0001473844FALSE00014738442024-07-262024-07-26

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): July 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 July 26, 2024, Stellar Bancorp, Inc. (the “Company”) issued a press release announcing its financial results for the second quarter of 2024. 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, July 26, 2024, at 8:00 a.m., Central Time, the Company will host an investor conference call and webcast to review its second 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, July 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: July 26, 2024By:/s/ Paul P. Egge
Paul P. Egge
Chief Financial Officer



Exhibit 99.1
image.jpg
PRESS RELEASE                                        

STELLAR BANCORP, INC. REPORTS
SECOND QUARTER 2024 RESULTS

HOUSTON, July 26, 2024 - Stellar Bancorp, Inc. (the “Company” or “Stellar”) (NYSE: STEL) today reported net income of $29.8 million, or diluted earnings per share of $0.56, for the second quarter of 2024 compared to net income of $26.1 million, or diluted earnings per share of $0.49, for the first quarter of 2024.

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

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

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

Second Quarter 2024 Financial Highlights

•Solid Profitability: Second quarter 2024 net income of $29.8 million, or diluted earnings per share of $0.56, translated into an annualized return on average assets of 1.13%, an annualized return on average equity of 7.78% and an annualized return on average tangible equity of 12.82%(1).

•Meaningful Regulatory Capital Build: Total risk-based capital ratio increased to 15.34% at June 30, 2024 from 14.62% at March 31, 2024 and Tier 1 leverage ratio increased to 10.93% at June 30, 2024 from 10.55% at March 31, 2024.

•Strong Net Interest Margin: Tax equivalent net interest margin was 4.24% for the second quarter of 2024 compared to 4.26% for the first quarter of 2024. The tax equivalent net interest margin, excluding purchase accounting accretion (“PAA”), was 3.82%(1) for the second quarter of 2024 compared to 3.91%(1) for the first quarter of 2024.

•Stable Credit Performance: Net charge-offs of $715 thousand, or 0.02%, for the year-to-date 2024.

Second Quarter 2024 Results

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


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


1

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

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

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

Financial Condition

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

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

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

Asset Quality

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

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

GAAP Reconciliation of Non-GAAP Financial Measures

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

Conference Call

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

About Stellar Bancorp, Inc.

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

Investor Relations
IR@stellar.bank


2


Forward-Looking Statements

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

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

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


3

Stellar Bancorp, Inc.
Financial Highlights
(Unaudited)
20242023
 June 30  March 31  December 31  September 30  June 30
 (Dollars in thousands)
ASSETS
Cash and due from banks$110,341 $74,663 $121,004 $94,970 $105,913 
Interest-bearing deposits at other financial institutions379,909 325,079 278,233 207,302 198,176 
Total cash and cash equivalents490,250 399,742 399,237 302,272 304,089 
Available for sale securities, at fair value1,630,971 1,523,100 1,395,680 1,414,952 1,478,222 
Loans held for investment7,713,897 7,908,111 7,925,133 8,004,528 8,068,718 
Less: allowance for credit losses on loans(94,772)(96,285)(91,684)(93,575)(100,195)
Loans, net7,619,125 7,811,826 7,833,449 7,910,953 7,968,523 
Accrued interest receivable43,348 45,466 44,244 43,536 42,051 
Premises and equipment, net113,984 115,698 118,683 119,332 119,142 
Federal Home Loan Bank stock15,089 16,050 25,051 29,022 24,478 
Bank-owned life insurance106,262 105,671 105,084 104,699 104,148 
Goodwill497,318 497,318 497,318 497,318 497,260 
Core deposit intangibles, net104,315 110,513 116,712 122,944 129,805 
Other assets103,001 103,838 111,681 120,432 110,633 
Total assets$10,723,663 $10,729,222 $10,647,139 $10,665,460 $10,778,351 
LIABILITIES AND SHAREHOLDERS’ EQUITY
LIABILITIES:
Deposits:
Noninterest-bearing$3,308,441 $3,323,149 $3,546,815 $3,656,288 $3,713,536 
Interest-bearing
Demand1,564,405 1,576,261 1,659,999 1,397,492 1,437,509 
Money market and savings2,213,031 2,203,767 2,136,777 2,128,950 2,174,073 
Certificates and other time1,639,426 1,691,539 1,529,876 1,503,891 1,441,251 
Total interest-bearing deposits5,416,862 5,471,567 5,326,652 5,030,333 5,052,833 
Total deposits8,725,303 8,794,716 8,873,467 8,686,621 8,766,369 
Accrued interest payable12,327 12,227 11,288 7,612 4,555 
Borrowed funds240,000 215,000 50,000 323,981 369,963 
Subordinated debt109,964 109,864 109,765 109,665 109,566 
Other liabilities70,274 66,717 81,601 76,735 69,218 
Total liabilities9,157,868 9,198,524 9,126,121 9,204,614 9,319,671 
SHAREHOLDERS’ EQUITY:
Common stock536 536 533 533 533 
Capital surplus1,238,477 1,235,221 1,232,627 1,231,686 1,228,532 
Retained earnings447,948 425,130 405,945 385,600 361,619 
Accumulated other comprehensive loss(121,166)(130,189)(118,087)(156,973)(132,004)
Total shareholders’ equity1,565,795 1,530,698 1,521,018 1,460,846 1,458,680 
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY$10,723,663 $10,729,222 $10,647,139 $10,665,460 $10,778,351 
4

Stellar Bancorp, Inc.
Financial Highlights
(Unaudited)
Three Months EndedSix Months Ended
2024202320242023
 June 30  March 31  December 31  September 30  June 30  June 30  June 30
(Dollars in thousands, except per share data)
INTEREST INCOME:
Loans, including fees$135,885 $134,685 $139,114 $138,948 $133,931 $270,570 $259,660 
Securities:
Taxable11,923 9,293 9,622 9,493 9,726 21,216 19,379 
Tax-exempt816 818 418 437 436 1,634 1,698 
Deposits in other financial institutions3,555 3,627 3,021 2,391 2,865 7,182 6,636 
Total interest income152,179 148,423 152,175 151,269 146,958 300,602 287,373 
INTEREST EXPENSE:
Demand, money market and savings deposits28,399 27,530 25,033 23,557 20,708 55,929 38,745 
Certificates and other time deposits18,758 15,084 15,075 13,282 9,622 33,842 12,929 
Borrowed funds1,700 1,774 4,154 5,801 6,535 3,474 7,852 
Subordinated debt1,912 1,917 1,983 1,908 1,812 3,829 3,739 
Total interest expense50,769 46,305 46,245 44,548 38,677 97,074 63,265 
NET INTEREST INCOME101,410 102,118 105,930 106,721 108,281 203,528 224,108 
(Reversal of) provision for credit losses(1,935)4,098 1,047 2,315 1,915 2,163 5,581 
Net interest income after provision for credit losses103,345 98,020 104,883 104,406 106,366 201,365 218,527 
NONINTEREST INCOME:
Service charges on deposit accounts1,648 1,598 1,520 1,620 1,575 3,246 2,924 
(Loss) gain on sale of assets(64)513 198 — (6)449 192 
Bank-owned life insurance591 587 573 551 532 1,178 1,054 
Debit card and ATM income543 527 542 935 1,821 1,070 3,519 
Other2,698 3,071 4,053 1,589 1,561 5,769 5,292 
Total noninterest income5,416 6,296 6,886 4,695 5,483 11,712 12,981 
NONINTEREST EXPENSE:
Salaries and employee benefits39,061 41,376 40,464 39,495 37,300 80,437 77,075 
Net occupancy and equipment4,503 4,390 4,572 4,455 3,817 8,893 7,905 
Depreciation1,948 1,964 1,955 1,952 1,841 3,912 3,677 
Data processing and software amortization5,501 4,894 5,000 4,798 4,674 10,395 9,728 
Professional fees1,620 2,662 3,867 997 1,564 4,282 3,091 
Regulatory assessments and FDIC insurance2,299 1,854 5,169 1,814 2,755 4,153 4,049 
Amortization of intangibles6,215 6,212 6,247 6,876 6,881 12,427 13,760 
Communications847 937 743 663 689 1,784 1,390 
Advertising891 765 1,004 877 907 1,656 1,746 
Acquisition and merger-related expenses— — 3,072 3,421 2,897 — 9,062 
Other8,331 6,356 5,848 5,400 5,882 14,687 10,322 
Total noninterest expense71,216 71,410 77,941 70,748 69,207 142,626 141,805 
INCOME BEFORE INCOME TAXES37,545 32,906 33,828 38,353 42,642 70,451 89,703 
Provision for income taxes7,792 6,759 6,562 7,445 7,467 14,551 17,380 
NET INCOME$29,753 $26,147 $27,266 $30,908 $35,175 $55,900 $72,323 
EARNINGS PER SHARE
Basic$0.56 $0.49 $0.51 $0.58 $0.66 $1.05 $1.36 
Diluted$0.56 $0.49 $0.51 $0.58 $0.66 $1.04 $1.36 
5

Stellar Bancorp, Inc.
Financial Highlights
(Unaudited)
Three Months EndedSix Months Ended
2024202320242023
 June 30  March 31  December 31  September 30  June 30  June 30  June 30
(Dollars and share amounts in thousands, except per share data)
Net income$29,753$26,147$27,266$30,908$35,175$55,900$72,323
Earnings per share, basic$0.56$0.49$0.51$0.58$0.66$1.05$1.36
Earnings per share, diluted$0.56$0.49$0.51$0.58$0.66$1.04$1.36
Dividends per share$0.13$0.13$0.13$0.13$0.13$0.26$0.26
Return on average assets(A)
1.13 %0.98 %1.02 %1.14 %1.31 %1.06 %1.35 %
Return on average equity(A)
7.78 %6.88 %7.33 %8.34 %9.67 %7.33 %10.14 %
Return on average tangible equity(A)(B)
12.82 %11.47 %12.61 %14.47 %17.05 %12.15 %18.14 %
Net interest margin (tax equivalent)(A)(C)
4.24 %4.26 %4.40 %4.37 %4.49 %4.25 %4.64 %
Net interest margin (tax equivalent) excluding PAA(A)(B)(C)
3.82 %3.91 %3.91 %3.87 %3.97 %3.86 %4.18 %
Efficiency ratio(D)
66.63 %66.18 %69.21 %63.50 %60.83 %66.40 %59.86 %
Capital Ratios
Stellar Bancorp, Inc. (Consolidated)
Equity to assets14.60 %14.27 %14.29 %13.70 %13.53 %14.60 %13.53 %
Tangible equity to tangible assets(B)
9.53 %9.12 %9.04 %8.37 %8.19 %9.53 %8.19 %
Estimated Total capital ratio (to risk-weighted assets)15.34 %14.62 %14.02 %13.61 %13.21 %15.34 %13.21 %
Estimated Common equity Tier 1 capital (to risk weighted assets)
12.98 %12.29 %11.77 %11.30 %10.83 %12.98 %10.83 %
Estimated Tier 1 capital (to risk-weighted assets)
13.10 %12.41 %11.89 %11.41 %10.94 %13.10 %10.94 %
Estimated Tier 1 leverage (to average tangible assets)
10.93 %10.55 %10.18 %9.82 %9.51 %10.93 %9.51 %
Stellar Bank
Estimated Total capital ratio (to risk-weighted assets)14.65 %14.13 %13.65 %13.32 %12.98 %14.65 %12.98 %
Estimated Common equity Tier 1 capital (to risk-weighted assets)
13.12 %12.61 %12.20 %11.80 %11.38 %13.12 %11.38 %
Estimated Tier 1 capital (to risk-weighted assets)
13.12 %12.61 %12.20 %11.80 %11.38 %13.12 %11.38 %
Estimated Tier 1 leverage (to average tangible assets)
10.94 %10.72 %10.44 %10.15 %9.89 %10.94 %9.89 %
Other Data
Weighted average shares:
Basic53,57253,34353,28253,31353,29753,45753,160
Diluted53,60853,40653,35053,38053,37553,50653,261
Period end shares outstanding53,56453,55153,29153,32253,30353,56453,303
Book value per share$29.23$28.58$28.54$27.40$27.37$29.23$27.37
Tangible book value per share(B)
$18.00$17.23$17.02$15.76$15.60$18.00$15.60
Employees - full-time equivalents1,0451,0079981,0081,0041,0451,004

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

    
6

Stellar Bancorp, Inc.
Financial Highlights
(Unaudited)
Three Months Ended
June 30, 2024March 31, 2024June 30, 2023
Average BalanceInterest Earned/
Interest Paid		Average Yield/RateAverage BalanceInterest Earned/
Interest Paid		Average Yield/RateAverage BalanceInterest Earned/
Interest Paid		Average Yield/Rate
(Dollars in thousands)
Assets
Interest-Earning Assets:
Loans$7,808,320 $135,885 7.00 %$7,938,824 $134,685 6.82 %$7,980,856 $133,931 6.73 %
Securities1,549,638 12,739 3.31 %1,441,814 10,111 2.82 %1,502,949 10,162 2.71 %
Deposits in other financial institutions258,916 3,555 5.52 %264,906 3,627 5.51 %209,722 2,865 5.48 %
Total interest-earning assets9,616,874 $152,179 6.36 %9,645,544 $148,423 6.19 %9,693,527 $146,958 6.08 %
Allowance for credit losses on loans(96,306)(91,612)(96,414)
Noninterest-earning assets1,103,297 1,132,857 1,143,025 
Total assets$10,623,865 $10,686,789 $10,740,138 
Liabilities and Shareholders' Equity
Interest-Bearing Liabilities:
Interest-bearing demand deposits$1,545,096 $12,213 3.18 %$1,697,211 $12,278 2.91 %$1,387,604 $9,343 2.70 %
Money market and savings deposits2,227,393 16,186 2.92 %2,150,805 15,252 2.85 %2,220,827 11,365 2.05 %
Certificates and other time deposits1,694,536 18,758 4.45 %1,444,048 15,084 4.20 %1,225,834 9,622 3.15 %
Borrowed funds112,187 1,700 6.09 %134,400 1,774 5.31 %479,896 6,535 5.46 %
Subordinated debt109,910 1,912 7.00 %109,808 1,917 7.02 %109,499 1,812 6.64 %
Total interest-bearing liabilities5,689,122 $50,769 3.59 %5,536,272 $46,305 3.36 %5,423,660 $38,677 2.86 %
Noninterest-Bearing Liabilities:
Noninterest-bearing demand deposits3,308,633 3,525,758 3,779,594 
Other liabilities87,986 96,461 78,411 
Total liabilities9,085,741 9,158,491 9,281,665 
Shareholders’ equity1,538,124 1,528,298 1,458,473 
Total liabilities and shareholders’ equity$10,623,865 $10,686,789 $10,740,138 
Net interest rate spread2.77 %2.83 %3.22 %
Net interest income and margin$101,410 4.24 %$102,118 4.26 %$108,281 4.48 %
Net interest income and net interest margin (tax equivalent)$101,482 4.24 %$102,207 4.26 %$108,509 4.49 %
Cost of funds2.27 %2.06 %1.69 %
Cost of deposits2.16 %1.94 %1.41 %
7

Stellar Bancorp, Inc.
Financial Highlights
(Unaudited)
Six Months Ended June 30,
20242023
Average BalanceInterest Earned/
Interest Paid		Average Yield/RateAverage BalanceInterest Earned/
Interest Paid		Average Yield/Rate
(Dollars in thousands)
Assets
Interest-Earning Assets:
Loans$7,873,572 $270,570 6.91 %$7,914,303 $259,660 6.62 %
Securities1,495,726 22,850 3.07 %1,553,200 21,077 2.74 %
Deposits in other financial institutions261,911 7,182 5.52 %286,823 6,636 4.67 %
Total interest-earning assets9,631,209 $300,602 6.28 %9,754,326 $287,373 5.94 %
Allowance for credit losses on loans(93,959)(94,881)
Noninterest-earning assets1,118,077 1,151,497 
Total assets$10,655,327 $10,810,942 
Liabilities and Shareholders' Equity
Interest-Bearing Liabilities:
Interest-bearing demand deposits$1,621,154 $24,491 3.04 %$1,518,213 $17,725 2.35 %
Money market and savings deposits2,189,099 31,438 2.89 %2,355,112 21,020 1.80 %
Certificates and other time deposits1,569,292 33,842 4.34 %1,044,721 12,929 2.50 %
Borrowed funds123,293 3,474 5.67 %293,578 7,852 5.39 %
Subordinated debt109,859 3,829 7.01 %109,458 3,739 6.89 %
Total interest-bearing liabilities5,612,697 $97,074 3.48 %5,321,082 $63,265 2.40 %
Noninterest-Bearing Liabilities:
Noninterest-bearing demand deposits3,417,196 3,971,862 
Other liabilities92,223 79,609 
Total liabilities9,122,116 9,372,553 
Shareholders’ equity1,533,211 1,438,389 
Total liabilities and shareholders' equity$10,655,327 $10,810,942 
Net interest rate spread2.80 %3.54 %
Net interest income and margin$203,528 4.25 %$224,108 4.63 %
Net interest income and net interest margin (tax equivalent)$203,688 4.25 %$224,628 4.64 %
Cost of funds2.16 %1.37 %
Cost of deposits2.05 %1.17 %
8

Stellar Bancorp, Inc.
Financial Highlights
(Unaudited)
Three Months Ended
20242023
 June 30  March 31  December 31 September 30 June 30
(Dollars in thousands)
Period-end Loan Portfolio:
Commercial and industrial$1,392,435$1,451,462$1,409,002$1,474,600$1,512,476
Paycheck Protection Program (PPP)3,6294,2935,1005,9688,027
Real estate:
Commercial real estate (including multi-family residential)4,029,6714,049,8854,071,8074,076,6064,038,487
Commercial real estate construction and land development922,8051,039,4431,060,4061,078,2651,136,124
1-4 family residential (including home equity)1,098,6811,049,3161,047,1741,024,9451,009,439
Residential construction200,134252,573267,357289,553311,208
Consumer and other66,54261,13964,28754,59152,957
Total loans held for investment$7,713,897$7,908,111$7,925,133$8,004,528$8,068,718
Deposits:
Noninterest-bearing$3,308,441$3,323,149$3,546,815$3,656,288$3,713,536
Interest-bearing
Demand1,564,4051,576,2611,659,9991,397,4921,437,509
Money market and savings2,213,0312,203,7672,136,7772,128,9502,174,073
Certificates and other time1,639,4261,691,5391,529,8761,503,8911,441,251
Total interest-bearing deposits5,416,8625,471,5675,326,6525,030,3335,052,833
Total deposits$8,725,303$8,794,716$8,873,467$8,686,621$8,766,369
Asset Quality:
Nonaccrual loans$50,906$57,129$39,191$38,291$43,349
Accruing loans 90 or more days past due—————
Total nonperforming loans50,90657,12939,19138,29143,349
Other real estate 2,548————
Total nonperforming assets$53,454$57,129$39,191$38,291$43,349
Net (recoveries) charge-offs $(1)$714$2,577$8,116$236
Nonaccrual loans:
Commercial and industrial$18,451$15,465$5,048$14,991$22,968
Real estate:
Commercial real estate (including multi-family residential)18,09421,26816,69913,5638,221
Commercial real estate construction and land development1,6418,4065,043170388
1-4 family residential (including home equity)12,45410,3688,8748,44210,880
Residential construction1551,4103,288635665
Consumer and other111212239490227
Total nonaccrual loans$50,906$57,129$39,191$38,291$43,349
Asset Quality Ratios:
Nonperforming assets to total assets0.50 %0.53 %0.37 %0.36 %0.40 %
Nonperforming loans to total loans0.66 %0.72 %0.49 %0.48 %0.54 %
Allowance for credit losses on loans to nonperforming loans186.17 %168.54 %233.94 %244.38 %231.14 %
Allowance for credit losses on loans to total loans1.23 %1.22 %1.16 %1.17 %1.24 %
Net charge-offs to average loans (annualized)0.00 %0.04 %0.13 %0.40 %0.01 %

9
Stellar Bancorp, Inc.
GAAP Reconciliation and Management’s Explanation of Non-GAAP Financial Measures
(Unaudited)




Stellar’s management uses certain non-GAAP (generally accepted accounting principles) financial measures to evaluate its performance. Stellar believes that these non-GAAP financial measures provide meaningful supplemental information regarding its performance and that management and investors benefit from referring to these non-GAAP financial measures in assessing Stellar’s performance and when planning, forecasting, analyzing and comparing past, present and future periods. Specifically, Stellar reviews pre-tax, pre-provision income, pre-tax pre-provision ROAA, tangible book value per share, return on average tangible equity, tangible equity to tangible assets and net interest margin (tax equivalent) excluding PAA for internal planning and forecasting purposes. Stellar has included in this earnings release information relating to these non-GAAP financial measures for the applicable periods presented. These non-GAAP measures should not be considered in isolation or as a substitute for the most directly comparable or other financial measures calculated in accordance with GAAP. Moreover, the manner in which Stellar calculates the non-GAAP financial measures may differ from that of other companies reporting measures with similar names.
Three Months EndedSix Months Ended
2024202320242023
 June 30  March 31  December 31  September 30  June 30  June 30  June 30
(Dollars and share amounts in thousands, except per share data)
Net income$29,753$26,147$27,266$30,908$35,175$55,900$72,323
Add: Provision for credit losses(1,935)4,0981,0472,3151,9152,1635,581
Add: Provision for income taxes7,7926,7596,5627,4457,46714,55117,380
Pre-tax, pre-provision income$35,610$37,004$34,875$40,668$44,557$72,614$95,284
Total average assets$10,623,865$10,686,789$10,626,373$10,741,295$10,740,138$10,655,327$10,810,942
Pre-tax, pre-provision return on average assets(B)
1.35 %1.39 %1.30 %1.50 %1.66 %1.37 %1.78 %
Total shareholders’ equity$1,565,795$1,530,698$1,521,018$1,460,846$1,458,680$1,565,795$1,458,680
Less: Goodwill and core deposit intangibles, net601,633607,831614,030620,262627,065601,633627,065
Tangible shareholders’ equity$964,162$922,867$906,988$840,584$831,615$964,162$831,615
Shares outstanding at end of period53,56453,55153,29153,32253,30353,56453,303
Tangible book value per share$18.00$17.23$17.02$15.76$15.60$18.00$15.60
Average shareholders’ equity$1,538,124$1,528,298$1,475,377$1,471,009$1,458,473$1,533,211$1,438,389
Less: Average goodwill and core deposit intangibles, net604,722611,149617,236623,864630,854607,935634,462
Average tangible shareholders’ equity$933,402$917,149$858,141$847,145$827,619$925,276$803,927
Return on average tangible equity(B)
12.82 %11.47 %12.61 %14.47 %17.05 %12.15 %18.14 %
Total assets$10,723,663$10,729,222$10,647,139$10,665,460$10,778,351$10,723,663$10,778,351
Less: Goodwill and core deposit intangibles, net601,633607,831614,030620,262627,065601,633627,065
Tangible assets$10,122,030$10,121,391$10,033,109$10,045,198$10,151,286$10,122,030$10,151,286
Tangible equity to tangible assets9.53 %9.12 %9.04 %8.37 %8.19 %9.53 %8.19 %
Net interest income (tax equivalent)$101,482$102,207$106,121$106,919$108,509$203,688$224,628
Less: Purchase accounting accretion10,0988,55111,72612,40012,57218,64922,676
Adjusted net interest income (tax equivalent)$91,384$93,656$94,395$94,519$95,937$185,039$201,952
Average earning assets$9,616,874$9,645,544$9,576,927$9,697,553$9,693,527$9,631,209$9,754,326
Net interest margin (tax equivalent) excluding PAA3.82 %3.91 %3.91 %3.87 %3.97 %3.86 %4.18 %
(A)Represents total noninterest expense, excluding acquisition and merger-related expenses, core deposit intangibles amortization and write-downs on assets moved to held for sale, divided by the sum of net interest income, excluding purchase accounting adjustments plus noninterest income, excluding gains and losses on the sale of assets. Additionally, taxes and provision for credit losses are not part of this calculation.
(B)Interim periods annualized.
10
Second Quarter 2024 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 Company’s merger with Allegiance Bancshares, Inc. and CBTX, Inc. (the “Merger”) 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. 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. Banking Centers  Strong core earnings power and capital position Banking Centers Free-standing ATM 6/30/2024 3/31/2024 Total assets 10,723,663$ 10,729,222$ Total loans 7,713,897 7,908,111 Total deposits 8,725,303 8,794,716 Total loans to total deposits 88.41% 89.92% Equity to assets 14.60% 14.27% Tangible equity to tangible assets (1) 9.53% 9.12% (Dollars in thousands)

 
$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 $157.3 Texas Independent BOK Regions Texas Capital Truist Comerica Third Coast Woodforest Prosperity Capital One Frost Cadence Stellar PNC Zions BofA Wells Fargo JPMorgan Focused on Serving the Houston Region 4 Note: Deposit market share based on FDIC data as of June 30, 2023. 1) Houston Region defined as the Houston-Pasadena-The Woodlands and Beaumont-Port Arthur MSAs; Excludes non-retail branches. Source: S&P Capital IQ Pro; Excludes non-retail branches Stel Houston Region Market Share(1) Deposits (dollars in billions) Houston Percent of Houston T otal Assets Region Com pany Region Market Nam e ($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 Second Quarter 2024 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) Interim periods annualized.  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. Tangible Book Value Per Share(1) Total Capital Ratio $14.02 $17.02 $18.00 12/31/2022 12/31/2023 6/30/2024 12.39% 14.02% 15.34% 12/31/2022 12/31/2023 6/30/2024

 
Deposit Summary 6 Deposit Portfolio Composition Deposits (in millions) Maintaining Discipline Navigating Competitive Deposit Market As of June 30, 2024: • Estimated uninsured deposits, net of collateralized deposits: 43.3% • Average account size: $78 thousand, excluding collateralized and brokered deposits • Loan to deposit ratio: 88.4% • Noninterest-bearing deposits to total deposits: 37.9% • Brokered deposits: $741.3 million at June 30, 2024 from $786.6 million at March 31, 2024 . (1) NIB 37.9% IB Demand 17.9% MMDA & Sav. 25.4% CD's 18.8% Q2 2024 Q1 2024 Noninterest-bearing ("NIB") 3,308,441$ 3,323,149$ Interest-bearing demand ("IB Demand") 1,564,405 1,576,261 Money market and savings ("MMDA & Sav.") 2,213,031 2,203,767 Certificates and other time ("CD's") 1,639,426 1,691,539 Total deposits 8,725,303$ 8,794,716$ (Dollars in thousands)

 
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 14.2% MF 5.4% Resi. C&D 2.6% CRE C&D 12.0% NOO CRE 22.0% OO CRE 24.8% C&I 18.1% Other 0.9% Q2 2024 Q1 2024 Commercial and Industrial (“C&I”) 1,396,064$ 1,455,755$ Nonowner-occupied Commercial Real Estate (“NOO CRE”) 1,694,022 1,711,089 Owner-occupied CRE (“OO CRE”) 1,912,387 1,886,641 Multifamily Real Estate (“MF”) 423,262 452,155 Total Commercial Real Estate 4,029,671 4,049,885 CRE Construction & Development (“CRE C&D”) 922,805 1,039,443 1-4 Family Residential (“1-4 Family”) 1,098,681 1,049,316 Residential Construction (“Resi. C&D”) 200,134 252,573 Consumer and other ("Other") 66,542 61,139 Total 7,713,897$ 7,908,111$ (In thousands) Average Yield Excl. PAA(1) Average Yield Excl. PAA(1) Interest-earning Assets: Loans 7,808,320$ 135,885$ 7.00% 6.48% 7,938,824$ 134,685$ 6.82% 6.39% Securities 1,549,638 12,739 3.31% 1,441,814 10,111 2.82% Deposits in other financial institutions 258,916 3,555 5.52% 264,906 3,627 5.51% Total interest-earning assets 9,616,874$ 152,179$ 6.36% 5.94% 9,645,544$ 148,423$ 6.19% 5.83% (Dollars in thousands) Q2 2024 Q1 2024 Average Outstanding Balance Interest Earned Average Outstanding Balance Interest Earned

 
CRE and Office Detail: Q2 2024 8 (1) (1) CRE (incl. multifamily) by Property Type CRE - Office Retail 16.9% Office 10.8% Warehouse 14.1% Multi-family 10.5% C-Store 11.1%Hotel/ Motel 4.2% Industrial 4.1% Restaurant/Bar 4.1% Auto Sales/ Repair 4.0% Church 3.1% Healthcare 3.0% Other 14.1% Owner- occupied 41.2% Non-owner occupied 58.8% Retail 679,626$ 1,273$ 16.9% Warehouse 566,759 728 14.1% Convenience Store (C-Store) 445,643 1,315 11.1% Office 433,486 810 10.8% Multi-family 423,262 1,856 10.5% Hotel / Motel 170,425 4,058 4.2% Industrial 166,575 1,501 4.1% Restaurant / Bar 165,879 987 4.1% Auto Sales / Repair 159,516 715 4.0% Church 124,605 865 3.1% Healthcare 122,076 1,110 3.0% Other 571,819 728 14.1% Total 4,029,671$ 1,094 100.0% Property Type Balance Average Loan Size % of Total (Dollars In thousands) Flex Office Space 75 53,556$ 714$ 12.4% Multi-Story Office Building 135 241,453 1,789 55.7% Single Story Office Building 325 138,477 426 31.9% Total 535 433,486$ 810 100.0% 0 - 12 months 99 58,843$ 594$ 13.5% 13 - 24 months 75 46,162 615 10.7% 25 - 36 months 77 84,075 1,092 19.4% 37 - 48 months 55 54,703 995 12.6% 49 + months 229 189,703 828 43.8% 535 433,486$ 810 100.0% (Dollars in thousands) (Dollars in thousands) Maturity % of Total Average Loan SizeNumber BalanceCollateral Type Average Loan Size % of TotalNumber Balance

 
CRE Construction and Development: Q2 2024 9 (1) (1) • Total committed exposure for CRE construction loans was $1.23 billion at June 30, 2024 and $1.44 billion at March 31, 2024 • The largest category of CRE construction loans was Land – Commercial at $365.1 million outstanding, or 39.6%, of CRE construction loans at June 30, 2024 • Owner-occupied CRE construction loans were 13.4% of CRE construction loans at June 30, 2024 (1) Multi-family community development loans (“CD”). CRE Construction Lending Highlights Land - Commercial 39.6% Warehouse 12.8% Multi-family - CD 13.8% Multi-family - Market Rate 4.7% Land - Residential Lot 7.5% Retail 4.0% C-Store 2.4% Residential Subdivision 5.2% Other 10.0% Number Balance Number Balance Land - Commercial 464 365,110$ 787$ 487 380,878$ 782$ Warehouse 29 118,566 4,088 41 127,041 3,099 Multi-family - CD(1) 14 127,298 9,093 14 120,297 8,593 Land - Residential Lot 265 68,751 259 284 82,845 292 Retail 26 37,072 1,426 35 52,575 1,502 Convenience Store (C-Store) 12 22,233 1,853 23 47,319 2,057 Residential Subdivision 8 48,178 6,022 9 40,122 4,458 Multi-family - Market Rate 8 43,615 5,452 11 39,440 3,585 Other 79 91,982 1,164 113 148,926 1,318 Total 905 922,805$ 1,020 1,017 1,039,443 1,022 (Dollars in thousand) (Dollars in thousand) Loan Type Q2 2024 Q1 2024 Average Loan Size Average Loan Size

 
Asset Quality Summary 10 Nonperforming Loans by Type (1) Combined represents the simple addition of legacy balances for 2022; estimated. Allowance for credit losses on loans: • $94.8 million, or 1.23% of total loans, at June 30, 2024, compared to $96.3 million, or 1.22% of total loans, as of March 31, 2024 Allowance for credit losses on loans to nonperforming loans: • 186.17% at June 30, 2024 compared to 168.54% as of March 31, 2024 C&I 36.3% Other 0.5% CRE 12.1% OO CRE 21.4% Multifamily RE 2.0% CRE C&D 3.2% 1-4 Family 24.5% Nonaccrual Loans with No Related Allowance Nonaccrual Loans with Related Allowance Total Nonaccrual Loans Commercial and industrial 1,030$ 17,421$ 18,451$ Commercial real estate (including multi-family residential) 13,842 4,252 18,094 Commercial real estate construction and land development 899 742 1,641 1-4 family residential (including equity) 8,068 4,386 12,454 Residential construction 155 — 155 Consumer and other 28 83 111 24,022$ 26,884$ 50,906$ (In thousands) Q2 2024 Q1 2024 Total nonperforming loans 50,906$ 57,129$ Nonperforming loans to total loans 0.66% 0.72% Total nonperforming assets 53,454$ 57,129$ 0.50% 0.53% Net (recoveries) charge-offs (1)$ 714$ 0.00% 0.04% (Dollars in thousands) Nonperforming assets to total assets Net charge-offs to average loans (annualized)

 
Regulatory Capital Ratios 11 (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. Minimum Required Plus Capital Conservation Buffer Consolidated Capital Ratios Estimated Total Capital Ratio (to risk-weighted assets) 15.34% 14.62% 10.50% Estimated Common Equity Tier 1 Capital Ratio (to risk-weighted assets) 12.98% 12.29% 7.00% Estimated Tier 1 Capital Ratio (to risk-weighted assets) 13.10% 12.41% 8.50% Estimated Tier 1 Leverage Ratio (to average tangible assets) 10.93% 10.55% 4.00% Estimated Tangible Equity to Tangible Assets (1) 9.53% 9.12% N/A Bank Capital Ratios Estimated Total Capital Ratio (to risk-weighted assets) 14.65% 14.13% 10.50% Estimated Common Equity Tier 1 Capital Ratio (to risk-weighted assets) 13.12% 12.61% 7.00% Estimated Tier 1 Capital Ratio (to risk-weighted assets) 13.12% 12.61% 8.50% Estimated Tier 1 Leverage Ratio (to average tangible assets) 10.94% 10.72% 4.00% June 30, 2024 March 31, 2024

 
12 Liquidity Profile Stellar is well-positioned to manage through the current environment Sources of Liquidity at June 30, 2024 Sources of Liquidity Estimated Uninsured Deposits at June 30, 2024 (1) Brokered deposit capacity is governed by internal policy limits. (Dollars in millions) Total deposits 8,725$ Estimated uninsured deposits 4,786 (1,009) Estimated uninsured, net of collateralized deposits 3,777$ Percent of total deposits 43.3% Less: collateralized deposits (Dollars in millions) Cash 490$ Unpledged securities 1,018 Total on-balance sheet 1,508 FHLB available capacity 1,858 Discount window available capacity 772 Total immediate available liquidity 4,138 Available brokered deposit capacity(1) 1,014 Total available liquidity 5,152$ 109.6% 136.4% Immediate available liquidity coverage of estimated uninsured deposits, net of collateralized deposits Total available liquidity coverage of estimated uninsured deposits, net of collateralized deposits

 
13 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

 
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 14 Houston is Diverse, with Significant Economic TailwindsGreater Houston Market 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 ’24-’29 Est. Number of Households Growth ’24-’29 Population Change (’19-’24) Median Household Income (’24) Significant Deposit Share Houston MSA: 6.0% Texas: 5.9% / U.S: 2.1% Houston MSA: $75,557 Texas: $73,203 / U.S: $75,874 Stellar has over $8.6 billion in deposits in the Houston region(1) Houston HQ Bank  Houston is the #4 most diverse city in the U.S. based on socioeconomic factors, according to Wallet Hub  Houston added nearly 140,000 residents in ’23, 2nd among U.S. metros in population growth. The increase equates to a new resident every 3.8 minutes  25th largest economy in the world – if ranked as a country − 14th largest population in the U.S – if ranked as a state  Port Houston is the busiest Gulf Coast container port, the Houston Ship Channel is #1 ranked U.S. port in total foreign and domestic waterborne tonnage  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 4.9% 4.7% 2.4% Houston MSA Texas USA 5.1% 5.1% 2.7% Houston MSA Texas USA

 
Diversified and Growing Economy 15 1) Data is preliminary as of February 2024, from the U.S. Bureau of Labor Statistics Source: U.S. Bureau of Labor Statistics Houston vs. U.S. Job Change by Industry (Feb ‘23 – Feb. ‘24)(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  Most of Houston's job sectors are growing at a faster rate than U.S.  Transportation, warehousing, and utility services showed a large gain over the last year versus the United States United States Houston MSA Professional and Business Services 16% Education and Health Services 14% Government 13% Leisure and Hospitality 10% Retail Trade 9% Manufacturing 7% Construction 7% Transportation, Warehousing, and Utilities 6% Financial Activities 5% Wholesale Trade 5% Other Services 4% Mining and Logging 2% Information 1% (0.7)% 5.3% 0.1% 1.9% 1.6% (2.4)% 1.9% 2.5% 4.4% 2.4% 3.3% 0.5% 0.0% 4.8% 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

 
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 16  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 965 thousand jobs since 2007 Population (M ) O il Pr ic e D ec lin e G re at R ec es si on Ik e H ar ve y C O VI D -1 9 Em pl oy m en t( M ) Employment Population1) Data is preliminary as of February 2024, from the U.S. Bureau of Labor Statistics Source: U.S. Bureau of Labor Statistics, Texas Workforce Commission

 
92,198 (150,000) (100,000) (50,000) 0 50,000 100,000 150,000 D al la s H ou st on Ta m pa At la nt a Ph oe ni x M ia m i D en ve r W as hi ng to n Bo st on M in ne ap ol is R iv er si de Se at tle Ba lti m or e Ph ila de lp hi a D et ro it Sa n D ie go Sa n Fr an ci sc o C hi ca go Lo s An ge le s N ew Y or k Houston’s Growth Projected to Continue 17 Source: S&P Capital IQ Pro; U.S. Census Bureau. 2010-2024 Population Change (%) Houston had the second highest net migration in 2023 20 most populated metros 3.93% 0.31% -0.48% 27.64% 27.00% 21.95% 8.88% 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 continued growth of the Houston metro will strengthen and diversify the greater economy, benefiting the businesses and constituents Houston added over 90,000 people by net migration in 2023, second only to Dallas

 
$92,406 $89,429 $85,119 $82,998 $75,557 $73,203 $75,874 New York MSA Los Angeles MSA Chicago MSA Dallas MSA Houston MSA Texas U.S. $800,000 $982,500 $363,500 $450,000 $339,000 $344,800 $420,357 New York Los Angeles Chicago Dallas Houston Texas U.S. 8.7x 11.0x 4.3x 5.4x 4.5x 4.7x 5.5x New York MSA Los Angeles MSA Chicago MSA Dallas MSA Houston MSA Texas U.S. Housing Market and Cost of Living 18 • Cost of living in Houston is 5.9% less than that of the U.S. market average while the median household income is in line with U.S. median • Houston is #1 in U.S. annual new home construction 20 24 M ed ia n H ou se ho ld In co m e 20 24 M ed ia n H om e Pr ic e (1 ) M ed ia n H om e Pr ic e to H H I R at io (1) Home price shown for each respective city Source: S&P Capital IQ Pro; Redfin (March 2024); Houston.org

 
Appendix: Non-GAAP Reconciliation(1) 19 (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. Total shareholders’ equity $ 1,565,795 $ 1,530,698 Less: Goodw ill and core deposit intangibles, net 601,633 607,831 Tangible shareholders’ equity $ 964,162 $ 922,867 Shares outstanding at end of period 53,564 53,551 Tangible book value per share $ 18.00 $ 17.23 Total assets $ 10,723,663 $ 10,729,222 Less: Goodw ill and core deposit intangibles, net 601,633 607,831 Tangible assets $ 10,122,030 $ 10,121,391 Tangible equity to tangible assets 9.53% 9.12% Net interest income (tax equivalent) $ 101,482 $ 102,207 Less: Purchase accounting accretion 10,098 8,551 Adjusted net interest income (tax equivalent) $ 91,384 $ 93,656 Average earning assets $ 9,616,874 $ 9,645,544 Net interest margin (tax equivalent)(2) 4.24% 4.26% Net interest margin (tax equivalent) excluding PAA(2) 3.82% 3.91% Interest on loans, as reported $ 135,885 $ 134,685 Less: Purchase accounting accretion 10,098 8,551 Interest on loans w ithout loan accretion $ 125,787 $ 126,134 Average loans $ 7,808,320 $ 7,938,824 Loan yield, as reported 7.00% 6.82% Loan yield, w ithout loan accretion 6.48% 6.39% Interest on interest-earning assets, as reported $ 152,179 $ 148,423 Less: Purchase accounting accretion 10,098 8,551 Interest on interest-earnings assets w ithout loan accretion $ 142,081 $ 139,872 Average interest-earnings assets $ 9,616,874 $ 9,645,544 Yield on interest-earnings assets, as reported 6.36% 6.19% Yield on interest-earnings assets, w ithout loan accretion 5.94% 5.83% (Dollars in thousands) Q2 2024 Q1 2024

 
20 NYSE: STEL

 
v3.24.2
Cover
Jul. 26, 2024
Cover [Abstract]  
Document Type 8-K
Amendment Flag false
Document Period End Date Jul. 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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