Stellar Bancorp, Inc. Reports Fourth Quarter and Full Year 2024 Results

HOUSTON--(BUSINESS WIRE)--Stellar Bancorp, Inc. (the “Company” or “Stellar”) (NYSE: STEL) today reported net income of $27.8 million, or diluted earnings per share of $0.52, for the fourth quarter of 2024 and net income of $117.6 million, or diluted earnings per share of $2.20, for the full year 2024. “We are proud of our team and their work establishing the foundation of Stellar Bank,” said Robert R. Franklin, Jr., Stellar’s Chief Executive Officer. “Our strong foundation is a testament to their significant efforts over the past two years and they have prepared us for the year ahead. We intend to turn towards growth at a more normalized organic pattern while we keep an eye towards opportunities with downstream partners that would increase our operating leverage,” Mr. Franklin continued. “We remain focused on core fundamentals as we enter 2025 and are encouraged by the economic activity in our markets. We are excited about the future ahead of us,” Mr. Franklin concluded. 2024 Financial Highlights Solid Profitability: Net income for the full year 2024 was $117.6 million, or diluted earnings per share of $2.20, which translated into a return on average assets of 1.10%, a return on average equity of 7.50% and a return on average tangible equity of 12.18%(1). Net income for the fourth quarter of 2024 was $27.8 million, or diluted earnings per share of $0.52, which translated into an annualized return on average assets of 1.04%, an annualized return on average equity of 6.85% and an annualized return on average tangible equity of 10.82%(1). Strong Net Interest Margin: Tax equivalent net interest margin was 4.24% for the year 2024 compared to 4.51% for 2023. The tax equivalent net interest margin, excluding purchase accounting accretion (“PAA”), was 3.89%(1) for 2024 compared to 4.03%(1) for 2023. Tax equivalent net interest margin for the fourth quarter of 2024 was 4.25% compared to 4.19% for the third quarter of 2024. The tax equivalent net interest margin, excluding PAA, was 3.94%(1) for the fourth quarter of 2024 compared to 3.91%(1) for the third quarter of 2024. Meaningful Capital and Book Value Build: Total risk-based capital ratio increased to 16.06% at December 31, 2024 from 14.02% at December 31, 2023, book value per share increased to $30.14 from $28.54 at December 31, 2023 and tangible book value per share increased to $19.10(1) from $17.02(1) at December 31, 2023. Credit Metrics: Nonperforming loans decreased $2.0 million to $37.2 million at December 31, 2024 from $39.2 million at December 31, 2023. _____________________ (1) Refer to page 10 of this earnings release for the calculation of this non-GAAP financial measure Year 2024 Results Net interest income for 2024 decreased $28.8 million, or 6.6%, to $408.0 million from $436.8 million for 2023. The net interest margin on a tax equivalent basis decreased 27 basis points to 4.24% for the full year 2024 from 4.51% for the full year 2023. The decrease in the net interest margin from the prior year was primarily due to the impact of increased average interest-bearing liabilities and increased rates on interest-bearing liabilities, partially offset by increased rates on interest-earning assets. Net interest income for the year 2024 benefited from $33.0 million of income from purchase accounting accretion compared to $46.8 million for the year 2023. Excluding purchase accounting accretion, net interest income (tax equivalent) for the year 2024 would have been $375.3 million(1) and the tax equivalent net interest margin would have been 3.89%(1). Noninterest income for the year 2024 was $23.0 million, an increase of $1.5 million, or 6.2%, compared to $24.6 million for the year 2023. Noninterest income decreased in 2024 compared to 2023 primarily due to a decrease in debit card and ATM income, partially offset by the increase in gains on sales of assets and Small Business Investment Company income recognized in 2024 compared to 2023. Noninterest expense for the year 2024 decreased $4.8 million, or 1.7%, to $285.7 million compared to $290.5 million for the year 2023. The decrease in noninterest expense in 2024 compared to 2023 was primarily due to $15.6 million of acquisition and merger-related expenses recognized in 2023, a $3.5 million decrease in regulatory assessments and a $2.7 million decrease in amortization of intangibles, partially offset by a $5.0 million increase in salaries and employee benefits. The efficiency ratio was 66.39% for the year ended December 31, 2024 compared to 63.02% for the year ended December 31, 2023. Returns on average assets, average equity and average tangible equity were 1.10%, 7.50% and 12.18%(1) for 2024, respectively, compared to 1.21%, 8.96% and 15.75%(1) for 2023, respectively. Fourth Quarter 2024 Results Net interest income in the fourth quarter of 2024 increased $1.5 million, or 1.4%, to $103.0 million from $101.5 million for the third quarter of 2024. The net interest margin on a tax equivalent basis increased 6 basis points to 4.25% for the fourth quarter of 2024 from 4.19% for the third quarter of 2024. The increase in the net interest margin from the prior quarter was primarily due to the impact of decreased rates on interest-bearing liabilities. Net interest income for the fourth quarter of 2024 benefited from $7.6 million of income from purchase accounting accretion compared to $6.8 million in the third quarter of 2024. Excluding purchase accounting accretion, net interest income (tax equivalent) for the fourth quarter of 2024 would have been $95.5 million(1) and the tax equivalent net interest margin would have been 3.94%(1). Noninterest income for the fourth quarter of 2024 was $5.0 million, a decrease of $1.3 million, or 20.2%, compared to $6.3 million for the third quarter of 2024. Noninterest income decreased in the fourth quarter of 2024 compared to the third quarter of 2024 primarily due to a loss on sales of assets in the fourth quarter of 2024 and Small Business Investment Company income recognized in the third quarter of 2024. Noninterest expense for the fourth quarter of 2024 increased $915 thousand, or 1.3%, to $72.0 million compared to $71.1 million for the third quarter of 2024. The increase in noninterest expense in the fourth quarter of 2024 compared to the third quarter of 2024 was primarily due to an increase of $1.7 million in professional fees and a $715 thousand increase in advertising expense, partially offset by a $611 thousand decrease in salaries and employee benefits and a $631 thousand decrease in amortization of intangibles. The efficiency ratio was 66.59% for the fourth quarter of 2024 compared to 66.18% for the third quarter of 2024. Annualized returns on average assets, average equity and average tangible equity were 1.04%, 6.85% and 10.82%(1) for the fourth quarter of 2024, respectively, compared to 1.27%, 8.49% and 13.63%(1) for the third quarter of 2024, respectively. Financial Condition Total assets at December 31, 2024 were $10.91 billion, an increase of $275.3 million, compared to $10.63 billion at September 30, 2024. Total loans at December 31, 2024 decreased $111.3 million to $7.44 billion compared to $7.55 billion at September 30, 2024. At December 31, 2024, the remaining balance of the purchase accounting accretion on loans was $73.7 million. Total deposits at December 31, 2024 increased $385.8 million to $9.13 billion compared to $8.74 billion at September 30, 2024, due to increases in interest-bearing and noninterest-bearing demand deposits, partially offset by decreases in certificates and other time deposits and money-market and savings accounts. Shifts in the deposit mix were primarily driven by the current interest rate environment and an intensely competitive market for deposits. Asset Quality Nonperforming assets totaled $38.9 million, or 0.36% of total assets, at December 31, 2024, compared to $35.1 million, or 0.33% of total assets, at September 30, 2024 and $39.2 million at December 31, 2023. The allowance for credit losses on loans as a percentage of total loans was 1.09% at December 31, 2024, 1.12% at September 30, 2024 and 1.16% at December 31, 2023. The fourth quarter of 2024 included a provision for credit losses of $942 thousand compared to a reversal of provision for credit losses of $6.0 million recorded during the third quarter of 2024. Net charge-offs for the fourth quarter of 2024 were $2.0 million, or 0.11% (annualized) of average loans, compared to net charge-offs of $3.9 million, or 0.21% (annualized) of average loans, for the third quarter of 2024. The year ended December 31, 2024 included a reversal of provision for credit losses of $2.9 million compared to a provision for credit losses of $8.9 million recorded for the year ended December 31, 2023. Net charge-offs for the year ended December 31, 2024 were $6.7 million, or 0.09% of average loans, compared to net charge-offs of $11.1 million, or 0.14% of average loans, for the year ended December 31, 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 31, 2025 at 8:00 a.m. Central Time (9:00 a.m. Eastern Time) to discuss its results for the fourth quarter and full year 2024. Participants may register for the conference call at https://registrations.events/direct/Q4I635866 conference ID 63586 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 webcast is available at https://registrations.events/direct/Q4I635866 and requires pre-registration. 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 December 31 September 30 June 30 March 31 December 31 (Dollars in thousands) ASSETS Cash and due from banks $ 419,967 $ 103,735 $ 110,341 $ 74,663 $ 121,004 Interest-bearing deposits at other financial institutions 491,249 412,482 379,909 325,079 278,233 Total cash and cash equivalents 911,216 516,217 490,250 399,742 399,237 Available for sale securities, at fair value 1,673,016 1,691,752 1,630,971 1,523,100 1,395,680 Loans held for investment 7,439,854 7,551,124 7,713,897 7,908,111 7,925,133 Less: allowance for credit losses on loans (81,058 ) (84,501 ) (94,772 ) (96,285 ) (91,684 ) Loans, net 7,358,796 7,466,623 7,619,125 7,811,826 7,833,449 Accrued interest receivable 37,884 39,473 43,348 45,466 44,244 Premises and equipment, net 111,856 113,742 113,984 115,698 118,683 Federal Home Loan Bank stock 8,209 20,123 15,089 16,050 25,051 Bank-owned life insurance 107,498 106,876 106,262 105,671 105,084 Goodwill 497,318 497,318 497,318 497,318 497,318 Core deposit intangibles, net 92,546 98,116 104,315 110,513 116,712 Other assets 106,771 79,537 103,001 103,838 111,681 Total assets $ 10,905,110 $ 10,629,777 $ 10,723,663 $ 10,729,222 $ 10,647,139 LIABILITIES AND SHAREHOLDERS’ EQUITY LIABILITIES: Deposits: Noninterest-bearing $ 3,576,206 $ 3,303,048 $ 3,308,441 $ 3,323,149 $ 3,546,815 Interest-bearing Demand 1,845,749 1,571,504 1,564,405 1,576,261 1,659,999 Money market and savings 2,253,193 2,280,651 2,213,031 2,203,767 2,136,777 Certificates and other time 1,453,236 1,587,398 1,639,426 1,691,539 1,529,876 Total interest-bearing deposits 5,552,178 5,439,553 5,416,862 5,471,567 5,326,652 Total deposits 9,128,384 8,742,601 8,725,303 8,794,716 8,873,467 Accrued interest payable 17,052 16,915 12,327 12,227 11,288 Borrowed funds — 60,000 240,000 215,000 50,000 Subordinated debt 70,105 110,064 109,964 109,864 109,765 Other liabilities 79,104 74,074 70,274 66,717 81,601 Total liabilities 9,294,645 9,003,654 9,157,868 9,198,524 9,126,121 SHAREHOLDERS’ EQUITY: Common stock 534 535 536 536 533 Capital surplus 1,240,050 1,238,619 1,238,477 1,235,221 1,232,627 Retained earnings 495,245 474,905 447,948 425,130 405,945 Accumulated other comprehensive loss (125,364 ) (87,936 ) (121,166 ) (130,189 ) (118,087 ) Total shareholders’ equity 1,610,465 1,626,123 1,565,795 1,530,698 1,521,018 TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $ 10,905,110 $ 10,629,777 $ 10,723,663 $ 10,729,222 $ 10,647,139 Stellar Bancorp, Inc. Financial Highlights (Unaudited) Three Months Ended Years Ended 2024 2023 2024 2023 December 31 September 30 June 30 March 31 December 31 December 31 December 31 INTEREST INCOME: Loans, including fees $ 128,738 $ 132,372 $ 135,885 $ 134,685 $ 139,114 $ 531,680 $ 537,722 Securities: Taxable 14,789 13,898 11,923 9,293 9,622 49,903 38,494 Tax-exempt 814 814 816 818 418 3,262 2,553 Deposits in other financial institutions 5,681 4,692 3,555 3,627 3,021 17,555 12,048 Total interest income 150,022 151,776 152,179 148,423 152,175 602,400 590,817 INTEREST EXPENSE: Demand, money market and savings deposits 27,877 29,440 28,399 27,530 25,033 113,246 87,335 Certificates and other time deposits 16,830 18,073 18,758 15,084 15,075 68,745 41,286 Borrowed funds 235 840 1,700 1,774 4,154 4,549 17,807 Subordinated debt 2,123 1,916 1,912 1,917 1,983 7,868 7,630 Total interest expense 47,065 50,269 50,769 46,305 46,245 194,408 154,058 NET INTEREST INCOME 102,957 101,507 101,410 102,118 105,930 407,992 436,759 Provision for (reversal of) credit losses 942 (5,985 ) (1,935 ) 4,098 1,047 (2,880 ) 8,943 Net interest income after provision for credit losses 102,015 107,492 103,345 98,020 104,883 410,872 427,816 NONINTEREST INCOME: Service charges on deposit accounts 1,590 1,594 1,648 1,598 1,520 6,430 6,064 (Loss) gain on sale of assets (112 ) 432 (64 ) 513 198 769 390 Bank-owned life insurance 622 614 591 587 573 2,414 2,178 Debit card and ATM income 570 551 543 527 542 2,191 4,996 Other 2,362 3,111 2,698 3,071 4,053 11,242 10,934 Total noninterest income 5,032 6,302 5,416 6,296 6,886 23,046 24,562 NONINTEREST EXPENSE: Salaries and employee benefits 40,512 41,123 39,061 41,376 40,464 162,072 157,034 Net occupancy and equipment 4,401 4,570 4,503 4,390 4,572 17,864 16,932 Depreciation 1,984 1,911 1,948 1,964 1,955 7,807 7,584 Data processing and software amortization 5,551 5,706 5,501 4,894 5,000 21,652 19,526 Professional fees 3,428 1,714 1,620 2,662 3,867 9,424 7,955 Regulatory assessments and FDIC insurance 1,636 1,779 2,299 1,854 5,169 7,568 11,032 Amortization of intangibles 5,581 6,212 6,215 6,212 6,247 24,220 26,883 Communications 807 827 847 937 743 3,418 2,796 Advertising 1,593 878 891 765 1,004 4,127 3,627 Acquisition and merger-related expenses — — — — 3,072 — 15,555 Other 6,488 6,346 8,331 6,356 5,848 27,521 21,570 Total noninterest expense 71,981 71,066 71,216 71,410 77,941 285,673 290,494 INCOME BEFORE INCOME TAXES 35,066 42,728 37,545 32,906 33,828 148,245 161,884 Provision for income taxes 7,249 8,837 7,792 6,759 6,562 30,637 31,387 NET INCOME $ 27,817 $ 33,891 $ 29,753 $ 26,147 $ 27,266 $ 117,608 $ 130,497 EARNINGS PER SHARE Basic $ 0.52 $ 0.63 $ 0.56 $ 0.49 $ 0.51 $ 2.20 $ 2.45 Diluted $ 0.52 $ 0.63 $ 0.56 $ 0.49 $ 0.51 $ 2.20 $ 2.45 Stellar Bancorp, Inc. Financial Highlights (Unaudited) Three Months Ended Years Ended 2024 2023 2024 2023 December 31 September 30 June 30 March 31 December 31 December 31 December 31 (Dollars and share amounts in thousands, except per share data) Net income $ 27,817 $ 33,891 $ 29,753 $ 26,147 $ 27,266 $ 117,608 $ 130,497 Earnings per share, basic $ 0.52 $ 0.63 $ 0.56 $ 0.49 $ 0.51 $ 2.20 $ 2.45 Earnings per share, diluted $ 0.52 $ 0.63 $ 0.56 $ 0.49 $ 0.51 $ 2.20 $ 2.45 Dividends per share $ 0.14 $ 0.13 $ 0.13 $ 0.13 $ 0.13 $ 0.53 $ 0.52 Return on average assets(A) 1.04 % 1.27 % 1.13 % 0.98 % 1.02 % 1.10 % 1.21 % Return on average equity(A) 6.85 % 8.49 % 7.78 % 6.88 % 7.33 % 7.50 % 8.96 % Return on average tangible equity(A)(B) 10.82 % 13.63 % 12.82 % 11.47 % 12.61 % 12.18 % 15.75 % Net interest margin (tax equivalent)(A)(C) 4.25 % 4.19 % 4.24 % 4.26 % 4.40 % 4.24 % 4.51 % Net interest margin (tax equivalent) excluding PAA(A)(B)(C) 3.94 % 3.91 % 3.82 % 3.91 % 3.91 % 3.89 % 4.03 % Efficiency ratio(D) 66.59 % 66.18 % 66.63 % 66.18 % 69.21 % 66.39 % 63.02 % Capital Ratios Stellar Bancorp, Inc. (Consolidated) Equity to assets 14.77 % 15.30 % 14.60 % 14.27 % 14.29 % 14.77 % 14.29 % Tangible equity to tangible assets(B) 9.89 % 10.27 % 9.53 % 9.12 % 9.04 % 9.89 % 9.04 % Estimated Total capital ratio (to risk-weighted assets) 16.06 % 15.91 % 15.34 % 14.62 % 14.02 % 16.06 % 14.02 % Estimated Common equity Tier 1 capital (to risk weighted assets) 14.19 % 13.62 % 12.98 % 12.29 % 11.77 % 14.19 % 11.77 % Estimated Tier 1 capital (to risk-weighted assets) 14.31 % 13.74 % 13.10 % 12.41 % 11.89 % 14.31 % 11.89 % Estimated Tier 1 leverage (to average tangible assets) 11.30 % 11.25 % 10.93 % 10.55 % 10.18 % 11.30 % 10.18 % Stellar Bank Estimated Total capital ratio (to risk-weighted assets) 15.34 % 15.07 % 14.65 % 14.13 % 13.65 % 15.34 % 13.65 % Estimated Common equity Tier 1 capital (to risk-weighted assets) 14.19 % 13.63 % 13.12 % 12.61 % 12.20 % 14.19 % 12.20 % Estimated Tier 1 capital (to risk-weighted assets) 14.19 % 13.63 % 13.12 % 12.61 % 12.20 % 14.19 % 12.20 % Estimated Tier 1 leverage (to average tangible assets) 11.19 % 11.16 % 10.94 % 10.72 % 10.44 % 11.19 % 10.44 % Other Data Weighted average shares: Basic 53,422 53,541 53,572 53,343 53,282 53,469 53,229 Diluted 53,471 53,580 53,608 53,406 53,350 53,510 53,313 Period end shares outstanding 53,429 53,446 53,564 53,551 53,291 53,429 53,291 Book value per share $ 30.14 $ 30.43 $ 29.23 $ 28.58 $ 28.54 $ 30.14 $ 28.54 Tangible book value per share(B) $ 19.10 $ 19.28 $ 18.00 $ 17.23 $ 17.02 $ 19.10 $ 17.02 Employees - full-time equivalents 1,037 1,040 1,045 1,007 998 1,037 998 (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 assets. Additionally, taxes and provision for credit losses are not part of this calculation. Stellar Bancorp, Inc. Financial Highlights (Unaudited) Three Months Ended December 31, 2024 September 30, 2024 December 31, 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 $ 7,477,332 $ 128,738 6.85 % $ 7,627,522 $ 132,372 6.90 % $ 7,973,780 $ 139,114 6.92 % Securities 1,702,111 15,603 3.65 % 1,676,614 14,712 3.49 % 1,386,079 10,040 2.87 % Deposits in other financial institutions 473,719 5,681 4.77 % 339,493 4,692 5.50 % 217,068 3,021 5.52 % Total interest-earning assets 9,653,162 $ 150,022 6.18 % 9,643,629 $ 151,776 6.26 % 9,576,927 $ 152,175 6.30 % Allowance for credit losses on loans (84,423 ) (94,785 ) (92,992 ) Noninterest-earning assets 1,080,429 1,077,422 1,142,438 Total assets $ 10,649,168 $ 10,626,266 $ 10,626,373 Liabilities and Shareholders' Equity Interest-Bearing Liabilities: Interest-bearing demand deposits $ 1,623,867 $ 11,341 2.78 % $ 1,606,736 $ 12,458 3.08 % $ 1,420,892 $ 10,548 2.95 % Money market and savings deposits 2,312,711 16,536 2.84 % 2,254,767 16,982 3.00 % 2,163,348 14,485 2.66 % Certificates and other time deposits 1,538,785 16,830 4.35 % 1,620,908 18,073 4.44 % 1,461,227 15,075 4.09 % Borrowed funds 15,978 235 5.85 % 49,077 840 6.81 % 275,694 4,154 5.98 % Subordinated debt 101,394 2,123 8.33 % 110,007 1,916 6.93 % 109,713 1,983 7.17 % Total interest-bearing liabilities 5,592,735 $ 47,065 3.35 % 5,641,495 $ 50,269 3.54 % 5,430,874 $ 46,245 3.38 % Noninterest-Bearing Liabilities: Noninterest-bearing demand deposits 3,342,636 3,303,726 3,624,417 Other liabilities 99,006 93,127 95,705 Total liabilities 9,034,377 9,038,348 9,150,996 Shareholders’ equity 1,614,791 1,587,918 1,475,377 Total liabilities and shareholders’ equity $ 10,649,168 $ 10,626,266 $ 10,626,373 Net interest rate spread 2.83 % 2.72 % 2.92 % Net interest income and margin $ 102,957 4.24 % $ 101,507 4.19 % $ 105,930 4.39 % Net interest income and net interest margin (tax equivalent) $ 103,039 4.25 % $ 101,578 4.19 % $ 106,121 4.40 % Cost of funds 2.10 % 2.24 % 2.03 % Cost of deposits 2.02 % 2.15 % 1.84 % Years Ended December 31, 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 $ 7,712,122 $ 531,680 6.89 % $ 7,961,911 $ 537,722 6.75 % Securities 1,593,073 53,165 3.34 % 1,490,588 41,047 2.75 % Deposits in other financial institutions 334,654 17,555 5.25 % 242,803 12,048 4.96 % Total interest-earning assets 9,639,849 $ 602,400 6.25 % 9,695,302 $ 590,817 6.09 % Allowance for credit losses on loans (91,770 ) (95,668 ) Noninterest-earning assets 1,098,395 1,147,232 Total assets $ 10,646,474 $ 10,746,866 Liabilities and Shareholders' Equity Interest-Bearing Liabilities: Interest-bearing demand deposits $ 1,618,212 $ 48,290 2.98 % $ 1,464,015 $ 38,689 2.64 % Money market and savings deposits 2,236,678 64,956 2.90 % 2,259,264 48,646 2.15 % Certificates and other time deposits 1,574,598 68,745 4.37 % 1,239,345 41,286 3.33 % Borrowed funds 77,662 4,549 5.86 % 318,721 17,807 5.59 % Subordinated debt 107,768 7,868 7.30 % 109,560 7,630 6.96 % Total interest-bearing liabilities 5,614,918 $ 194,408 3.46 % 5,390,905 $ 154,058 2.86 % Noninterest-Bearing Liabilities: Noninterest-bearing demand deposits 3,369,931 3,814,651 Other liabilities 94,156 85,376 Total liabilities 9,079,005 9,290,932 Shareholders’ equity 1,567,469 1,455,934 Total liabilities and shareholders' equity $ 10,646,474 $ 10,746,866 Net interest rate spread 2.79 % 3.23 % Net interest income and margin $ 407,992 4.23 % $ 436,759 4.50 % Net interest income and net interest margin (tax equivalent) $ 408,305 4.24 % $ 437,670 4.51 % Cost of funds 2.16 % 1.67 % Cost of deposits 2.07 % 1.47 % Stellar Bancorp, Inc. Financial Highlights (Unaudited) Three Months Ended 2024 2023 December 31 September 30 June 30 March 31 December 31 (Dollars in thousands) Period-end Loan Portfolio: Commercial and industrial $ 1,362,260 $ 1,350,753 $ 1,396,064 $ 1,455,755 $ 1,414,102 Real estate: Commercial real estate (including multi-family residential) 3,868,218 3,976,296 4,029,671 4,049,885 4,071,807 Commercial real estate construction and land development 845,494 890,316 922,805 1,039,443 1,060,406 1-4 family residential (including home equity) 1,115,484 1,112,235 1,098,681 1,049,316 1,047,174 Residential construction 157,977 161,494 200,134 252,573 267,357 Consumer and other 90,421 60,030 66,542 61,139 64,287 Total loans held for investment $ 7,439,854 $ 7,551,124 $ 7,713,897 $ 7,908,111 $ 7,925,133 Deposits: Noninterest-bearing $ 3,576,206 $ 3,303,048 $ 3,308,441 $ 3,323,149 $ 3,546,815 Interest-bearing Demand 1,845,749 1,571,504 1,564,405 1,576,261 1,659,999 Money market and savings 2,253,193 2,280,651 2,213,031 2,203,767 2,136,777 Certificates and other time 1,453,236 1,587,398 1,639,426 1,691,539 1,529,876 Total interest-bearing deposits 5,552,178 5,439,553 5,416,862 5,471,567 5,326,652 Total deposits $ 9,128,384 $ 8,742,601 $ 8,725,303 $ 8,794,716 $ 8,873,467 Asset Quality: Nonaccrual loans $ 37,212 $ 32,140 $ 50,906 $ 57,129 $ 39,191 Accruing loans 90 or more days past due — — — — — Total nonperforming loans 37,212 32,140 50,906 57,129 39,191 Foreclosed assets 1,708 2,984 2,548 — — Total nonperforming assets $ 38,920 $ 35,124 $ 53,454 $ 57,129 $ 39,191 Net charge-offs (recoveries) $ 2,016 $ 3,933 $ (1 ) $ 714 $ 2,577 Nonaccrual loans: Commercial and industrial $ 8,500 $ 9,718 $ 18,451 $ 15,465 $ 5,048 Real estate: Commercial real estate (including multi-family residential) 16,459 10,695 18,094 21,268 16,699 Commercial real estate construction and land development 3,061 4,183 1,641 8,406 5,043 1-4 family residential (including home equity) 9,056 7,259 12,454 10,368 8,874 Residential construction — 121 155 1,410 3,288 Consumer and other 136 164 111 212 239 Total nonaccrual loans $ 37,212 $ 32,140 $ 50,906 $ 57,129 $ 39,191 Asset Quality Ratios: Nonperforming assets to total assets 0.36 % 0.33 % 0.50 % 0.53 % 0.37 % Nonperforming loans to total loans 0.50 % 0.43 % 0.66 % 0.72 % 0.49 % Allowance for credit losses on loans to nonperforming loans 217.83 % 262.92 % 186.17 % 168.54 % 233.94 % Allowance for credit losses on loans to total loans 1.09 % 1.12 % 1.23 % 1.22 % 1.16 % Net charge-offs to average loans (annualized) 0.11 % 0.21 % 0.00 % 0.04 % 0.13 % 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 Years Ended 2024 2023 2024 2023 December 31 September 30 June 30 March 31 December 31 December 31 December 31 (Dollars and share amounts in thousands, except per share data) Net income $ 27,817 $ 33,891 $ 29,753 $ 26,147 $ 27,266 $ 117,608 $ 130,497 Add: Provision for credit losses 942 (5,985 ) (1,935 ) 4,098 1,047 (2,880 ) 8,943 Add: Provision for income taxes 7,249 8,837 7,792 6,759 6,562 30,637 31,387 Pre-tax, pre-provision income $ 36,008 $ 36,743 $ 35,610 $ 37,004 $ 34,875 $ 145,365 $ 170,827 Total average assets $ 10,649,168 $ 10,626,266 $ 10,623,865 $ 10,686,789 $ 10,626,373 $ 10,646,474 $ 10,746,866 Pre-tax, pre-provision return on average assets(B) 1.35 % 1.38 % 1.35 % 1.39 % 1.30 % 1.37 % 1.59 % Total shareholders’ equity $ 1,610,465 $ 1,626,123 $ 1,565,795 $ 1,530,698 $ 1,521,018 $ 1,610,465 $ 1,521,018 Less: Goodwill and core deposit intangibles, net 589,864 595,434 601,633 607,831 614,030 589,864 614,030 Tangible shareholders’ equity $ 1,020,601 $ 1,030,689 $ 964,162 $ 922,867 $ 906,988 $ 1,020,601 $ 906,988 Shares outstanding at end of period 53,429 53,446 53,564 53,551 53,291 53,429 53,291 Tangible book value per share $ 19.10 $ 19.28 $ 18.00 $ 17.23 $ 17.02 $ 19.10 $ 17.02 Average shareholders’ equity $ 1,614,791 $ 1,587,918 $ 1,538,124 $ 1,528,298 $ 1,475,377 $ 1,567,469 $ 1,455,934 Less: Average goodwill and core deposit intangibles, net 592,471 598,866 604,722 611,149 617,236 601,768 627,449 Average tangible shareholders’ equity $ 1,022,320 $ 989,052 $ 933,402 $ 917,149 $ 858,141 $ 965,701 $ 828,485 Return on average tangible equity(B) 10.82 % 13.63 % 12.82 % 11.47 % 12.61 % 12.18 % 15.75 % Total assets $ 10,905,110 $ 10,629,777 $ 10,723,663 $ 10,729,222 $ 10,647,139 $ 10,905,110 $ 10,647,139 Less: Goodwill and core deposit intangibles, net 589,864 595,434 601,633 607,831 614,030 589,864 614,030 Tangible assets $ 10,315,246 $ 10,034,343 $ 10,122,030 $ 10,121,391 $ 10,033,109 $ 10,315,246 $ 10,033,109 Tangible equity to tangible assets 9.89 % 10.27 % 9.53 % 9.12 % 9.04 % 9.89 % 9.04 % Net interest income (tax equivalent) $ 103,039 $ 101,578 $ 101,482 $ 102,207 $ 106,121 $ 408,305 $ 437,670 Less: Purchase accounting accretion 7,555 6,795 10,098 8,551 11,726 32,999 46,802 Adjusted net interest income (tax equivalent) $ 95,484 $ 94,783 $ 91,384 $ 93,656 $ 94,395 $ 375,306 $ 390,868 Average earning assets $ 9,653,162 $ 9,643,629 $ 9,616,874 $ 9,645,544 $ 9,576,927 $ 9,639,849 $ 9,695,302 Net interest margin (tax equivalent) excluding PAA 3.94 % 3.91 % 3.82 % 3.91 % 3.91 % 3.89 % 4.03 % (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.

Stellar Bancorp, Inc. Reports Fourth Quarter and Full Year 2024 Results

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