0001473844FALSE00014738442023-10-272023-10-27

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________________________________
Form 8-K
____________________________________________
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event Reported): January 26, 2024
Stellar Bancorp, Inc.
(Exact Name of Registrant as Specified in Charter)
Texas001-3828020-8339782
(State or Other Jurisdiction of Incorporation)(Commission File Number)(I.R.S. Employer Identification Number)
9 Greenway Plaza, Suite 110  
Houston, Texas 77046
(Address of Principal Executive Offices) (Zip Code)
(713) 210-7600
(Registrant's telephone number, including area code)
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
£Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
£Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
£Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
£Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading
Symbol(s)
Name of each exchange on which registered
Common stock, par value $0.01 per shareSTEL New York Stock Exchange
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company £
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. £


Item 2.02. Results of Operations and Financial Condition.

On January 26, 2024, Stellar Bancorp, Inc. (the “Company”) issued a press release announcing its financial results for the year ended December 31, 2023 and fourth quarter of 2023. A copy of the press release, as well as a copy of the accompanying earnings presentation, are furnished as Exhibit 99.1 and Exhibit 99.2 hereto, respectively, and incorporated herein by reference.

In accordance with General Instruction B.2 to Form 8-K, the information furnished in this Item 2.02, Exhibit 99.1 and Exhibit 99.2 of this Current Report on Form 8-K shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, and such information shall not be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, (the ”Securities Act”), except as shall be expressly set forth by specific reference in such filing.

Item 7.01 Regulation FD Disclosure

On Friday, January 26, 2024, at 8:30 a.m., Central Time, the Company will host an investor conference call and webcast to review its fourth quarter financial results. The webcast will include a presentation that consists of information regarding the Company’s financial results. The presentation materials will be posted on the Company’s website before the open of the market on Friday, January 26, 2024. The presentation materials are attached hereto as Exhibit 99.2 and are incorporated herein by reference.

In accordance with General Instruction B.2 to Form 8-K, the information furnished in this Item 7.01, including Exhibit 99.2, of this Current Report on Form 8-K shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act or otherwise subject to the liabilities of that section, and such information shall not be deemed incorporated by reference in any filing under the Securities Act or the
Item 9.01. Financial Statements and Exhibits.
(d)    Exhibits. The following are furnished as exhibits to this Current Report on Form 8-K:
Exhibit NumberDescription of Exhibit
99.1
99.2
104Cover Page Interactive Data File (embedded within the Inline XBRL document)
Forward-Looking Statements

This Current Report on Form 8-K contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the Company’s actual results, performance or achievements to be materially different from any future results, performance or achievements anticipated in such statements. Forward-looking statements speak only as of the date they are made and, except as required by law, the Company does not assume any duty to update forward-looking statements. Such forward-looking statements include, but are not limited to, statements concerning the Company’s plans, objectives, strategies, expectations, intentions and other statements that are not statements of historical fact, and may be identified by words such as “anticipates,” “believes,” “building,” “continue,” “could,” “drive,” “estimates,” “expects,” “extent,” “focus,” “forecasts,” “goal,” “guidance,” “intends,” “may,” “might,” “outlook,” “plan,” “position,” “probable,” “progressing,” “projects,” “prudent,” “seeks,” “should,” “target,” “view,” “will” or “would” or the negative of these words and phrases or similar words or phrases. For a list of factors that could cause actual results to differ materially from those set forth in the forward-looking statements, see the risk factors described in the Company’s most recent Annual Report on Form 10-K and subsequent Quarterly Reports on Form 10-Q and other reports that are filed with the Securities and Exchange Commission. All forward-looking statements are qualified in their entirety by this cautionary statement.


SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
STELLAR BANCORP, INC.
Date: January 26, 2024By:/s/ Paul P. Egge
Paul P. Egge
Chief Financial Officer



Exhibit 99.1
image.jpg
PRESS RELEASE                                        

STELLAR BANCORP, INC. REPORTS
FOURTH QUARTER 2023 RESULTS

HOUSTON, January 26, 2024 - Stellar Bancorp, Inc. (the “Company” or “Stellar”) (NYSE: STEL) today reported net income of $27.3 million, or diluted earnings per share of $0.51, for the fourth quarter 2023 and net income of $130.5 million, or diluted earnings per share of $2.45, for the year ended December 31, 2023. During the fourth quarter, the Company recorded certain nonrecurring noninterest expense items, including the FDIC special insurance assessment expense of $2.4 million.

“We are pleased to announce our full-year and fourth quarter results, capping a successful year despite industry challenges and economic uncertainty,” said Robert R. Franklin, Jr., Stellar’s Chief Executive Officer. “We maintained our focus on capital, liquidity, and credit to protect shareholder value in a year of rapidly rising interest rates and large bank failures, all while setting the foundation of a new organization following our combination in late 2022. Our staff has done a great job in combining two banks and we are poised to refine what we have built. The success of our team’s efforts during the year is reflected by our maintaining a solid net interest margin, a strong deposit base, our credit quality and ability to build capital,” he continued.

“While we expect a somewhat slower economy in 2024, our focus will be on continuing to optimize and reduce our noninterest expenses as we manage the organization’s needs and requirements from crossing the $10 billion asset threshold. We believe that we are well positioned to take advantage of the opportunities that may be presented in 2024 and that our strategy provides us with optionality,” said Mr. Franklin.

“We operate in some of the best banking markets in the country and we look forward to the possibility of additional clarity around the direction of interest rates and a more reasonably priced market for deposits and funding in the new year. Thank you to our shareholders for their support and we look forward to continuing to build shareholder value in 2024,” concluded Mr. Franklin.

2023 Financial Highlights

•Strong Earnings: Stellar recorded 2023 net income of $130.5 million, or diluted earnings per share of $2.45, representing a return on average assets of 1.21%, return on average equity of 8.96% and return on average tangible equity of 15.75%(1).

•Meaningful Regulatory Capital Build: Total risk-based capital ratio increased to 14.02% at December 31, 2023 from 12.39% at December 31, 2022 and Tier 1 leverage ratio increased to 10.18% at December 31, 2023 from 8.55% at December 31, 2022.

•Book Value Growth: During 2023, book value per share increased to $28.54 at December 31, 2023 compared to $26.12 at December 31, 2022 while tangible book value per share increased by $3.00, or 21.4%, from $14.02 at December 31, 2022 to $17.02 at December 31, 2023.

•Advantageous Funding Profile: Noninterest-bearing deposit balances remained a significant portion of our deposit funding base, ending the year at 40.0% of total deposits.

Fourth Quarter 2023 Financial Highlights

•Strong Net Interest Margin: Tax equivalent net interest margin was 4.40% for fourth quarter of 2023 up from 4.37% in the third quarter of 2023. The tax equivalent net interest margin, excluding purchase accounting accretion (“PAA”), was 3.91%(1) for the fourth quarter of 2023 up from 3.87%(1) for the third quarter of 2023.

•Solid Profitability: Fourth quarter 2023 net income of $27.3 million, or diluted earnings per share of $0.51, translated into an annualized return on average assets of 1.02%, an annualized return on average equity of 7.33% and an annualized return on average tangible equity of 12.61%(1).
_____________________
(1) Refer to page 10 of this earnings release for the calculation of this non-GAAP financial measure.


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Merger of Equals

The merger of equals (the “Merger”) between Allegiance Bancshares, Inc. (“Allegiance”) and CBTX, Inc. (“CBTX”), which became effective on October 1, 2022, was accounted for as a reverse acquisition using the acquisition method of accounting, with CBTX treated as the legal acquirer and Allegiance treated as the accounting acquirer for financial reporting purposes. Therefore, the historical financial statements of the Company prior to the Merger reflect the historical financial statement balances of Allegiance. In addition, the assets and liabilities of CBTX as of the date of the Merger were recorded at estimated fair value and added to those of Allegiance. The Merger had a significant impact on all aspects of the Company's financial statements and, as a result, financial results after the Merger are not comparable
to financial results prior to the Merger. Results of operations for 2023 and the fourth quarter 2022 reflect the combined operations following the Merger. The full year 2022 results of operations reflect the combined operations for the fourth quarter 2022 and the stand-alone Allegiance results for all periods prior to October 1, 2022.

Fourth Quarter 2023 Results

Net interest income in the fourth quarter 2023 decreased $791 thousand, or 0.7%, to $105.9 million from $106.7 million for the third quarter 2023. The net interest margin on a tax equivalent basis increased three basis points to 4.40% for the fourth quarter 2023 from 4.37% for the third quarter 2023. The increase in the net interest margin from the prior quarter was primarily due to the increased yield on interest earning assets partially offset by increased rates on our cost of funding. Net interest income for the fourth quarter of 2023 benefited from $11.7 million of income from purchase accounting adjustments compared to $12.4 million in the third quarter of 2023. Excluding purchase accounting adjustments, a non-GAAP measure that is reconciled on page 10 of this earnings release, net interest income (tax equivalent) for the fourth quarter 2023 would have been $94.4 million and the tax equivalent net interest margin would have been 3.91%.

Noninterest income for the fourth quarter 2023 was $6.9 million, an increase of $2.2 million, or 46.7%, compared to $4.7 million for the third quarter 2023. Noninterest income increased in the fourth quarter of 2023 compared to the third quarter of 2023 primarily due to Small Business Investment Company income recognized partially offset by a decrease in debit card and ATM income due to the impact of the Durbin Amendment and change in the Company’s policy on charging nonsufficient funds fees.

Noninterest expense for the fourth quarter 2023 increased $7.2 million, or 10.2%, to $77.9 million compared to $70.7 million for the third quarter 2023. The increase in noninterest expense in the fourth quarter of 2023 compared to the third quarter of 2023 was primarily due to nonrecurring items including higher professional fees associated with various projects during the quarter some of which related to crossing the $10 billion asset threshold, a $2.4 million accrual for future payments to the FDIC pursuant to the special insurance assessment associated with two bank failures during 2023 and $1.9 million of severance expense.

The efficiency ratio was 69.21% for the fourth quarter 2023 compared to 63.50% for the third quarter 2023. Fourth quarter 2023 annualized returns on average assets, average equity and average tangible equity were 1.02%, 7.33% and 12.61%, respectively, compared to 1.14%, 8.34% and 14.47%, respectively, for the third quarter 2023. Return on average tangible equity is a non-GAAP measure. Please refer to the non-GAAP reconciliation on page 10 of this earnings release.

Year Ended December 31, 2023 Results

Net interest income for the year ended December 31, 2023 increased $147.8 million, or 51.1%, to $436.8 million from $289.0 million for the year ended December 31, 2022. The net interest margin on a tax equivalent basis increased 57 basis points to 4.51% for the year ended December 31, 2023 from 3.94% for the year ended December 31, 2022. The increase in the net interest margin from the prior quarter was primarily due to the impact of the Merger. Net interest income for the year ended December 31, 2023 benefited from $46.8 million of purchase accounting adjustments compared to $8.4 million for the year ended December 31, 2022. Excluding purchase accounting adjustments, a non-GAAP measure that is reconciled on page 10 of this earnings release, net interest income (tax equivalent) for the year ended December 31, 2023 would have been $390.9 million and the tax equivalent net interest margin would have been 4.03%.

Noninterest income for the year ended December 31, 2023 was $24.6 million, an increase of $4.2 million, or 20.7%, compared to $20.4 million for the year ended December 31, 2022. Noninterest income increased in 2023 compared to 2022 primarily due to increased scale as a result of the Merger along with increased Small Business Investment Company income. The increase in noninterest income was partially offset by the decrease in debit card and ATM income due to the impact of the Durbin Amendment and change in the Company’s policy on charging nonsufficient funds fees along with the nonrecurring gains on sale of securities, loans and assets during the fourth quarter 2022.

Noninterest expense for the year ended December 31, 2023 increased $94.4 million, or 48.2%, to $290.5 million compared to $196.1 million for the year ended December 31, 2022. The increase in noninterest expense in 2023 compared to 2022 was due to increased scale as a result of the Merger primarily within categories such as salaries and benefits and amortization of intangibles along with higher professional fees


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associated with various projects some of which related to crossing the $10 billion asset threshold, partially offset by a decrease in acquisition and merger-related expenses to $15.6 million from $24.1 million in 2022.

The efficiency ratio was 63.02% for the year ended December 31, 2023 compared to 64.23% for the year ended December 31, 2022. Annualized returns on average assets, average equity and average tangible equity were 1.21%, 8.96% and 15.75%, respectively, for the year ended December 31, 2023 compared to 0.64%, 5.69% and 9.16%, respectively, for the year ended December 31, 2022. Return on average tangible equity is a non-GAAP measure. Please refer to the non-GAAP reconciliation on page 10 of this earnings release.

Financial Condition

Total loans at December 31, 2023 decreased $79.4 million to $7.93 billion compared to $8.00 billion at September 30, 2023. At December 31, 2023, the remaining balance of the purchase accounting adjustments on loans was $106.8 million.

Total deposits at December 31, 2023 increased $186.8 million to $8.87 billion compared to $8.69 billion at September 30, 2023, due to increases in interest-bearing demand, money market and certificates and other time deposits, partially offset by a decreases noninterest-bearing 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 $4.95 billion and estimated uninsured deposits net of collateralized deposits of $1.17 billion were $3.78 billion, or 42.6%, of total deposits at December 31, 2023.

Total assets at December 31, 2023 were $10.65 billion, a decrease of $18.3 million, compared to $10.67 billion at September 30, 2023.

Asset Quality

Nonperforming assets totaled $39.2 million, or 0.37% of total assets, at December 31, 2023, compared to $38.3 million, or 0.36%, of total assets, at September 30, 2023. The allowance for credit losses on loans as a percentage of total loans was 1.16% at December 31, 2023 and 1.17% at September 30, 2023.

The provision for credit losses for the fourth quarter 2023 was $1.0 million compared to $2.3 million for the third quarter 2023. Fourth quarter 2023 net charge-offs were $2.6 million, or 0.13% (annualized) of average loans, compared to net charge-offs of $8.1 million, or 0.40% (annualized) of average loans, for the third quarter 2023.

GAAP Reconciliation of Non-GAAP Financial Measures

Stellar’s management uses certain non-GAAP financial measures to evaluate its performance. Please refer to the GAAP Reconciliation and Management’s Explanation of Non-GAAP Financial Measures on page 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, January 26, 2024 at 8:00 a.m. Central Time (9:00 a.m. Eastern Time) to discuss its fourth quarter 2023 results. Participants may register for the conference call at https://conferencingportals.com/event/FdklYbaS 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/844946085. 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



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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 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.


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Stellar Bancorp, Inc.
Financial Highlights
(Unaudited)
20232022
December 31September 30June 30March 31December 31
 (Dollars in thousands)
ASSETS
Cash and due from banks$121,004 $94,970 $105,913 $99,231 $67,063 
Interest-bearing deposits at other financial institutions278,233 207,302 198,176 164,102 304,642 
Total cash and cash equivalents399,237 302,272 304,089 263,333 371,705 
Available for sale securities, at fair value1,395,680 1,414,952 1,478,222 1,519,175 1,807,586 
Loans held for investment7,925,133 8,004,528 8,068,718 7,886,044 7,754,751 
Less: allowance for credit losses on loans(91,684)(93,575)(100,195)(96,188)(93,180)
Loans, net7,833,449 7,910,953 7,968,523 7,789,856 7,661,571 
Accrued interest receivable44,244 43,536 42,051 42,405 44,743 
Premises and equipment, net118,683 119,332 119,142 124,723 126,803 
Federal Home Loan Bank stock25,051 29,022 24,478 19,676 15,058 
Bank-owned life insurance105,084 104,699 104,148 103,616 103,094 
Goodwill497,318 497,318 497,260 497,260 497,260 
Core deposit intangibles, net116,712 122,944 129,805 136,665 143,525 
Other assets111,681 120,432 110,633 108,009 129,092 
Total assets$10,647,139 $10,665,460 $10,778,351 $10,604,718 $10,900,437 
LIABILITIES AND SHAREHOLDERS’ EQUITY
LIABILITIES:
Deposits:
Noninterest-bearing$3,546,815 $3,656,288 $3,713,536 $3,877,859 $4,230,169 
Interest-bearing
Demand1,659,999 1,397,492 1,437,509 1,394,244 1,591,828 
Money market and savings2,136,777 2,128,950 2,174,073 2,401,840 2,575,923 
Certificates and other time1,529,876 1,503,891 1,441,251 1,064,932 869,712 
Total interest-bearing deposits5,326,652 5,030,333 5,052,833 4,861,016 5,037,463 
Total deposits8,873,467 8,686,621 8,766,369 8,738,875 9,267,632 
Accrued interest payable11,288 7,612 4,555 3,875 2,098 
Borrowed funds50,000 323,981 369,963 238,944 63,925 
Subordinated debt109,765 109,665 109,566 109,420 109,367 
Other liabilities81,601 76,735 69,218 67,388 74,239 
Total liabilities9,126,121 9,204,614 9,319,671 9,158,502 9,517,261 
SHAREHOLDERS’ EQUITY:
Common stock533 533 533 533 530 
Capital surplus1,232,627 1,231,686 1,228,532 1,225,596 1,222,761 
Retained earnings405,945 385,600 361,619 333,368 303,146 
Accumulated other comprehensive loss(118,087)(156,973)(132,004)(113,281)(143,261)
Total shareholders’ equity1,521,018 1,460,846 1,458,680 1,446,216 1,383,176 
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY$10,647,139 $10,665,460 $10,778,351 $10,604,718 $10,900,437 
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Stellar Bancorp, Inc.
Financial Highlights
(Unaudited)
Three Months EndedYears Ended
2023202220232022
 December 31  September 30 June 30March 31December 31December 31December 31
(Dollars in thousands, except per share data)
INTEREST INCOME:
Loans, including fees$139,114 $138,948 $133,931 $125,729 $116,145 $537,722 $280,375 
Securities:
Taxable9,622 9,493 9,726 9,653 9,834 38,494 27,128 
Tax-exempt418 437 436 1,262 3,057 2,553 10,733 
Deposits in other financial institutions3,021 2,391 2,865 3,771 2,933 12,048 4,758 
Total interest income152,175 151,269 146,958 140,415 131,969 590,817 322,994 
INTEREST EXPENSE:
Demand, money market and savings deposits25,033 23,557 20,708 18,037 12,406 87,335 19,139 
Certificates and other time deposits15,075 13,282 9,622 3,307 2,083 41,286 7,825 
Borrowed funds4,154 5,801 6,535 1,317 417 17,807 1,216 
Subordinated debt1,983 1,908 1,812 1,927 1,449 7,630 5,856 
Total interest expense46,245 44,548 38,677 24,588 16,355 154,058 34,036 
NET INTEREST INCOME105,930 106,721 108,281 115,827 115,614 436,759 288,958 
Provision for credit losses1,047 2,315 1,915 3,666 44,793 8,943 50,712 
Net interest income after provision for credit losses104,883 104,406 106,366 112,161 70,821 427,816 238,246 
NONINTEREST INCOME:
Nonsufficient funds and overdraft charges183 291 418 406 447 1,298 834 
Service charges on deposit accounts1,337 1,329 1,157 943 1,242 4,766 2,856 
Gain (loss) on sale of assets198 — (6)198 4,025 390 4,050 
Bank-owned life insurance573 551 532 522 515 2,178 1,125 
Debit card and ATM income542 935 1,821 1,698 1,897 4,996 4,465 
Other4,053 1,589 1,561 3,731 2,511 10,934 7,024 
Total noninterest income6,886 4,695 5,483 7,498 10,637 24,562 20,354 
NONINTEREST EXPENSE:
Salaries and employee benefits40,464 39,495 37,300 39,775 40,949 157,034 107,554 
Net occupancy and equipment4,572 4,455 3,817 4,088 3,781 16,932 10,335 
Depreciation1,955 1,952 1,841 1,836 1,903 7,584 4,951 
Data processing and software amortization5,000 4,798 4,674 5,054 3,776 19,526 11,337 
Professional fees3,867 997 1,564 1,527 2,298 7,955 3,583 
Regulatory assessments and FDIC insurance5,169 1,814 2,755 1,294 1,263 11,032 4,914 
Amortization of intangibles6,247 6,876 6,881 6,879 7,051 26,883 9,303 
Communications743 663 689 701 737 2,796 1,800 
Advertising1,004 877 907 839 1,130 3,627 2,460 
Acquisition and merger-related expenses3,072 3,421 2,897 6,165 11,469 15,555 24,138 
Other5,848 5,400 5,882 4,440 5,267 21,570 15,701 
Total noninterest expense77,941 70,748 69,207 72,598 79,624 290,494 196,076 
INCOME BEFORE INCOME TAXES33,828 38,353 42,642 47,061 1,834 161,884 62,524 
Provision for income taxes6,562 7,445 7,467 9,913 (218)31,387 11,092 
NET INCOME$27,266 $30,908 $35,175 $37,148 $2,052 $130,497 $51,432 
EARNINGS PER SHARE
Basic$0.51 $0.58 $0.66 $0.70 $0.04 $2.45 $1.48 
Diluted$0.51 $0.58 $0.66 $0.70 $0.04 $2.45 $1.47 
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Stellar Bancorp, Inc.
Financial Highlights
(Unaudited)
Three Months EndedYears Ended
2023202220232022
December 31September 30June 30 March 31December 31December 31 December 31
(Dollars and share amounts in thousands, except per share data)
Net income$27,266$30,908$35,175$37,148$2,052$130,497$51,432
Earnings per share, basic$0.51$0.58$0.66$0.70$0.04$2.45$1.48
Earnings per share, diluted$0.51$0.58$0.66$0.70$0.04$2.45$1.47
Dividends per share$0.13$0.13$0.13$0.13$0.13$0.52$0.43
Return on average assets(A)
1.02 %1.14 %1.31 %1.38 %0.07 %1.21 %0.64 %
Return on average equity(A)
7.33 %8.34 %9.67 %10.62 %0.60 %8.96 %5.69 %
Return on average tangible equity(A)(B)
12.61 %14.47 %17.05 %19.32 %1.16 %15.75 %9.16 %
Net interest margin (tax equivalent)(A)(C)
4.40 %4.37 %4.49 %4.80 %4.71 %4.51 %3.94 %
Net interest margin (tax equivalent) excluding PAA(A)(B)(C)3.91 %3.87 %3.97 %4.38 %4.38 %4.03 %3.83 %
Efficiency ratio(D)
69.21 %63.50 %60.83 %58.96 %65.14 %63.02 %64.23 %
Capital Ratios
Stellar Bancorp, Inc. (Consolidated)
Equity to assets14.29 %13.70 %13.53 %13.64 %12.69 %14.29 %12.69 %
Tangible equity to tangible assets(B)
9.04 %8.37 %8.19 %8.15 %7.24 %9.04 %7.24 %
Estimated Total capital ratio (to risk-weighted assets)14.02 %13.42 %13.03 %12.72 %12.39 %14.02 %12.39 %
Estimated Common equity Tier 1 capital (to risk weighted assets)
11.77 %11.14 %10.67 %10.39 %10.04 %11.77 %10.04 %
Estimated Tier 1 capital (to risk-weighted assets)
11.89 %11.25 %10.78 %10.50 %10.15 %11.89 %10.15 %
Estimated Tier 1 leverage (to average tangible assets)
10.18 %9.82 %9.51 %9.01 %8.55 %10.18 %8.55 %
Stellar Bank
Estimated Total capital ratio (to risk-weighted assets)13.65 %13.13 %12.80 %12.42 %12.02 %13.65 %12.02 %
Estimated Common equity Tier 1 capital (to risk-weighted assets)
12.20 %11.63 %11.22 %10.87 %10.46 %12.20 %10.46 %
Estimated Tier 1 capital (to risk-weighted assets)
12.20 %11.63 %11.22 %10.87 %10.46 %12.20 %10.46 %
Estimated Tier 1 leverage (to average tangible assets)
10.44 %10.15 %9.89 %9.35 %8.81 %10.44 %8.81 %
Other Data
Weighted average shares:
Basic53,28253,31353,29753,02152,71553,22934,738
Diluted53,35053,38053,37553,13852,97353,31335,007
Period end shares outstanding53,29153,32253,30353,29652,95553,29152,955
Book value per share$28.54$27.40$27.37$27.14$26.12$28.54$26.12
Tangible book value per share(B)
$17.02$15.76$15.60$15.24$14.02$17.02$14.02
Employees - full-time equivalents9981,0081,0041,0551,0259981,025

(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
December 31, 2023September 30, 2023December 31, 2022
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$7,973,780 $139,114 6.92 %$8,043,706 $138,948 6.85 %$7,666,502 $116,145 6.01 %
Securities1,386,079 10,040 2.87 %1,471,916 9,930 2.68 %1,795,082 12,891 2.85 %
Deposits in other financial institutions217,068 3,021 5.52 %181,931 2,391 5.21 %354,117 2,933 3.29 %
Total interest-earning assets9,576,927 $152,175 6.30 %9,697,553 $151,269 6.19 %9,815,701 $131,969 5.33 %
Allowance for credit losses on loans(92,992)(99,892)(88,150)
Noninterest-earning assets1,142,438 1,143,634 1,218,458 
Total assets$10,626,373 $10,741,295 $10,946,009 
Liabilities and
    Shareholders' Equity
Interest-Bearing Liabilities:
Interest-bearing demand
    deposits
$1,420,892 $10,548 2.95 %$1,400,508 $10,415 2.95 %$1,465,711 $5,422 1.47 %
Money market and savings
    deposits
2,163,348 14,485 2.66 %2,166,610 13,142 2.41 %2,705,984 6,984 1.02 %
Certificates and other time
    deposits
1,461,227 15,075 4.09 %1,400,367 13,282 3.76 %932,058 2,083 0.89 %
Borrowed funds275,694 4,154 5.98 %411,212 5,801 5.60 %37,824 417 4.37 %
Subordinated debt109,713 1,983 7.17 %109,608 1,908 6.91 %109,307 1,449 5.26 %
Total interest-bearing liabilities5,430,874 $46,245 3.38 %5,488,305 $44,548 3.22 %5,250,884 $16,355 1.24 %
Noninterest-Bearing
    Liabilities:
Noninterest-bearing demand
    deposits
3,624,417 3,695,592 4,199,982 
Other liabilities95,705 86,389 147,205 
Total liabilities9,150,996 9,270,286 9,598,071 
Shareholders' equity1,475,377 1,471,009 1,347,938 
Total liabilities and
    shareholders' equity
$10,626,373 $10,741,295 $10,946,009 
Net interest rate spread2.92 %2.97 %4.09 %
Net interest income and margin$105,930 4.39 %$106,721 4.37 %$115,614 4.67 %
Net interest income and net
    interest margin (tax equivalent)
$106,121 4.40 %$106,919 4.37 %$116,574 4.71 %
Cost of funds2.03 %1.92 %0.69 %
Cost of deposits1.84 %1.69 %0.62 %
7

Stellar Bancorp, Inc.
Financial Highlights
(Unaudited)
Years Ended December 31,
20232022
Average BalanceInterest Earned/
Interest Paid		Average Yield/RateAverage BalanceInterest Earned/
Interest Paid		Average Yield/Rate
(Dollars in thousands)
Assets
Interest-Earning Assets:
Loans$7,961,911 $537,722 6.75 %$5,171,944 $280,375 5.42 %
Securities1,490,588 41,047 2.75 %1,779,425 37,861 2.13 %
Deposits in other financial institutions242,803 12,048 4.96 %462,075 4,758 1.03 %
Total interest-earning assets9,695,302 $590,817 6.09 %7,413,444 $322,994 4.36 %
Allowance for credit losses
    on loans		(95,668)(59,099)
Noninterest-earning assets1,147,232 633,928 
Total assets$10,746,866 $7,988,273 
Liabilities and Shareholders' Equity
Interest-Bearing Liabilities:
Interest-bearing demand deposits$1,464,015 $38,689 2.64 %$1,140,575 $9,278 0.81 %
Money market and savings deposits2,259,264 48,646 2.15 %1,841,348 9,861 0.54 %
Certificates and other time deposits1,239,345 41,286 3.33 %1,034,491 7,825 0.76 %
Borrowed funds318,721 17,807 5.59 %61,773 1,216 1.97 %
Subordinated debt109,560 7,630 6.96 %109,111 5,856 5.37 %
Total interest-bearing liabilities5,390,905 $154,058 2.86 %4,187,298 34,036 0.81 %
Noninterest-Bearing Liabilities:
Noninterest-bearing demand deposits3,814,651 2,833,865 
Other liabilities85,376 62,581 
Total liabilities9,290,932 7,083,744 
Shareholders' equity1,455,934 904,529 
Total liabilities and shareholders' equity$10,746,866 $7,988,273 
Net interest rate spread3.23 %3.55 %
Net interest income and margin$436,759 4.50 %$288,958 3.90 %
Net interest income and net interest
    margin (tax equivalent)
$437,670 4.51 %$292,152 3.94 %
Cost of funds1.67 %0.48 %
Cost of deposits1.47 %0.39 %
8

Stellar Bancorp, Inc.
Financial Highlights
(Unaudited)

Three Months Ended
20232022
December 31September 30June 30March 31December 31
(Dollars in thousands)
Period-end Loan Portfolio:
Commercial and industrial$1,409,002$1,474,600$1,512,476$1,477,340$1,455,795
Paycheck Protection Program (PPP)5,1005,9688,02711,08113,226
Real estate:
Commercial real estate (including multi-family residential)4,071,8074,076,6064,038,4874,014,6093,931,480
Commercial real estate construction and land development1,060,4061,078,2651,136,1241,034,5381,037,678
1-4 family residential (including home equity)1,047,1741,024,9451,009,4391,008,3621,000,956
Residential construction267,357289,553311,208292,143268,150
Consumer and other64,28754,59152,95747,97147,466
Total loans held for investment$7,925,133$8,004,528$8,068,718$7,886,044$7,754,751
Deposits:
Noninterest-bearing$3,546,815$3,656,288$3,713,536$3,877,859$4,230,169
Interest-bearing
Demand1,659,9991,397,4921,437,5091,394,2441,591,828
Money market and savings2,136,7772,128,9502,174,0732,401,8402,575,923
Certificates and other time1,529,8761,503,8911,441,2511,064,932869,712
Total interest-bearing deposits5,326,6525,030,3335,052,8334,861,0165,037,463
Total deposits$8,873,467$8,686,621$8,766,369$8,738,875$9,267,632
Asset Quality:
Nonaccrual loans$39,191$38,291$43,349$43,413$45,048
Accruing loans 90 or more days past due—————
Total nonperforming loans39,19138,29143,34943,41345,048
Other repossessed assets———124—
Total nonperforming assets$39,191$38,291$43,349$43,537$45,048
Net charge-offs $2,577$8,116$236$192$5,707
Nonaccrual loans:
Commercial and industrial$5,048$14,991$22,968$23,329$25,402
Real estate:
Commercial real estate (including multi-family residential)16,69913,5638,2219,0269,970
Commercial real estate construction and land development5,04317038827—
1-4 family residential (including home equity)8,8748,44210,88010,5869,404
Residential construction3,288635665195—
Consumer and other239490227250272
Total nonaccrual loans$39,191$38,291$43,349$43,413$45,048
Asset Quality Ratios:
Nonperforming assets to total assets0.37 %0.36 %0.40 %0.41 %0.41 %
Nonperforming loans to total loans0.49 %0.48 %0.54 %0.55 %0.58 %
Allowance for credit losses on loans to nonperforming loans233.94 %244.38 %231.14 %221.56 %206.85 %
Allowance for credit losses on loans to total loans1.16 %1.17 %1.24 %1.22 %1.20 %
Net charge-offs to average loans (annualized)0.13 %0.40 %0.01 %0.01 %0.30 %

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 EndedYears Ended
2023202220232022
December 31September 30June 30March 31December 31December 31December 31
(Dollars and share amounts in thousands, except per share data)
Net income$27,266$30,908$35,175$37,148$2,052$130,497$51,432
Add: Provision for credit losses1,0472,3151,9153,66644,7938,94350,712
Add: Provision for income taxes6,5627,4457,4679,913(218)31,38711,092
Pre-tax, pre-provision income$34,875$40,668$44,557$50,727$46,627$170,827$113,236
Total average assets$10,626,373$10,741,295$10,740,138$10,882,533$10,946,009$10,746,866$7,988,273
Pre-tax, pre-provision return on average assets(B)
1.30 %1.50 %1.66 %1.89 %1.69 %1.59 %1.42 %
Total shareholders' equity$1,521,018$1,460,846$1,458,680$1,446,216$1,383,176$1,521,018$1,383,176
Less: Goodwill and core deposit intangibles, net614,030620,262627,065633,925640,785614,030640,785
Tangible shareholders’ equity$906,988$840,584$831,615$812,291$742,391$906,988$742,391
Shares outstanding at end of period53,29153,32253,30353,29652,95553,29152,955
Tangible book value per share$17.02$15.76$15.60$15.24$14.02$17.02$14.02
Average shareholders' equity$1,475,377$1,471,009$1,458,473$1,418,082$1,347,938$1,455,934$904,529
Less: Average goodwill and core deposit intangibles, net617,236623,864630,854638,110658,107627,449343,257
Average tangible shareholders’ equity$858,141$847,145$827,619$779,972$689,831$828,485$561,272
Return on average tangible equity(B)
12.61 %14.47 %17.05 %19.32 %1.18 %15.75 %9.16 %
Total assets$10,647,139$10,665,460$10,778,351$10,604,718$10,900,437$10,647,139$10,900,437
Less: Goodwill and core deposit intangibles, net614,030620,262627,065633,925640,785614,030640,785
Tangible assets$10,033,109$10,045,198$10,151,286$9,970,793$10,259,652$10,033,109$10,259,652
Tangible equity to tangible assets9.04 %8.37 %8.19 %8.15 %7.24 %9.04 %7.24 %
Net interest income (tax equivalent)$106,121$106,919$108,509$116,119$116,574$437,670$292,152
Less: Purchase accounting accretion11,72612,40012,57210,1048,16046,8028,370
Adjusted net interest income (tax equivalent)$94,395$94,519$95,937$106,015$108,414$390,868$283,782
Average earning assets$9,576,927$9,697,553$9,693,527$9,815,803$9,815,701$9,695,302$7,413,444
Net interest margin (tax equivalent) excluding PAA3.91 %3.87 %3.97 %4.38 %4.38 %4.03 %3.83 %
(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
Fourth Quarter 2023 Earnings Presentation Exhibit 99.2

 
Forward-Looking Statements and Non-GAAP Financial Measures 2 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 merger of equals (the “Merger”) between Allegiance Bancshares, Inc. and CBTX, Inc. which became effective on October 1, 2022, 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 Bancorp, Inc. (“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. GAAP Reconciliation of Non-GAAP Financial Measures The Company’s management uses certain non-GAAP (generally accepted accounting principles) financial measures to evaluate its performance. The Company 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 the Company’s performance and when planning, forecasting, analyzing and comparing past, present and future periods. Specifically, the Company reviews pre-tax, pre-provision income; pre-tax pre-provision ROAA, the ratio of tangible equity to tangible assets; net interest margin (tax equivalent) excluding purchase accounting adjustments; and loan yield excluding accretion for internal planning and forecasting purposes. The Company has included in this presentation 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.

 
3 (1) Refer to the calculation of this non-GAAP financial measure and a reconciliation to its most directly comparable GAAP financial measure in the appendix. Stellar Bancorp, Inc. - Snapshot Houston’s largest regionally-focused bank  Principal banking subsidiary renamed Stellar Bank upon successful system conversion in February 2023  Combination delivered scale, growth opportunities, and talent depth  Merger-of-equals between CBTX, Inc. and Allegiance Bancshares, Inc. became effective October 1, 2022 (NYSE: STEL)  Valuable franchise in one of the best markets in the U.S. 12/31/2023 9/30/2023 Total assets 10,647,139$ 10,665,460$ Total loans 7,925,133 8,004,528 Total deposits 8,873,467 8,686,621 Total loans to total deposits 89.31% 92.15% Equity to assets 14.29% 13.70% Tangible equity to tangible assets (1) 9.04% 8.37% (Dollars in thousands) Banking Centers  Strong core earnings power and capital position

 
$1.9 $1.9 $2.1 $2.5 $2.6 $3.0 $3.1 $5.5 $5.7 $6.7 $7.6 $7.8 $8.6 $10.2 $12.0 $27.2 $29.8 $157.3 Texas Independent BOK Regions Texas Capital Truist Comerica Third Coast Woodforest Prosperity Capital One Frost Cadence Stellar PNC Zions BofA Wells Fargo JPMorgan Focused on Serving the Houston Region 4 Note: Deposit market share based on FDIC data as of June 30, 2023. 1) Houston Region defined as the Houston-Pasadena-The Woodlands and Beaumont-Port Arthur MSAs; Excludes non-retail branches. Source: S&P Capital IQ Pro; Excludes non-retail branches Stel a Houston Region Market Share(1) Deposits ($B) Houston Percent of Houston T otal Assets Region Com pany Region Market Nam e ($B) Deposits ($B) Deposits (%) Share (%) JPMorgan 3,868 157.3 6.6 48.2 Wells Fargo 1,876 29.8 2.2 9.1 BofA 3,123 27.2 1.4 8.3 Zions 87.2 12.0 16.2 3.7 PNC 558 10.2 2.4 3.1 Stellar 10.8 8.6 97.7 2.6 Cadence 48.8 7.8 20.1 2.4 Frost 48.6 7.6 18.8 2.3 Capital One 468 6.7 1.9 2.0 Prosperity 39.9 5.7 20.9 1.8 Woodforest 9.6 5.5 69.7 1.7 Third Coast 4.0 3.1 90.9 0.9 Comerica 91.0 3.0 4.5 0.9 Truist 555 2.6 0.6 0.8 Texas Capital 29.0 2.5 10.7 0.8 Regions 156 2.1 1.6 0.6 BOK 49.2 1.9 5.7 0.6 Texas Independent 2.2 1.9 100.0 0.6 (1)

 
5 Full Year and Fourth Quarter 2023 Highlights (1) Refer to the calculation of these non-GAAP financial measures and a reconciliation to their most directly comparable GAAP financial measures in the appendix. (2) Annualized.  Strong Net Interest Margin (“NIM”): NIM of 4.40% (2) and NIM excluding purchase accounting adjustments (“PAA”) of 3.91% (1)(2) , up from 4.37% (2) and 3.87% (1)(2) , respectively, for the third quarter 2023.  Solid Profitability: Net income of $27.3 million, or $0.51 per diluted share, for the fourth quarter 2023. Return on average assets was 1.02% (2) and return on average tangible equity was 12.61% (1)(2) for the fourth quarter 2023. The fourth quarter 2023 results reflect certain nonrecurring items, including the FDIC special insurance assessment of $2.4 million. Fourth Quarter 2023 Financial Highlights:  Strong Earnings: Stellar recorded 2023 net income of $130.5 million, or diluted earnings per share of $2.45, representing a return on average assets of 1.21%, return on average equity of 8.96% and return on average tangible equity of 15.75%(1) .  Meaningful Regulatory Capital Build: Total risk based capital ratio increased to 14.02% at December 31, 2023 from 12.39% at December 31, 2022 and Tier 1 leverage ratio increased to 10.18% at December 31, 2023 from 8.55% at December 31, 2022.  Book Value Growth: During 2023, book value per share increased to $28.54 at December 31, 2023 compared to $26.12 at December 31, 2022 while tangible book value per share increased by $3.00, or 21.4%, from $14.02 (2) at December 31, 2022 to $17.02 (2) at December 31, 2023.  Advantageous Funding Profile: Noninterest-bearing deposit balances remained a significant portion of our deposit funding base, ending the year at 40.0% of total deposits. 2023 Financial Highlights Tangible Book Value Per Share (1) Total Capital Ratio 12.39% 14.02% 2022 2023 $14.02 $17.02 2022 2023

 
Fourth Quarter Deposit Summary 6 Deposit Mix Deposits (in millions) Maintaining Discipline Navigating Competitive Deposit Market As of December 31, 2023: • Retained favorable mix: 40.0% noninterest-bearing deposits • Estimated uninsured deposits, net of collateralized deposits: 42.6% • Average account size of $92 thousand, excluding collateralized and brokered deposits • 89.3% loan to deposit ratio • Brokered deposits increased to $615.9 million from $579.0 million at September 30, 2023 and FHLB borrowings decreased to $50.0 million from $324.0 million at September 30, 2023 . (1) NIB 40.0% IB Demand 18.7% MMDA & Sav. 24.1% CD's 17.2% Q4 2023 Q3 2023 Noninterest-bearing ("NIB") 3,546,815$ 3,656,288$ Interest-bearing demand ("IB Demand") 1,659,999 1,397,492 Money market and savings ("MMDA & Sav.") 2,136,777 2,128,950 Certificates and other time ("CD's") 1,529,876 1,503,891 Total deposits 8,873,467$ 8,686,621$ Cost of deposits 1.84% 1.69% Cost of interest-bearing deposits 3.15% 2.94% (Dollars in thousands)

 
Fourth Quarter Loan Summary 7 (1) Refer to the calculation of these non-GAAP financial measures and a reconciliation to their most directly comparable GAAP financial measures in the appendix. . Loan Portfolio Composition (1) (1) 1-4 Family 13.2% Multifamily RE 5.8% Resi. C&D 3.4% CRE C&D 13.4% CRE 21.8% OO CRE 23.7% C&I 17.9% Consumer & Other 0.8%Q4 2023 Q3 2023 Commercial and Industrial (“C&I”) 1,414,102$ 1,480,568$ Commercial Real Estate (“CRE”) 1,728,566 1,731,467 Owner-occupied CRE (“OO CRE") 1,880,075 1,891,794 Multifamily Real Estate 463,166 453,345 Total Commercial Real Estate 4,071,807 4,076,606 CRE Construction & Development (“CRE C&D”) 1,060,406 1,078,265 1-4 Family Residential ("1-4 Family") 1,047,174 1,024,945 Residential Construction (“Resi. C&D”) 267,357 289,553 Consumer and other 64,287 54,591 Total 7,925,133$ 8,004,528$ (Dollars in thousands) Average Yield / Rate Excl. PAA(1) Average Yield / Rate Excl. PAA(1) Interest-Earning Assets: Loans 7,973,780$ 139,114$ 6.92% 6.34% 8,043,706$ 138,948$ 6.85% 6.24% Securities 1,386,079 10,040 2.87% 1,471,916 9,930 2.68% Deposits in other financial institutions 217,068 3,021 5.52% 181,931 2,391 5.21% Total interest-earning assets 9,576,927$ 152,175$ 6.30% 5.82% 9,697,553$ 151,269$ 6.19% 5.68% (Dollars in thousands) Q4 2023 Q3 2023 Average Outstanding Balance Interest Earned / Interest Paid Average Outstanding Balance Interest Earned / Interest Paid

 
Fourth Quarter Asset Quality Summary 8 Nonperforming Loans by Type (1) Combined represents the simple addition of legacy balances for 2022; estimated. Allowance for credit losses on loans: • As of December 31, 2023, was $91.7 million, or 1.16% of total loans, compared to $93.6 million, or 1.17% of total loans, as of September 30, 2023 Allowance for credit losses on loans to nonperforming loans: • As of December 31, 2023, was 233.94% compared to 244.38% as of September 30, 2023 Q4 2023 Q3 2023 Total nonperforming loans 39,191$ 38,291$ Nonperforming loans to total loans 0.49% 0.48% Total nonperforming assets 39,191$ 38,291$ 0.37% 0.36% Net charge-offs 2,577$ 8,116$ 0.13% 0.40% (Dollars in thousands) Nonperforming assets to total assets Net charge-offs to average loans (annualized) Nonaccrual Loans with No Related Allowance Nonaccrual Loans with Related Allowance Total Nonaccrual Loans Commercial and industrial 1,616$ 3,432$ 5,048$ Commercial real estate (including multi-family residential) 11,844 4,855 16,699 Commercial real estate construction and land development 5,043 — 5,043 1-4 family residential (including equity) 7,400 1,474 8,874 Residential construction 3,288 — 3,288 Consumer and other 54 185 239 29,245$ 9,946$ 39,191$ (Dollars in thousands) C&I 12.9% CRE 28.3% OO CRE 9.9% Multifamily RE 4.4% CRE C&D 12.9% 1-4 Family 22.6% Other 9.0%

 
Regulatory Capital Ratios 9 (1) Refer to the calculation of this non-GAAP financial measure and a reconciliation to its most directly comparable GAAP financial measure in the appendix. Regulatory capital ratios have grown meaningfully in 2023 Minimum Required Plus Capital Conservation Buffer Consolidated Capital Ratios Total Capital Ratio (to risk-weighted assets) 14.02% 12.39% 10.50% Common Equity Tier 1 Capital Ratio (to risk-weighted assets) 11.77% 10.04% 7.00% Tier 1 Capital Ratio (to risk-weighted assets) 11.89% 10.15% 8.50% Tier 1 Leverage Ratio (to average tangible assets) 10.18% 8.55% 4.00% Tangible equity to tangible assets (1) 9.04% 7.24% N/A Bank Capital Ratios Total Capital Ratio (to risk-weighted assets) 13.65% 12.02% 10.50% Common Equity Tier 1 Capital Ratio (to risk-weighted assets) 12.20% 10.46% 7.00% Tier 1 Capital Ratio (to risk-weighted assets) 12.20% 10.46% 8.50% Tier 1 Leverage Ratio (to average tangible assets) 10.44% 8.81% 4.00% 2023 2022

 
10 Strong Liquidity Profile Stellar is well-positioned to manage through current environment Sources of Liquidity at December 31, 2023 Sources of Liquidity Estimated Uninsured Deposits at December 31, 2023 (1) Brokered deposit capacity is governed by internal policy limits. 95.8% 126.6% Immediate available liquidity coverage of estimated uninsured deposits, net of collateralized deposits Total available liquidity coverage of estimated uninsured deposits, net of collateralized deposits (Dollars in millions) Cash 399$ Unpledged securities 788 Total on-balance sheet 1,187 FHLB available capacity 1,608 Discount window available capacity 824 Total immediate available liquidity 3,619 Available brokered deposit capacity(1) 1,164 Total available liquidity 4,783$ Amount (Dollars in millions) Total deposits 8,873$ Estimated uninsured deposits 4,946 Less: collateralized deposits (1,169) Estimated uninsured, net of collateralized deposits 3,777$ Percent of total deposits 42.6% Amount

 
11 Key Takeaways Excellent core funding profile Strong earnings power and franchise value in one of the best markets in the U.S. Key success factors: Credit performance and risk management Significant financial flexibility Positioned for rapid capital-build to continue

 
4.8% 4.1% 2.1% Houston MSA Texas USA 5.0% 4.4% 2.4% Houston MSA Texas USA 29.8 27.2 12.0 10.2 8.6 7.8 7.6 6.7 5.7 JP Morgan Wells Fargo BofA Zions PNC Stellar Cadence Frost Capital One Prosperity Diverse and Strong Markets of Operation 12 Houston is Diverse, with Significant Economic Tailwinds Greater Houston Market  Houston is the #1 most diverse city in the U.S. based on socioeconomic factors, according to Wallet Hub  26th largest economy in the world – if ranked as a country − 15th largest population in the U.S – if ranked as a state  Port Houston is the largest Gulf Coast container port, 1st in foreign tonnage for 26 consecutive years  Houston is home to the Texas Medical Center, the world's largest medical complex, which has 10 million annual patient encounters  Business friendly: #3 among U.S. metro areas in Fortune 500 headquarters (26)  Major business clusters in Beaumont-Port Arthur area include chemical and petroleum manufacturing, materials manufacturing and transportation Top 10 Bank by Deposits in Houston Region(1) ($B) Note: Deposit market share based on FDIC data as of June 30, 2023. 1) Houston Region defined as the Houston-Pasadena-The Woodlands and Beaumont-Port Arthur MSAs; Excludes non-retail branches. Source: S&P Capital IQ Pro, Houston.org, Texas Medical Center, and Wallet Hub. $157 Est. Population Growth ’23-’28 Est. Number of Households Growth ’23-’28 Population Change (’18-’23) Median Household Income (’23) Significant Deposit Share Houston MSA: 5.5% Texas: 5.4% / U.S: 2.4% Houston MSA: $74,325 Texas: $71,347 / U.S: $73,503 Stellar has over $8.6 billion in deposits in the Houston region(1) Houston HQ Bank

 
Professional and Business Services 17% Government 13% Education and Health Services 13% Leisure and Hospitality 10% Retail Trade 9% Manufacturing 7% Construction 6% Transportation, Warehousing, and Utilities 6% Financial Activities 6% Wholesale Trade 5% Other Services 4% Mining and Logging 2% Information 1% 4.6% 5.4% 4.0% 3.2% 2.6% 0.9% 4.7% 6.1% 2.8% 2.9% 2.9% (3.9)% 2.2% (0.6)% Mining and Logging Private Education and Health Services Financial Activities Leisure and Hospitality Professional and Business Services Information Wholesale Trade Transportation, Warehousing, and Utilities Government Total Nonfarm Manufacturing Construction Retail Trade Other Services Diversified and Growing Economy 13 1) Data is preliminary as of September 2023, from the U.S. Bureau of Labor Statistics Source: U.S. Bureau of Labor Statistics Houston vs. U.S. Job Change by Industry (Sept ‘22 – Sept. ‘23)(1) Diversified Economy by Job Sector(1) Commentary  Houston’s economy has become much more diversified over the years, while remaining the energy capital of the United States  Houston's largest job sector, professional and business services, recovered faster than U.S. and has shown sector growth  Financial activities showed a large gain over the last year versus the United States United States Houston MSA

 
2.0 3.0 4.0 5.0 6.0 7.0 2.0 2.5 3.0 3.5 2007 2009 2011 2013 2015 2017 2019 2021 2023 Houston is a Resilient Market 14  Since the Great Recession, Houston has proven its resiliency, weathering economic cycles and natural disasters − Houston welcomed 2.1 million new residents and created over 905 thousand jobs since 2007 P o p u la tio n (M ) O il P ri ce D ec li n e G re a t R ec es si o n Ik e H a rv ey C O V ID -1 9 E m p lo y m e n t (M ) Employment Population1) Data is preliminary as of September 2023, from the U.S. Bureau of Labor Statistics Source: U.S. Bureau of Labor Statistics, Texas Workforce Commission

 
302,570 (300,000) (200,000) (100,000) 0 100,000 200,000 300,000 400,000 H o u st o n D a ll a s N ew Y o rk A tl a n ta P h o en ix M ia m i T a m p a S ea tt le R iv er si d e B o st o n D en v er W a sh in g to n S a n F ra n ci sc o M in n ea p o li s P h il a d el p h ia S a n D ie g o B a lt im o re D et ro it L o s A n g el es C h ic a g o Houston’s Growth Projected to Continue 15 Source: S&P Capital IQ Pro as of June 30, 2022; Oxford Economics, December 2022, CBRE Research. 2010-2023 Population Change (%) Houston has the highest projected net migration 20 most populated metros 5.20% 1.35% 0.46% 24.61% 24.45% 19.57% 8.34% New York MSA Los Angeles MSA Chicago MSA Dallas MSA Houston MSA Texas U.S. • Houston has seen tremendous growth over the past ten years, aided by the relocation of multiple Fortune 500 companies • The growth is not expected to stop any time soon either, as it is projected to see the largest net migration compared to the top 30 most populated metros • The continued growth of the Houston metro will strengthen and diversify the greater economy, benefiting the businesses and constituents Houston is projected to add over 302,000 people by net migration in the next 5 years – a 60,500/year average

 
$92,662 $86,611 $83,193 $81,625 $74,325 $71,347 $73,503 New York MSA Los Angeles MSA Chicago MSA Dallas MSA Houston MSA Texas U.S. $787,500 $978,000 $335,000 $385,000 $330,000 $341,700 $400,528 New York MSA Los Angeles MSA Chicago MSA Dallas MSA Houston MSA Texas U.S. 8.5x 11.3x 4.0x 4.7x 4.4x 4.8x 5.4x New York MSA Los Angeles MSA Chicago MSA Dallas MSA Houston MSA Texas U.S. Housing Market and Cost of Living 16 • Cost of living in Houston is 8.3% less than that of the U.S. market average while the median household income is above the U.S. median • Houston is #2 in U.S. annual new home starts and closing, only behind Dallas 2 0 2 3 M e d ia n H o u s e h o ld I n c o m e 2 0 2 3 M e d ia n H o m e P r ic e H H I t o M e d ia n H o m e P r ic e R a ti o Source: S&P Capital IQ Pro as of June 30, 2022

 
Appendix: Non-GAAP Reconciliation(1) 17 (1) See the disclosure under the heading “GAAP Reconciliation of Non-GAAP Financial Measures” on slide 2 regarding the use of non-GAAP financial measures. (2) Interim periods annualized. Net income $ 27,266 $ 30,908 $ 130,497 $ 51,432 Add: Provision for credit losses 1,047 2,315 8,943 50,712 Add: Provision for income taxes 6,562 7,445 31,387 11,092 Pre-tax, pre-provision Income $ 34,875 $ 40,668 $ 170,827 $ 113,236 Total average assets $ 10,626,373 $ 10,741,295 $ 10,746,866 $ 7,988,273 Pre-tax, pre-provision return on average assets (2) 1.30% 1.50% 1.59% 1.42% Total shareholders' equity $ 1,521,018 $ 1,460,846 $ 1,521,018 $ 1,383,176 Less: Goodw ill and core deposit intangibles, net 614,030 620,262 614,030 640,785 Tangible shareholders' equity $ 906,988 $ 840,584 $ 906,988 $ 742,391 Total assets $ 10,647,139 $ 10,665,460 $ 10,647,139 $ 10,900,437 Less: Goodw ill and core deposit intangibles, net 614,030 620,262 614,030 640,785 Tangible assets $ 10,033,109 $ 10,045,198 $ 10,033,109 $ 10,259,652 Tangible equity to tangible assets 9.04% 8.37% 9.04% 7.24% Net interest income (tax equivalent) $ 106,121 $ 106,919 $ 437,670 $ 292,152 Less: Purchase accounting accretion 11,726 12,400 46,802 8,370 Adjusted net interest income (tax equivalent) $ 94,395 $ 94,519 $ 390,868 $ 283,782 Average earning assets $ 9,576,927 $ 9,697,553 $ 9,695,302 $ 7,413,444 Net interest margin (tax equivalent)(2) 4.40% 4.37% 4.51% 3.94% Net interest margin (tax equivalent) excluding PAA (2) 3.91% 3.87% 4.03% 3.83% Interest on loans, as reported $ 139,114 $ 138,948 $ 537,722 $ 280,375 Less: Purchase accounting accretion (loans) 11,726 12,400 46,802 8,370 Interest on loans w ithout loan discount accretion $ 127,388 $ 126,548 $ 490,920 $ 272,005 Average loans $ 7,973,780 $ 8,043,706 $ 7,961,911 $ 5,171,944 Loan yield, as reported 6.92% 6.85% 6.75% 5.42% Loan yield, w ithout discount accretion 6.34% 6.24% 6.17% 5.26% Interest on interest-earning assets, as reported $ 152,175 $ 151,269 $ 590,817 $ 322,994 Less: Purchase accounting accretion (loans) 11,726 12,400 46,802 8,370 Interest on interest-earnings assets w ithout loan discount accretion $ 140,449 $ 138,869 $ 544,015 $ 314,624 Average interest-earnings assets $ 9,576,927 $ 9,697,553 $ 9,695,302 $ 7,413,444 Yield on interest-earnings assets, as reported 6.30% 6.19% 6.09% 4.36% Yield on interest-earnings assets, w ithout discount accretion 5.82% 5.68% 5.61% 4.24% Year 2022 (Dollars in thousands) Q4 2023 Q3 2023 Year 2023

 
18 NYSE: STEL

 
v3.23.4
Cover
Oct. 27, 2023
Cover [Abstract]  
Document Type 8-K
Amendment Flag false
Document Period End Date Jan. 26, 2024
Entity File Number 001-38280
Entity Registrant Name Stellar Bancorp, Inc.
Entity Central Index Key 0001473844
Entity Tax Identification Number 20-8339782
Entity Incorporation, State or Country Code TX
Entity Address, Address Line One 9 Greenway Plaza,
Entity Address, Address Line Two Suite 110
Entity Address, City or Town Houston
Entity Address, State or Province TX
Entity Address, Postal Zip Code 77046
City Area Code 713
Local Phone Number 210-7600
Written Communications false
Soliciting Material false
Pre-commencement Tender Offer false
Pre-commencement Issuer Tender Offer false
Title of 12(b) Security Common stock, par value $0.01 per share
Trading Symbol STEL
Security Exchange Name NYSE
Entity Emerging Growth Company false
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