Stellar Bancorp, Inc. Reports Second Quarter 2024 Results

Rhea-AI Summary

Stellar Bancorp, Inc. (NYSE: STEL) reported net income of $29.8 million, or diluted earnings per share of $0.56, for the second quarter of 2024. This represents an increase from the first quarter's net income of $26.1 million, or $0.49 per share. The company's annualized return on average assets was 1.13%, with a return on average equity of 7.78%.

Key highlights include:

• Total risk-based capital ratio increased to 15.34%
• Tier 1 leverage ratio rose to 10.93%
• Tax equivalent net interest margin was 4.24%
• Net charge-offs were $715 thousand, or 0.02%, year-to-date

The company's focus remains on building capital, maintaining credit quality, and ensuring strong liquidity. Stellar's CEO, Robert R. Franklin, Jr., emphasized the bank's preparedness for potential interest rate changes and its strategic positioning in resilient markets.

Positive

• Net income increased to $29.8 million from $26.1 million in the previous quarter
• Diluted earnings per share rose to $0.56 from $0.49
• Total risk-based capital ratio improved to 15.34% from 14.62%
• Tier 1 leverage ratio increased to 10.93% from 10.55%
• Strong tax equivalent net interest margin of 4.24%
• Low net charge-offs of 0.02% year-to-date

Negative

• Net interest income decreased by $708 thousand to $101.4 million
• Noninterest income decreased by $880 thousand to $5.4 million
• Total loans decreased by $194.2 million to $7.71 billion
• Total deposits decreased by $69.4 million to $8.73 billion
• Efficiency ratio slightly increased to 66.63% from 66.18%

Insights

Financial Analyst

Stellar Bancorp's Q2 2024 results demonstrate resilience in a challenging economic environment. The bank reported $29.8 million in net income, translating to diluted EPS of $0.56, up from $26.1 million and $0.49 in Q1 2024, respectively. This 13.8% quarter-over-quarter increase in net income is noteworthy.

The bank's focus on capital, credit and liquidity appears to be paying off. The total risk-based capital ratio improved to 15.34% from 14.62% in Q1, while the Tier 1 leverage ratio increased to 10.93% from 10.55%. These improvements strengthen Stellar's position amidst economic uncertainties.

However, there are some areas of concern. Net interest income decreased slightly by $708,000 to $101.4 million and the net interest margin dipped 2 basis points to 4.24%. This suggests some pressure on the bank's core earnings. Additionally, noninterest income fell by 14% to $5.4 million, primarily due to decreased gains on asset sales.

The efficiency ratio slightly worsened to 66.63% from 66.18%, indicating a minor decline in operational efficiency. However, the bank's credit quality remains solid, with net charge-offs at a negligible $1,000 for Q2.

Overall, Stellar Bancorp's performance shows stability and growth in key areas, but also highlights challenges in maintaining net interest income and noninterest income in the current economic climate.

Market Research Analyst

Stellar Bancorp's Q2 results offer interesting insights into the banking sector's current dynamics. The bank's strategy of reducing commercial real estate exposure and pursuing a more balanced lending approach through expansion of its commercial and industrial portfolio is noteworthy. This shift could be a response to perceived risks in the real estate market and an attempt to diversify revenue streams.

The bank's performance in some of the strongest markets in the country provides a unique perspective on regional economic resilience. Despite the Federal Reserve's tightening cycle, these markets have shown robustness, which bodes well for Stellar's future prospects.

However, the mention of a contentious presidential election as a factor to monitor is intriguing. Political uncertainty often leads to market volatility and Stellar's proactive approach in building a strong balance sheet could be a strategic move to weather potential economic turbulence.

The decrease in noninterest income, particularly from reduced gains on asset sales, might indicate a cooling in certain market segments. This trend, if continued, could pressure banks to find alternative revenue sources.

Lastly, the estimated 43.3% of uninsured deposits (net of collateralized deposits) is a metric worth watching. In the wake of recent banking sector stress, depositor confidence and the stability of funding sources remain important factors for all banks.

HOUSTON--(BUSINESS WIRE)-- Stellar Bancorp, Inc. (the “Company” or “Stellar”) (NYSE: STEL) today reported net income of $29.8 million, or diluted earnings per share of $0.56, for the second quarter of 2024 compared to net income of $26.1 million, or diluted earnings per share of $0.49, for the first quarter of 2024.

“We are pleased to announce our second quarter 2024 results,” said Robert R. Franklin, Jr., Stellar’s Chief Executive Officer. “Our disciplined focus on capital, credit and liquidity gives us strength and optionality as we move into the back half of the year. Although many anticipate lower interest rates in September, we are prepared if that does not come to pass,” said Mr. Franklin. “Stellar Bank is well-positioned for either outcome.”

“In addition to building capital, we have reduced our commercial real estate exposure and are pursuing a more balanced approach to our lending through new additions to our team to help us build our commercial and industrial portfolio. Our credit quality remains steady as the economy in our markets remains solid. We operate in some of, if not the best, markets in the country and they have shown resilience throughout this tightening cycle,” Mr. Franklin continued.

“Our focus on capital, credit and liquidity will not change. We will continue to monitor effects of higher interest rates and the contentious presidential election on our markets. We believe that building and maintaining a strong balance sheet, positions us to take advantage of opportunities that arise from this economic cycle. Our focus remains on building long-term shareholder value as we embark on the second half of 2024 and the future is bright,” concluded Mr. Franklin.

Second Quarter 2024 Financial Highlights

• Solid Profitability: Second quarter 2024 net income of $29.8 million, or diluted earnings per share of $0.56, translated into an annualized return on average assets of 1.13%, an annualized return on average equity of 7.78% and an annualized return on average tangible equity of 12.82%⁽¹⁾.
• Meaningful Regulatory Capital Build: Total risk-based capital ratio increased to 15.34% at June 30, 2024 from 14.62% at March 31, 2024 and Tier 1 leverage ratio increased to 10.93% at June 30, 2024 from 10.55% at March 31, 2024.
• Strong Net Interest Margin: Tax equivalent net interest margin was 4.24% for the second quarter of 2024 compared to 4.26% for the first quarter of 2024. The tax equivalent net interest margin, excluding purchase accounting accretion (“PAA”), was 3.82%⁽¹⁾ for the second quarter of 2024 compared to 3.91%⁽¹⁾ for the first quarter of 2024.
• Stable Credit Performance: Net charge-offs of $715 thousand, or 0.02%, for the year-to-date 2024.

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

Second Quarter 2024 Results

Net interest income in the second quarter of 2024 decreased $708 thousand, or 0.7%, to $101.4 million from $102.1 million for the first quarter of 2024. The net interest margin on a tax equivalent basis decreased 2 basis points to 4.24% for the second quarter of 2024 from 4.26% for the first quarter of 2024. The decrease in the net interest margin from the prior quarter was primarily due to the impact of increased interest rates on our cost of funding only partially offset by increased income on interest earning assets. Net interest income for the second quarter of 2024 benefited from $10.1 million of income from purchase accounting adjustments compared to $8.6 million in the first quarter of 2024. Excluding purchase accounting adjustments, net interest income (tax equivalent) for the second quarter 2024 would have been $91.4 million⁽¹⁾ and the tax equivalent net interest margin would have been 3.82%⁽¹⁾.

Noninterest income for the second quarter of 2024 was $5.4 million, a decrease of $880 thousand, or 14.0%, compared to $6.3 million for the first quarter of 2024. Noninterest income decreased in the second quarter of 2024 compared to the first quarter of 2024 primarily due to a decrease in gains on sales of assets in the second quarter of 2024 compared to the first quarter of 2024.

Noninterest expense for the second quarter of 2024 decreased $194 thousand, or 0.3%, to $71.2 million compared to $71.4 million for the first quarter of 2024. The decrease in noninterest expense in the second quarter of 2024 compared to the first quarter of 2024 was primarily due to a $2.3 million decrease in salaries and employee benefits and a $1.0 million decrease in professional fees partially offset by other expenses.

The efficiency ratio was 66.63% for the second quarter of 2024 compared to 66.18% for the first quarter of 2024. Annualized returns on average assets, average equity and average tangible equity were 1.13%, 7.78% and 12.82%⁽¹⁾ for the second quarter of 2024, respectively, compared to 0.98%, 6.88% and 11.47%⁽¹⁾, respectively, for the first quarter of 2024.

Financial Condition

Total loans at June 30, 2024 decreased $194.2 million to $7.71 billion compared to $7.91 billion at March 31, 2024. At June 30, 2024, the remaining balance of the purchase accounting adjustments on loans was $87.4 million.

Total deposits at June 30, 2024 decreased $69.4 million to $8.73 billion compared to $8.79 billion at March 31, 2024, due to decreases in certificates and other time deposits, noninterest-bearing deposits and interest-bearing demand deposits, partially offset by increases in money market and savings deposits. Shifts in the deposit mix were primarily driven by the current interest rate environment and an intensely competitive market for deposits. Estimated uninsured deposits totaled $4.79 billion and estimated uninsured deposits net of collateralized deposits of $1.01 billion were $3.78 billion, or 43.3%, of total deposits at June 30, 2024.

Total assets at June 30, 2024 were $10.72 billion, a decrease of $5.6 million, compared to $10.73 billion at March 31, 2024.

Asset Quality

Nonperforming assets totaled $53.4 million, or 0.50% of total assets, at June 30, 2024, compared to $57.1 million, or 0.53% of total assets, at March 31, 2024. The allowance for credit losses on loans as a percentage of total loans was 1.23% at June 30, 2024 and 1.22% at March 31, 2024.

The second quarter of 2024 included a reversal of provision for credit losses expenses of $1.9 million compared to a $4.1 million provision for credit losses recorded during the first quarter of 2024. Net charge-offs for the second quarter of 2024 were $1 thousand, or 0.00% (annualized) of average loans, compared to net charge-offs of $714 thousand, or 0.04% (annualized) of average loans, for the first quarter of 2024.

GAAP Reconciliation of Non-GAAP Financial Measures

Stellar’s management uses certain non-GAAP financial measures to evaluate its performance. Please refer to the GAAP Reconciliation and Management’s Explanation of Non-GAAP Financial Measures on page 10 of this earnings release for a reconciliation of these non-GAAP financial measures.

Conference Call

Stellar’s management team will host a conference call and webcast on Friday, July 26, 2024 at 8:00 a.m. Central Time (9:00 a.m. Eastern Time) to discuss its results for the second quarter of 2024. Participants may register for the conference call at https://registrations.events/direct/Q4I635860 to receive the dial-in numbers and unique PIN to access the call. If you need assistance in obtaining a dial-in number, please contact IR@stellar.bank. A simultaneous audio-only webcast may be accessed at https://events.q4inc.com/attendee/232230638. If you are unable to participate during the live webcast, the webcast will be accessible via the Investor Relations section of the Company’s website at ir.stellar.bank.

About Stellar Bancorp, Inc.

Stellar Bancorp, Inc. is a bank holding company headquartered in Houston, Texas. Stellar’s principal banking subsidiary, Stellar Bank, provides a diversified range of commercial banking services primarily to small- to medium-sized businesses and individual customers across the Houston, Dallas, Beaumont and surrounding communities in Texas.

Forward-Looking Statements

Certain statements in this press release which are not historical in nature are intended to be, and are hereby identified as, “forward-looking statements” for purposes of the safe harbor provided by Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements include, but are not limited to, statements about the benefits of the Company’s merger with Allegiance Bancshares, Inc. (the “Merger”), including future financial performance and operating results, the Company’s plans, business and growth strategies, objectives, expectations and intentions, and other statements that are not historical facts, including projections of macroeconomic and industry trends, which are inherently unreliable due to the multiple factors that impact economic trends, and any such variations may be material. Forward-looking statements may be identified by terminology such as “may,” “will,” “should,” “could,” “scheduled,” “plans,” “intends,” “projects,” “anticipates,” “expects,” “believes,” “estimates,” “potential,” “would,” or “continue” or negatives of such terms or other comparable terminology.

All forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties and other factors that may cause the actual results, performance or achievements of Stellar to differ materially from any results expressed or implied by such forward-looking statements. Such factors include, among others: the risk that the cost savings and any revenue synergies from the Merger may not be fully realized or may take longer than anticipated to be realized; disruption to our business as a result of the Merger; the risk that the integration of operations will be materially delayed or will be more costly or difficult than we expected or that we are otherwise unable to successfully integrate our legacy businesses; the amount of the costs, fees, expenses and charges related to the Merger; reputational risk and the reaction of our customers, suppliers, employees or other business partners to the Merger; changes in the interest rate environment, the value of Stellar’s assets and obligations and the availability of capital and liquidity; general competitive, economic, political and market conditions; and other factors that may affect future results of Stellar including changes in asset quality and credit risk; the inability to sustain revenue and earnings growth; changes in interest rates and capital markets; inflation; customer borrowing, repayment, investment and deposit practices; the impact, extent and timing of technological changes; capital management activities; disruptions to the economy and the U.S. banking system caused by recent bank failures, risks associated with uninsured deposits and responsive measures by federal or state governments or banking regulators, including increases in the cost of our deposit insurance assessments and other actions of the Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation and Texas Department of Banking and legislative and regulatory actions and reforms.

Additional factors which could affect the Company’s future results can be found in the Company’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, in each case filed with the SEC and available on the SEC’s website at https://www.sec.gov. We disclaim any obligation and do not intend to update or revise any forward-looking statements contained in this communication, which speak only as of the date hereof, whether as a result of new information, future events or otherwise, except as required by federal securities laws. As forward-looking statements involve significant risks and uncertainties, caution should be exercised against placing undue reliance on such statements.

Stellar Bancorp, Inc. Financial Highlights (Unaudited)
	2024								2023
	June 30				March 31				December 31				September 30				June 30
	(Dollars in thousands)
ASSETS
Cash and due from banks	$	110,341			$	74,663			$	121,004			$	94,970			$	105,913
Interest-bearing deposits at other financial institutions		379,909				325,079				278,233				207,302				198,176
Total cash and cash equivalents		490,250				399,742				399,237				302,272				304,089
Available for sale securities, at fair value		1,630,971				1,523,100				1,395,680				1,414,952				1,478,222
Loans held for investment		7,713,897				7,908,111				7,925,133				8,004,528				8,068,718
Less: allowance for credit losses on loans		(94,772	)			(96,285	)			(91,684	)			(93,575	)			(100,195	)
Loans, net		7,619,125				7,811,826				7,833,449				7,910,953				7,968,523
Accrued interest receivable		43,348				45,466				44,244				43,536				42,051
Premises and equipment, net		113,984				115,698				118,683				119,332				119,142
Federal Home Loan Bank stock		15,089				16,050				25,051				29,022				24,478
Bank-owned life insurance		106,262				105,671				105,084				104,699				104,148
Goodwill		497,318				497,318				497,318				497,318				497,260
Core deposit intangibles, net		104,315				110,513				116,712				122,944				129,805
Other assets		103,001				103,838				111,681				120,432				110,633
Total assets	$	10,723,663			$	10,729,222			$	10,647,139			$	10,665,460			$	10,778,351
LIABILITIES AND SHAREHOLDERS’ EQUITY
LIABILITIES:
Deposits:
Noninterest-bearing	$	3,308,441			$	3,323,149			$	3,546,815			$	3,656,288			$	3,713,536
Interest-bearing
Demand		1,564,405				1,576,261				1,659,999				1,397,492				1,437,509
Money market and savings		2,213,031				2,203,767				2,136,777				2,128,950				2,174,073
Certificates and other time		1,639,426				1,691,539				1,529,876				1,503,891				1,441,251
Total interest-bearing deposits		5,416,862				5,471,567				5,326,652				5,030,333				5,052,833
Total deposits		8,725,303				8,794,716				8,873,467				8,686,621				8,766,369
Accrued interest payable		12,327				12,227				11,288				7,612				4,555
Borrowed funds		240,000				215,000				50,000				323,981				369,963
Subordinated debt		109,964				109,864				109,765				109,665				109,566
Other liabilities		70,274				66,717				81,601				76,735				69,218
Total liabilities		9,157,868				9,198,524				9,126,121				9,204,614				9,319,671
SHAREHOLDERS’ EQUITY:
Common stock		536				536				533				533				533
Capital surplus		1,238,477				1,235,221				1,232,627				1,231,686				1,228,532
Retained earnings		447,948				425,130				405,945				385,600				361,619
Accumulated other comprehensive loss		(121,166	)			(130,189	)			(118,087	)			(156,973	)			(132,004	)
Total shareholders’ equity		1,565,795				1,530,698				1,521,018				1,460,846				1,458,680
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	10,723,663			$	10,729,222			$	10,647,139			$	10,665,460			$	10,778,351

Stellar Bancorp, Inc. Financial Highlights (Unaudited)
	Three Months Ended																	Six Months Ended
	2024							2023										2024			2023
	June 30				March 31			December 31			September 30			June 30				June 30			June 30
	(Dollars in thousands, except per share data)
INTEREST INCOME:
Loans, including fees	$	135,885			$	134,685		$	139,114		$	138,948		$	133,931			$	270,570		$	259,660
Securities:
Taxable		11,923				9,293			9,622			9,493			9,726				21,216			19,379
Tax-exempt		816				818			418			437			436				1,634			1,698
Deposits in other financial institutions		3,555				3,627			3,021			2,391			2,865				7,182			6,636
Total interest income		152,179				148,423			152,175			151,269			146,958				300,602			287,373
INTEREST EXPENSE:
Demand, money market and savings deposits		28,399				27,530			25,033			23,557			20,708				55,929			38,745
Certificates and other time deposits		18,758				15,084			15,075			13,282			9,622				33,842			12,929
Borrowed funds		1,700				1,774			4,154			5,801			6,535				3,474			7,852
Subordinated debt		1,912				1,917			1,983			1,908			1,812				3,829			3,739
Total interest expense		50,769				46,305			46,245			44,548			38,677				97,074			63,265
NET INTEREST INCOME		101,410				102,118			105,930			106,721			108,281				203,528			224,108
(Reversal of) provision for credit losses		(1,935	)			4,098			1,047			2,315			1,915				2,163			5,581
Net interest income after provision for credit losses		103,345				98,020			104,883			104,406			106,366				201,365			218,527
NONINTEREST INCOME:
Service charges on deposit accounts		1,648				1,598			1,520			1,620			1,575				3,246			2,924
(Loss) gain on sale of assets		(64	)			513			198			—			(6	)			449			192
Bank-owned life insurance		591				587			573			551			532				1,178			1,054
Debit card and ATM income		543				527			542			935			1,821				1,070			3,519
Other		2,698				3,071			4,053			1,589			1,561				5,769			5,292
Total noninterest income		5,416				6,296			6,886			4,695			5,483				11,712			12,981
NONINTEREST EXPENSE:
Salaries and employee benefits		39,061				41,376			40,464			39,495			37,300				80,437			77,075
Net occupancy and equipment		4,503				4,390			4,572			4,455			3,817				8,893			7,905
Depreciation		1,948				1,964			1,955			1,952			1,841				3,912			3,677
Data processing and software amortization		5,501				4,894			5,000			4,798			4,674				10,395			9,728
Professional fees		1,620				2,662			3,867			997			1,564				4,282			3,091
Regulatory assessments and FDIC insurance		2,299				1,854			5,169			1,814			2,755				4,153			4,049
Amortization of intangibles		6,215				6,212			6,247			6,876			6,881				12,427			13,760
Communications		847				937			743			663			689				1,784			1,390
Advertising		891				765			1,004			877			907				1,656			1,746
Acquisition and merger-related expenses		—				—			3,072			3,421			2,897				—			9,062
Other		8,331				6,356			5,848			5,400			5,882				14,687			10,322
Total noninterest expense		71,216				71,410			77,941			70,748			69,207				142,626			141,805
INCOME BEFORE INCOME TAXES		37,545				32,906			33,828			38,353			42,642				70,451			89,703
Provision for income taxes		7,792				6,759			6,562			7,445			7,467				14,551			17,380
NET INCOME	$	29,753			$	26,147		$	27,266		$	30,908		$	35,175			$	55,900		$	72,323
EARNINGS PER SHARE
Basic	$	0.56			$	0.49		$	0.51		$	0.58		$	0.66			$	1.05		$	1.36
Diluted	$	0.56			$	0.49		$	0.51		$	0.58		$	0.66			$	1.04		$	1.36

	Three Months Ended																				Six Months Ended
	2024								2023												2024				2023
	June 30				March 31				December 31				September 30				June 30				June 30				June 30
	(Dollars and share amounts in thousands, except per share data)
Net income	$	29,753			$	26,147			$	27,266			$	30,908			$	35,175			$	55,900			$	72,323
Earnings per share, basic	$	0.56			$	0.49			$	0.51			$	0.58			$	0.66			$	1.05			$	1.36
Earnings per share, diluted	$	0.56			$	0.49			$	0.51			$	0.58			$	0.66			$	1.04			$	1.36
Dividends per share	$	0.13			$	0.13			$	0.13			$	0.13			$	0.13			$	0.26			$	0.26
Return on average assets(A)		1.13	%			0.98	%			1.02	%			1.14	%			1.31	%			1.06	%			1.35	%
Return on average equity(A)		7.78	%			6.88	%			7.33	%			8.34	%			9.67	%			7.33	%			10.14	%
Return on average tangible equity(A)(B)		12.82	%			11.47	%			12.61	%			14.47	%			17.05	%			12.15	%			18.14	%
Net interest margin (tax equivalent)(A)(C)		4.24	%			4.26	%			4.40	%			4.37	%			4.49	%			4.25	%			4.64	%
Net interest margin (tax equivalent) excluding PAA(A)(B)(C)		3.82	%			3.91	%			3.91	%			3.87	%			3.97	%			3.86	%			4.18	%
Efficiency ratio(D)		66.63	%			66.18	%			69.21	%			63.50	%			60.83	%			66.40	%			59.86	%
Capital Ratios
Stellar Bancorp, Inc. (Consolidated)
Equity to assets		14.60	%			14.27	%			14.29	%			13.70	%			13.53	%			14.60	%			13.53	%
Tangible equity to tangible assets(B)		9.53	%			9.12	%			9.04	%			8.37	%			8.19	%			9.53	%			8.19	%
Estimated Total capital ratio (to risk-weighted assets)		15.34	%			14.62	%			14.02	%			13.61	%			13.21	%			15.34	%			13.21	%
Estimated Common equity Tier 1 capital (to risk weighted assets)		12.98	%			12.29	%			11.77	%			11.30	%			10.83	%			12.98	%			10.83	%
Estimated Tier 1 capital (to risk-weighted assets)		13.10	%			12.41	%			11.89	%			11.41	%			10.94	%			13.10	%			10.94	%
Estimated Tier 1 leverage (to average tangible assets)		10.93	%			10.55	%			10.18	%			9.82	%			9.51	%			10.93	%			9.51	%
Stellar Bank
Estimated Total capital ratio (to risk-weighted assets)		14.65	%			14.13	%			13.65	%			13.32	%			12.98	%			14.65	%			12.98	%
Estimated Common equity Tier 1 capital (to risk-weighted assets)		13.12	%			12.61	%			12.20	%			11.80	%			11.38	%			13.12	%			11.38	%
Estimated Tier 1 capital (to risk-weighted assets)		13.12	%			12.61	%			12.20	%			11.80	%			11.38	%			13.12	%			11.38	%
Estimated Tier 1 leverage (to average tangible assets)		10.94	%			10.72	%			10.44	%			10.15	%			9.89	%			10.94	%			9.89	%
Other Data
Weighted average shares:
Basic		53,572				53,343				53,282				53,313				53,297				53,457				53,160
Diluted		53,608				53,406				53,350				53,380				53,375				53,506				53,261
Period end shares outstanding		53,564				53,551				53,291				53,322				53,303				53,564				53,303
Book value per share	$	29.23			$	28.58			$	28.54			$	27.40			$	27.37			$	29.23			$	27.37
Tangible book value per share(B)	$	18.00			$	17.23			$	17.02			$	15.76			$	15.60			$	18.00			$	15.60
Employees - full-time equivalents		1,045				1,007				998				1,008				1,004				1,045				1,004

(A)	Interim periods annualized.
(B)	Refer to the calculation of these non-GAAP financial measures and a reconciliation to their most directly comparable GAAP financial measures on page 10 of this Earnings Release.
(C)	Net interest margin represents net interest income divided by average interest-earning assets.
(D)	Represents total noninterest expense divided by the sum of net interest income plus noninterest income, excluding net gains and losses on the sale of loans, securities and assets. Additionally, taxes and provision for credit losses are not part of this calculation.

Stellar Bancorp, Inc. Financial Highlights (Unaudited)
	Three Months Ended
	June 30, 2024										March 31, 2024										June 30, 2023
	Average Balance				Interest Earned/ Interest Paid			Average Yield/Rate			Average Balance				Interest Earned/ Interest Paid			Average Yield/Rate			Average Balance				Interest Earned/ Interest Paid			Average Yield/Rate
	(Dollars in thousands)
Assets
Interest-Earning Assets:
Loans	$	7,808,320			$	135,885		7.00	%		$	7,938,824			$	134,685		6.82	%		$	7,980,856			$	133,931		6.73	%
Securities		1,549,638				12,739		3.31	%			1,441,814				10,111		2.82	%			1,502,949				10,162		2.71	%
Deposits in other financial institutions		258,916				3,555		5.52	%			264,906				3,627		5.51	%			209,722				2,865		5.48	%
Total interest-earning assets		9,616,874			$	152,179		6.36	%			9,645,544			$	148,423		6.19	%			9,693,527			$	146,958		6.08	%
Allowance for credit losses on loans		(96,306	)									(91,612	)									(96,414	)
Noninterest-earning assets		1,103,297										1,132,857										1,143,025
Total assets	$	10,623,865									$	10,686,789									$	10,740,138
Liabilities and Shareholders' Equity
Interest-Bearing Liabilities:
Interest-bearing demand deposits	$	1,545,096			$	12,213		3.18	%		$	1,697,211			$	12,278		2.91	%		$	1,387,604			$	9,343		2.70	%
Money market and savings deposits		2,227,393				16,186		2.92	%			2,150,805				15,252		2.85	%			2,220,827				11,365		2.05	%
Certificates and other time deposits		1,694,536				18,758		4.45	%			1,444,048				15,084		4.20	%			1,225,834				9,622		3.15	%
Borrowed funds		112,187				1,700		6.09	%			134,400				1,774		5.31	%			479,896				6,535		5.46	%
Subordinated debt		109,910				1,912		7.00	%			109,808				1,917		7.02	%			109,499				1,812		6.64	%
Total interest-bearing liabilities		5,689,122			$	50,769		3.59	%			5,536,272			$	46,305		3.36	%			5,423,660			$	38,677		2.86	%
Noninterest-Bearing Liabilities:
Noninterest-bearing demand deposits		3,308,633										3,525,758										3,779,594
Other liabilities		87,986										96,461										78,411
Total liabilities		9,085,741										9,158,491										9,281,665
Shareholders’ equity		1,538,124										1,528,298										1,458,473
Total liabilities and shareholders’ equity	$	10,623,865									$	10,686,789									$	10,740,138
Net interest rate spread								2.77	%									2.83	%									3.22	%
Net interest income and margin					$	101,410		4.24	%						$	102,118		4.26	%						$	108,281		4.48	%
Net interest income and net interest margin (tax equivalent)					$	101,482		4.24	%						$	102,207		4.26	%						$	108,509		4.49	%
Cost of funds								2.27	%									2.06	%									1.69	%
Cost of deposits								2.16	%									1.94	%									1.41	%

Stellar Bancorp, Inc. Financial Highlights (Unaudited)
	Six Months Ended June 30,
	2024										2023
	Average Balance				Interest Earned/ Interest Paid			Average Yield/Rate			Average Balance				Interest Earned/ Interest Paid			Average Yield/Rate
	(Dollars in thousands)
Assets
Interest-Earning Assets:
Loans	$	7,873,572			$	270,570		6.91	%		$	7,914,303			$	259,660		6.62	%
Securities		1,495,726				22,850		3.07	%			1,553,200				21,077		2.74	%
Deposits in other financial institutions		261,911				7,182		5.52	%			286,823				6,636		4.67	%
Total interest-earning assets		9,631,209			$	300,602		6.28	%			9,754,326			$	287,373		5.94	%
Allowance for credit losses on loans		(93,959	)									(94,881	)
Noninterest-earning assets		1,118,077										1,151,497
Total assets	$	10,655,327									$	10,810,942
Liabilities and Shareholders' Equity
Interest-Bearing Liabilities:
Interest-bearing demand deposits	$	1,621,154			$	24,491		3.04	%		$	1,518,213			$	17,725		2.35	%
Money market and savings deposits		2,189,099				31,438		2.89	%			2,355,112				21,020		1.80	%
Certificates and other time deposits		1,569,292				33,842		4.34	%			1,044,721				12,929		2.50	%
Borrowed funds		123,293				3,474		5.67	%			293,578				7,852		5.39	%
Subordinated debt		109,859				3,829		7.01	%			109,458				3,739		6.89	%
Total interest-bearing liabilities		5,612,697			$	97,074		3.48	%			5,321,082			$	63,265		2.40	%
Noninterest-Bearing Liabilities:
Noninterest-bearing demand deposits		3,417,196										3,971,862
Other liabilities		92,223										79,609
Total liabilities		9,122,116										9,372,553
Shareholders’ equity		1,533,211										1,438,389
Total liabilities and shareholders' equity	$	10,655,327									$	10,810,942
Net interest rate spread								2.80	%									3.54	%
Net interest income and margin					$	203,528		4.25	%						$	224,108		4.63	%
Net interest income and net interest margin (tax equivalent)					$	203,688		4.25	%						$	224,628		4.64	%
Cost of funds								2.16	%									1.37	%
Cost of deposits								2.05	%									1.17	%

Stellar Bancorp, Inc. Financial Highlights (Unaudited)
	Three Months Ended
	2024								2023
	June 30				March 31				December 31				September 30				June 30
	(Dollars in thousands)
Period-end Loan Portfolio:
Commercial and industrial	$	1,392,435			$	1,451,462			$	1,409,002			$	1,474,600			$	1,512,476
Paycheck Protection Program (PPP)		3,629				4,293				5,100				5,968				8,027
Real estate:
Commercial real estate (including multi-family residential)		4,029,671				4,049,885				4,071,807				4,076,606				4,038,487
Commercial real estate construction and land development		922,805				1,039,443				1,060,406				1,078,265				1,136,124
1-4 family residential (including home equity)		1,098,681				1,049,316				1,047,174				1,024,945				1,009,439
Residential construction		200,134				252,573				267,357				289,553				311,208
Consumer and other		66,542				61,139				64,287				54,591				52,957
Total loans held for investment	$	7,713,897			$	7,908,111			$	7,925,133			$	8,004,528			$	8,068,718
Deposits:
Noninterest-bearing	$	3,308,441			$	3,323,149			$	3,546,815			$	3,656,288			$	3,713,536
Interest-bearing
Demand		1,564,405				1,576,261				1,659,999				1,397,492				1,437,509
Money market and savings		2,213,031				2,203,767				2,136,777				2,128,950				2,174,073
Certificates and other time		1,639,426				1,691,539				1,529,876				1,503,891				1,441,251
Total interest-bearing deposits		5,416,862				5,471,567				5,326,652				5,030,333				5,052,833
Total deposits	$	8,725,303			$	8,794,716			$	8,873,467			$	8,686,621			$	8,766,369
Asset Quality:
Nonaccrual loans	$	50,906			$	57,129			$	39,191			$	38,291			$	43,349
Accruing loans 90 or more days past due		—				—				—				—				—
Total nonperforming loans		50,906				57,129				39,191				38,291				43,349
Other real estate		2,548				—				—				—				—
Total nonperforming assets	$	53,454			$	57,129			$	39,191			$	38,291			$	43,349
Net (recoveries) charge-offs	$	(1	)		$	714			$	2,577			$	8,116			$	236
Nonaccrual loans:
Commercial and industrial	$	18,451			$	15,465			$	5,048			$	14,991			$	22,968
Real estate:
Commercial real estate (including multi-family residential)		18,094				21,268				16,699				13,563				8,221
Commercial real estate construction and land development		1,641				8,406				5,043				170				388
1-4 family residential (including home equity)		12,454				10,368				8,874				8,442				10,880
Residential construction		155				1,410				3,288				635				665
Consumer and other		111				212				239				490				227
Total nonaccrual loans	$	50,906			$	57,129			$	39,191			$	38,291			$	43,349
Asset Quality Ratios:
Nonperforming assets to total assets		0.50	%			0.53	%			0.37	%			0.36	%			0.40	%
Nonperforming loans to total loans		0.66	%			0.72	%			0.49	%			0.48	%			0.54	%
Allowance for credit losses on loans to nonperforming loans		186.17	%			168.54	%			233.94	%			244.38	%			231.14	%
Allowance for credit losses on loans to total loans		1.23	%			1.22	%			1.16	%			1.17	%			1.24	%
Net charge-offs to average loans (annualized)		0.00	%			0.04	%			0.13	%			0.40	%			0.01	%

Stellar Bancorp, Inc. GAAP Reconciliation and Management’s Explanation of Non-GAAP Financial Measures (Unaudited)
Stellar’s management uses certain non-GAAP (generally accepted accounting principles) financial measures to evaluate its performance. Stellar believes that these non-GAAP financial measures provide meaningful supplemental information regarding its performance and that management and investors benefit from referring to these non-GAAP financial measures in assessing Stellar’s performance and when planning, forecasting, analyzing and comparing past, present and future periods. Specifically, Stellar reviews pre-tax, pre-provision income, pre-tax pre-provision ROAA, tangible book value per share, return on average tangible equity, tangible equity to tangible assets and net interest margin (tax equivalent) excluding PAA for internal planning and forecasting purposes. Stellar has included in this earnings release information relating to these non-GAAP financial measures for the applicable periods presented. These non-GAAP measures should not be considered in isolation or as a substitute for the most directly comparable or other financial measures calculated in accordance with GAAP. Moreover, the manner in which Stellar calculates the non-GAAP financial measures may differ from that of other companies reporting measures with similar names.
	Three Months Ended																				Six Months Ended
	2024								2023												2024				2023
	June 30				March 31				December 31				September 30				June 30				June 30				June 30
	(Dollars and share amounts in thousands, except per share data)
Net income	$	29,753			$	26,147			$	27,266			$	30,908			$	35,175			$	55,900			$	72,323
Add: Provision for credit losses		(1,935	)			4,098				1,047				2,315				1,915				2,163				5,581
Add: Provision for income taxes		7,792				6,759				6,562				7,445				7,467				14,551				17,380
Pre-tax, pre-provision income	$	35,610			$	37,004			$	34,875			$	40,668			$	44,557			$	72,614			$	95,284
Total average assets	$	10,623,865			$	10,686,789			$	10,626,373			$	10,741,295			$	10,740,138			$	10,655,327			$	10,810,942
Pre-tax, pre-provision return on average assets(B)		1.35	%			1.39	%			1.30	%			1.50	%			1.66	%			1.37	%			1.78	%
Total shareholders’ equity	$	1,565,795			$	1,530,698			$	1,521,018			$	1,460,846			$	1,458,680			$	1,565,795			$	1,458,680
Less: Goodwill and core deposit intangibles, net		601,633				607,831				614,030				620,262				627,065				601,633				627,065
Tangible shareholders’ equity	$	964,162			$	922,867			$	906,988			$	840,584			$	831,615			$	964,162			$	831,615
Shares outstanding at end of period		53,564				53,551				53,291				53,322				53,303				53,564				53,303
Tangible book value per share	$	18.00			$	17.23			$	17.02			$	15.76			$	15.60			$	18.00			$	15.60
Average shareholders’ equity	$	1,538,124			$	1,528,298			$	1,475,377			$	1,471,009			$	1,458,473			$	1,533,211			$	1,438,389
Less: Average goodwill and core deposit intangibles, net		604,722				611,149				617,236				623,864				630,854				607,935				634,462
Average tangible shareholders’ equity	$	933,402			$	917,149			$	858,141			$	847,145			$	827,619			$	925,276			$	803,927
Return on average tangible equity(B)		12.82	%			11.47	%			12.61	%			14.47	%			17.05	%			12.15	%			18.14	%
Total assets	$	10,723,663			$	10,729,222			$	10,647,139			$	10,665,460			$	10,778,351			$	10,723,663			$	10,778,351
Less: Goodwill and core deposit intangibles, net		601,633				607,831				614,030				620,262				627,065				601,633				627,065
Tangible assets	$	10,122,030			$	10,121,391			$	10,033,109			$	10,045,198			$	10,151,286			$	10,122,030			$	10,151,286
Tangible equity to tangible assets		9.53	%			9.12	%			9.04	%			8.37	%			8.19	%			9.53	%			8.19	%
Net interest income (tax equivalent)	$	101,482			$	102,207			$	106,121			$	106,919			$	108,509			$	203,688			$	224,628
Less: Purchase accounting accretion		10,098				8,551				11,726				12,400				12,572				18,649				22,676
Adjusted net interest income (tax equivalent)	$	91,384			$	93,656			$	94,395			$	94,519			$	95,937			$	185,039			$	201,952
Average earning assets	$	9,616,874			$	9,645,544			$	9,576,927			$	9,697,553			$	9,693,527			$	9,631,209			$	9,754,326
Net interest margin (tax equivalent) excluding PAA		3.82	%			3.91	%			3.91	%			3.87	%			3.97	%			3.86	%			4.18	%

(A)	Represents total noninterest expense, excluding acquisition and merger-related expenses, core deposit intangibles amortization and write-downs on assets moved to held for sale, divided by the sum of net interest income, excluding purchase accounting adjustments plus noninterest income, excluding gains and losses on the sale of assets. Additionally, taxes and provision for credit losses are not part of this calculation.
(B)	Interim periods annualized.

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20240726333029/en/

Investor Relations

IR@stellar.bank

Source: Stellar Bancorp, Inc.

FAQ

What was Stellar Bancorp's (STEL) net income for Q2 2024?

Stellar Bancorp (STEL) reported a net income of $29.8 million for the second quarter of 2024.

How did Stellar Bancorp's (STEL) earnings per share change in Q2 2024?

Stellar Bancorp's (STEL) diluted earnings per share increased to $0.56 in Q2 2024, up from $0.49 in Q1 2024.

What was Stellar Bancorp's (STEL) net interest margin in the second quarter of 2024?

Stellar Bancorp's (STEL) tax equivalent net interest margin was 4.24% for the second quarter of 2024.

How did Stellar Bancorp's (STEL) total loans change in Q2 2024?

Stellar Bancorp's (STEL) total loans decreased by $194.2 million to $7.71 billion in Q2 2024 compared to Q1 2024.

What was Stellar Bancorp's (STEL) return on average assets for Q2 2024?

Stellar Bancorp's (STEL) annualized return on average assets was 1.13% for the second quarter of 2024.