$

840,584

$

1,030,689

$

840,584

Shares outstanding at end of period

53,446

53,564

53,551

53,291

53,322

53,446

53,322

Tangible book value per share

$

19.28

$

18.00

$

17.23

$

17.02

$

15.76

$

19.28

$

15.76

Average shareholders' equity

$

1,587,918

$

1,538,124

$

1,528,298

$

1,475,377

$

1,471,009

$

1,551,579

$

1,449,382

Less: Average goodwill and core

deposit intangibles, net

598,866

604,722

611,149

617,236

623,864

604,890

630,890

Average tangible shareholders'

equity

$

989,052

$

933,402

$

917,149

$

858,141

$

847,145

$

946,689

$

818,492

Return on average tangible

equity(B)

13.63 %

12.82 %

11.47 %

12.61 %

14.47 %

12.67 %

16.86 %

Total assets

$

10,629,777

$

10,723,663

$

10,729,222

$

10,647,139

$

10,665,460

$

10,629,777

$

10,665,460

Less: Goodwill and core deposit

intangibles, net

595,434

601,633

607,831

614,030

620,262

595,434

620,262

Tangible assets

$

10,034,343

$

10,122,030

$

10,121,391

$

10,033,109

$

10,045,198

$

10,034,343

$

10,045,198

Tangible equity to tangible assets

10.27 %

9.53 %

9.12 %

9.04 %

8.37 %

10.27 %

8.37 %

Net interest income (tax equivalent)

$

101,578

$

101,482

$

102,207

$

106,121

$

106,919

$

305,266

$

331,549

Less: Purchase accounting accretion

6,795

10,098

8,551

11,726

12,400

25,444

35,076

Adjusted net interest income (tax

equivalent)

$

94,783

$

91,384

$

93,656

$

94,395

$

94,519

$

279,822

$

296,473

Average earning assets

$

9,643,629

$

9,616,874

$

9,645,544

$

9,576,927

$

9,697,553

$

9,635,379

$

9,735,194

Net interest margin (tax

equivalent) excluding PAA

3.91 %

3.82 %

3.91 %

3.91 %

3.87 %

3.88 %

4.07 %

10

Disclaimer

Stellar Bancorp Inc. published this content on October 31, 2024, and is solely responsible for the information contained herein. Distributed by Public, unedited and unaltered, on October 31, 2024 at 17:25:35.099.