HOUSTON, April 28, 2023 (GLOBE NEWSWIRE) -- Stellar Bancorp, Inc. (the “Company” or “Stellar”) (NASDAQ: STEL) today reported net income of $37.1 million and diluted earnings per share of $0.70 for the first quarter 2023 as compared to net income of $2.1 million and diluted earnings per share of $0.04 for the fourth quarter 2022. The results for the first quarter of 2023 and the fourth quarter of 2022 for Stellar reflect significant nonrecurring items related to the merger of equals (the “Merger”) between Allegiance Bancshares, Inc. (“Allegiance”) and CBTX, Inc. (“CBTX”), which became effective on October 1, 2022.
“We are pleased to present our results to start the year in what was a tumultuous quarter for the banking industry. We believe the resilience of our local and relationship-driven business model, combined with Stellar’s ongoing focus on capital, liquidity and credit, positions us well to manage through the challenges of the current environment and drive long-term value to our shareholders,” said Robert R. Franklin, Jr., Stellar’s Chief Executive Officer.
“During the first quarter we completed a number of strategic initiatives, including the conversion of technology systems in February and launching the Stellar Bank brand. We are so grateful for our team’s efforts and their shared commitment to serving our customers and supporting the communities where we live and work,” continued Mr. Franklin.
“Stellar is ready for the challenges and opportunities that lie ahead. Although the economy in our markets remain strong, we remain vigilant to changes impacting the economy and financing conditions. We are focused on maintaining strong credit, liquidity and capital while providing outstanding service to the markets that we serve. Our balance sheet is strong, and as the largest, locally-focused community bank in one of the best markets in the country, the long-term future is bright for Stellar,” concluded Mr. Franklin.
First Quarter 2023 Financial Highlights
- First quarter 2023 net income of $37.1 million and diluted earnings per share of $0.70 translated into an annualized return on average assets of 1.38% and an annualized return on average tangible equity of 19.32%(1).
- Pre-tax, pre-provision income for the first quarter 2023 was $50.7 million(1), representing an annualized pre-tax, pre-provision return on average assets of 1.89%(1) and an adjusted pre-tax, pre-provision income of $53.5 million(1), representing an annualized adjusted pre-tax, pre-provision return on average assets of 1.99%(1).
- Tax equivalent net interest margin was 4.80% for the first quarter of 2023 as compared to 4.71% in the fourth quarter of 2022. The tax equivalent net interest margin, excluding purchase accounting accretion, was 4.38%(1) for the first quarter of 2023 and the fourth quarter of 2022.
- Book value per share was $27.14 for the first quarter 2023 compared to $26.12 for the fourth quarter 2022. Tangible book value per share increased to $15.24(1) for the first quarter 2023 from $14.02(1) for the fourth quarter 2022. Equity to assets and tangible equity to tangible assets increased to 13.64% and 8.15%(1) for the first quarter 2023 from 12.69% and 7.24%(1) for the fourth quarter 2022, respectively.
(1) Refer to page 9 for the calculation of this non-GAAP financial measure.
Merger of Equals
The Merger was accounted for as a reverse acquisition using the acquisition method of accounting, with CBTX treated as the legal acquirer and Allegiance treated as the accounting acquirer for financial reporting purposes. Therefore, the historical financial statements of the Company prior to the Merger reflect the historical financial statement balances of Allegiance. In addition, the assets and liabilities of CBTX as of the date of the Merger were recorded at estimated fair value and added to those of Allegiance. The Company’s valuations of CBTX's assets and liabilities are preliminary and may be refined for up to a year from the date of the Merger. The Merger had a significant impact on all aspects of the Company's financial statements, and as a result, financial results after the Merger are not comparable to financial results prior to the Merger. Results of operations reflect the combined operations following the Merger for the first quarter of 2023 and the fourth quarter 2022 and stand-alone Allegiance for all periods prior.
First Quarter 2023 Results
Stellar’s net interest income in the first quarter 2023 increased $213 thousand, or 0.2%, from $115.6 million for the fourth quarter 2022. The net interest margin on a tax equivalent basis increased 9 basis points to 4.80% for the first quarter 2023 from 4.71% for the fourth quarter 2022. The increase in the margin over the prior quarter was primarily due to higher purchase accounting adjustments (“PAA”) relating to the Merger and increases in interest rates. Net interest income for the first quarter of 2023 benefited from $10.1 million of income from purchase accounting adjustments compared to $8.2 million in the fourth quarter of 2022. Excluding purchase accounting adjustments, a non-GAAP measure on page 9, net interest income for the first quarter 2023 would have been $105.7 million and the tax equivalent net interest margin would have been 4.38%.
Noninterest income for the first quarter 2023 was $7.5 million, a decrease of $3.1 million, or 29.5%, compared to $10.6 million for the fourth quarter 2022. Noninterest income decreased in the first quarter of 2023 compared to the fourth quarter of 2022 primarily due to nonrecurring gains and losses on the sale of assets totaling $4.0 million recorded in the fourth quarter of 2022.
Noninterest expense for the first quarter 2023 decreased $7.0 million, or 8.8%, to $72.6 million compared to $79.6 million for the fourth quarter of 2022. The decrease in noninterest expense in the first quarter of 2023 compared to the fourth quarter of 2022 was primarily due to a decrease in acquisition and merger-related expenses which totaled $6.2 million for the first quarter of 2023 compared to $11.5 million in the fourth quarter of 2022.
Stellar’s efficiency ratio decreased to 58.96% for the first quarter 2023 from 65.14% for the fourth quarter 2022. First quarter 2023 annualized returns on average assets, average equity and average tangible equity were 1.38%, 10.62% and 19.32%, respectively, compared to 0.07%, 0.60% and 1.16%, respectively, for the fourth quarter 2022. Return on average tangible equity is a non-GAAP measure. Please refer to the non-GAAP reconciliation on page 9.
Financial Condition
Total loans at March 31, 2023 increased $131.3 million to $7.89 billion compared to $7.75 billion at December 31, 2022. At March 31, 2023, the remaining balance of the purchase accounting adjustments on loans was $144.0 million. Core loans, which exclude Paycheck Protection Program (PPP) loans, increased $133.4 million to $7.87 billion at March 31, 2023 from $7.74 billion at December 31, 2022.
Total deposits at March 31, 2023 decreased $528.8 million to $8.74 billion compared to $9.27 billion at December 31, 2022. The linked quarter change was primarily driven by seasonality, industry-wide pressures and the maintenance of pricing discipline in an intensely competitive market for deposits. Estimated uninsured deposits, excluding collateralized deposits, totaled $4.06 billion, or 46.4% of total deposits as of March 31, 2023.
Total assets at March 31, 2023 were $10.60 billion, a decrease of $295.7 million, compared to $10.90 billion at December 31, 2022.
Asset Quality
Nonperforming assets totaled $43.5 million, or 0.41% of total assets, at March 31, 2023 compared to $45.0 million, or 0.41% of total assets, at December 31, 2022. The allowance for credit losses on loans as a percentage of total loans was 1.22% at March 31, 2023 and 1.20% at December 31, 2022.
The provision for credit losses for the first quarter 2023 was $3.7 million compared to $44.8 million for the fourth quarter 2022. The fourth quarter 2022 provision included a $28.2 million provision for credit losses on loans and a $5.0 million provision for unfunded commitments related to the Merger, along with a $7.6 million allowance for credit losses on purchased credit deteriorated loans acquired. First quarter 2023 net charge-offs were $192 thousand, or 0.01% (annualized) of average loans, compared to net charge-offs of $5.7 million, or 0.30% (annualized) of average loans, for the fourth quarter 2022. Fourth quarter net charge-offs included $4.6 million of charge-offs on loans sold during the fourth quarter 2022.
GAAP Reconciliation of Non-GAAP Financial Measures
Stellar’s management uses certain non-GAAP financial measures. Please refer to the GAAP Reconciliation and Management’s Explanation of Non-GAAP Financial Measures on page 9 of this earnings release for a reconciliation of these non-GAAP financial measures.
Conference Call
As previously announced, Stellar’s management team will host a conference call and webcast on Friday, April 28, 2023 at 8:00 a.m. Central Time (9:00 a.m. Eastern Time) to discuss first quarter 2023 results. Individuals and investment professionals may register for the conference call at https://register.vevent.com/register/BId04d2f9fb05141c3b5efe6b285a38874 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@stellarbancorpinc.com. A simultaneous audio-only webcast may be accessed via the Investor Relations section of Stellar’s website at https://ir.stellarbancorpinc.com/news-and-events/webcast-and-presentations. If you are unable to participate during the live webcast, the webcast will be accessible via the Investor Relations section of Stellar’s website at ir.stellarbancorpinc.com.
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@stellarbancorpinc.com
Forward-Looking Statements
Certain statements in this press release which are not historical in nature are intended to be, and are hereby identified as, “forward-looking statements” for purposes of the safe harbor provided by Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements include, but are not limited to, statements about the benefits of the Merger, including future financial performance and operating results, the Company’s plans, business and growth strategies, objectives, expectations and intentions, and other statements that are not historical facts, including projections of macroeconomic and industry trends, which are inherently unreliable due to the multiple factors that impact economic trends, and any such variations may be material. Forward-looking statements may be identified by terminology such as “may,” “will,” “should,” “could,” “scheduled,” “plans,” “intends,” “projects,” “anticipates,” “expects,” “believes,” “estimates,” “potential,” “would,” or “continue” or negatives of such terms or other comparable terminology.
All forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties and other factors that may cause the actual results, performance or achievements of Stellar to differ materially from any results expressed or implied by such forward-looking statements. Such factors include, among others: the risk that the cost savings and any revenue synergies from the Merger may not be fully realized or may take longer than anticipated to be realized; disruption to our business as a result of the Merger; the risk that the integration of our operations following the Merger 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) | |||||||||||||||||||
| 2023 | 2022 | ||||||||||||||||||
| March 31 | December 31 | September 30 | June 30 | March 31 | |||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||
| ASSETS | |||||||||||||||||||
| Cash and due from banks | $ | 99,231 | $ | 67,063 | $ | 16,449 | $ | 17,547 | $ | 26,629 | |||||||||
| Interest-bearing deposits at other financial institutions | 164,102 | 304,642 | 102,118 | 275,290 | 672,755 | ||||||||||||||
| Total cash and cash equivalents | 263,333 | 371,705 | 118,567 | 292,837 | 699,384 | ||||||||||||||
| Available for sale securities, at fair value | 1,519,175 | 1,807,586 | 1,618,995 | 1,709,321 | 1,790,707 | ||||||||||||||
| Loans held for investment | 7,886,044 | 7,754,751 | 4,591,912 | 4,348,833 | 4,283,514 | ||||||||||||||
| Less: allowance for credit losses on loans | (96,188 | ) | (93,180 | ) | (52,147 | ) | (50,242 | ) | (49,215 | ) | |||||||||
| Loans, net | 7,789,856 | 7,661,571 | 4,539,765 | 4,298,591 | 4,234,299 | ||||||||||||||
| Accrued interest receivable | 42,405 | 44,743 | 29,697 | 29,882 | 31,505 | ||||||||||||||
| Premises and equipment, net | 124,723 | 126,803 | 57,837 | 58,482 | 62,168 | ||||||||||||||
| Federal Home Loan Bank stock | 19,676 | 15,058 | 16,843 | 4,078 | 9,376 | ||||||||||||||
| Bank owned life insurance | 103,616 | 103,094 | 28,305 | 28,170 | 28,374 | ||||||||||||||
| Goodwill | 497,260 | 497,260 | 223,642 | 223,642 | 223,642 | ||||||||||||||
| Core deposit intangibles, net | 136,665 | 143,525 | 12,406 | 13,156 | 13,907 | ||||||||||||||
| Other assets | 108,009 | 129,092 | 84,285 | 73,605 | 56,001 | ||||||||||||||
| Total assets | $ | 10,604,718 | $ | 10,900,437 | $ | 6,730,342 | $ | 6,731,764 | $ | 7,149,363 | |||||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||||||||||||||
| LIABILITIES: | |||||||||||||||||||
| Deposits: | |||||||||||||||||||
| Noninterest-bearing | $ | 3,877,859 | $ | 4,230,169 | $ | 2,465,839 | $ | 2,394,719 | $ | 2,353,604 | |||||||||
| Interest-bearing | |||||||||||||||||||
| Demand | 1,394,244 | 1,591,828 | 956,920 | 1,016,381 | 1,070,855 | ||||||||||||||
| Money market and savings | 2,401,840 | 2,575,923 | 1,471,690 | 1,510,008 | 1,552,853 | ||||||||||||||
| Certificates and other time | 1,064,932 | 869,712 | 766,270 | 959,524 | 1,185,015 | ||||||||||||||
| Total interest-bearing deposits | 4,861,016 | 5,037,463 | 3,194,880 | 3,485,913 | 3,808,723 | ||||||||||||||
| Total deposits | 8,738,875 | 9,267,632 | 5,660,719 | 5,880,632 | 6,162,327 | ||||||||||||||
| Accrued interest payable | 3,875 | 2,098 | 2,673 | 1,500 | 3,086 | ||||||||||||||
| Borrowed funds | 238,944 | 63,925 | 257,000 | — | 89,959 | ||||||||||||||
| Subordinated debt | 109,420 | 109,367 | 109,241 | 109,109 | 108,978 | ||||||||||||||
| Other liabilities | 67,388 | 74,239 | 44,407 | 35,194 | 33,073 | ||||||||||||||
| Total liabilities | 9,158,502 | 9,517,261 | 6,074,040 | 6,026,435 | 6,397,423 | ||||||||||||||
| SHAREHOLDERS’ EQUITY: | |||||||||||||||||||
| Common stock | 533 | 530 | 281 | 286 | 290 | ||||||||||||||
| Capital surplus | 1,225,596 | 1,222,761 | 511,434 | 524,033 | 532,372 | ||||||||||||||
| Retained earnings | 333,368 | 303,146 | 307,975 | 296,477 | 282,896 | ||||||||||||||
| Accumulated other comprehensive loss | (113,281 | ) | (143,261 | ) | (163,388 | ) | (115,467 | ) | (63,618 | ) | |||||||||
| Total shareholders’ equity | 1,446,216 | 1,383,176 | 656,302 | 705,329 | 751,940 | ||||||||||||||
| TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | 10,604,718 | $ | 10,900,437 | $ | 6,730,342 | $ | 6,731,764 | $ | 7,149,363 | |||||||||
| Stellar Bancorp, Inc. | ||||||||||||||||
| Financial Highlights | ||||||||||||||||
| (Unaudited) | ||||||||||||||||
| Three Months Ended | ||||||||||||||||
| 2023 | 2022 | |||||||||||||||
| March 31 | December 31 | September 30 | June 30 | March 31 | ||||||||||||
| (Dollars in thousands, except per share data) | ||||||||||||||||
| INTEREST INCOME: | ||||||||||||||||
| Loans, including fees | $ | 125,729 | $ | 116,145 | $ | 58,025 | $ | 53,835 | $ | 52,370 | ||||||
| Securities: | ||||||||||||||||
| Taxable | 9,653 | 9,834 | 6,655 | 5,571 | 5,068 | |||||||||||
| Tax-exempt | 1,262 | 3,057 | 2,594 | 2,557 | 2,525 | |||||||||||
| Deposits in other financial institutions | 3,771 | 2,933 | 608 | 877 | 340 | |||||||||||
| Total interest income | 140,415 | 131,969 | 67,882 | 62,840 | 60,303 | |||||||||||
| INTEREST EXPENSE: | ||||||||||||||||
| Demand, money market and savings deposits | 18,037 | 12,406 | 3,527 | 1,859 | 1,347 | |||||||||||
| Certificates and other time deposits | 3,307 | 2,083 | 1,664 | 1,922 | 2,156 | |||||||||||
| Borrowed funds | 1,317 | 417 | 499 | 114 | 186 | |||||||||||
| Subordinated debt | 1,927 | 1,449 | 1,502 | 1,463 | 1,442 | |||||||||||
| Total interest expense | 24,588 | 16,355 | 7,192 | 5,358 | 5,131 | |||||||||||
| NET INTEREST INCOME | 115,827 | 115,614 | 60,690 | 57,482 | 55,172 | |||||||||||
| Provision for credit losses | 3,666 | 44,793 | 1,962 | 2,143 | 1,814 | |||||||||||
| Net interest income after provision for credit losses | 112,161 | 70,821 | 58,728 | 55,339 | 53,358 | |||||||||||
| NONINTEREST INCOME: | ||||||||||||||||
| Nonsufficient funds fees | 406 | 447 | 145 | 126 | 116 | |||||||||||
| Service charges on deposit accounts | 943 | 1,242 | 527 | 560 | 527 | |||||||||||
| Gain (loss) on sale of assets | 198 | 4,025 | 42 | (17 | ) | — | ||||||||||
| Bank owned life insurance | 522 | 515 | 135 | 342 | 133 | |||||||||||
| Debit card and ATM card income | 1,698 | 1,897 | 869 | 880 | 819 | |||||||||||
| Other | 3,731 | 2,511 | 1,277 | 813 | 2,423 | |||||||||||
| Total noninterest income | 7,498 | 10,637 | 2,995 | 2,704 | 4,018 | |||||||||||
| NONINTEREST EXPENSE: | ||||||||||||||||
| Salaries and employee benefits | 39,775 | 40,949 | 22,013 | 21,864 | 22,728 | |||||||||||
| Net occupancy and equipment | 4,088 | 3,781 | 2,129 | 2,220 | 2,205 | |||||||||||
| Depreciation | 1,836 | 1,903 | 1,003 | 1,012 | 1,033 | |||||||||||
| Data processing and software amortization | 5,054 | 3,776 | 2,541 | 2,522 | 2,498 | |||||||||||
| Professional fees | 1,527 | 2,298 | 485 | 662 | 138 | |||||||||||
| Regulatory assessments and FDIC insurance | 1,294 | 1,263 | 1,134 | 1,256 | 1,261 | |||||||||||
| Amortization of intangibles | 6,879 | 7,051 | 750 | 751 | 751 | |||||||||||
| Communications | 701 | 737 | 359 | 363 | 341 | |||||||||||
| Advertising | 839 | 1,130 | 385 | 483 | 462 | |||||||||||
| Other real estate expense | 272 | 152 | 93 | 65 | 59 | |||||||||||
| Acquisition and merger-related expenses | 6,165 | 11,469 | 10,551 | 1,667 | 451 | |||||||||||
| Other | 4,168 | 5,115 | 2,588 | 5,039 | 2,590 | |||||||||||
| Total noninterest expense | 72,598 | 79,624 | 44,031 | 37,904 | 34,517 | |||||||||||
| INCOME BEFORE INCOME TAXES | 47,061 | 1,834 | 17,692 | 20,139 | 22,859 | |||||||||||
| Provision for income taxes | 9,913 | (218 | ) | 3,406 | 3,702 | 4,202 | ||||||||||
| NET INCOME | $ | 37,148 | $ | 2,052 | $ | 14,286 | $ | 16,437 | $ | 18,657 | ||||||
| EARNINGS PER SHARE | ||||||||||||||||
| Basic | $ | 0.70 | $ | 0.04 | $ | 0.51 | $ | 0.57 | $ | 0.65 | ||||||
| Diluted | $ | 0.70 | $ | 0.04 | $ | 0.50 | $ | 0.56 | $ | 0.64 | ||||||
| Stellar Bancorp, Inc. | |||||||||||||||||||
| Financial Highlights | |||||||||||||||||||
| (Unaudited) | |||||||||||||||||||
| Three Months Ended | |||||||||||||||||||
| 2023 | 2022 | ||||||||||||||||||
| March 31 | December 31 | September 30 | June 30 | March 31 | |||||||||||||||
| (Dollars and share amounts in thousands, except per share data) | |||||||||||||||||||
| Net income | $ | 37,148 | $ | 2,052 | $ | 14,286 | $ | 16,437 | $ | 18,657 | |||||||||
| Earnings per share, basic | $ | 0.70 | $ | 0.04 | $ | 0.51 | $ | 0.57 | $ | 0.65 | |||||||||
| Earnings per share, diluted | $ | 0.70 | $ | 0.04 | $ | 0.50 | $ | 0.56 | $ | 0.64 | |||||||||
| Dividends per share | $ | 0.13 | $ | 0.13 | $ | 0.10 | $ | 0.10 | $ | 0.10 | |||||||||
| Return on average assets(A) | 1.38 | % | 0.07 | % | 0.84 | % | 0.94 | % | 1.04 | % | |||||||||
| Return on average equity(A) | 10.62 | % | 0.60 | % | 7.90 | % | 8.86 | % | 9.40 | % | |||||||||
| Return on average tangible equity(A)(B) | 19.32 | % | 1.16 | % | 11.78 | % | 13.00 | % | 13.35 | % | |||||||||
| Net interest margin (tax equivalent)(A)(C) | 4.80 | % | 4.71 | % | 3.85 | % | 3.53 | % | 3.30 | % | |||||||||
| Net interest margin (tax equivalent) excluding PAA(A)(B)(C) | 4.38 | % | 4.38 | % | 3.85 | % | 3.52 | % | 3.29 | % | |||||||||
| Efficiency ratio(D) | 58.96 | % | 65.14 | % | 69.18 | % | 62.96 | % | 58.32 | % | |||||||||
| Capital Ratios | |||||||||||||||||||
| Stellar Bancorp, Inc. (consolidated) | |||||||||||||||||||
| Equity to assets | 13.64 | % | 12.69 | % | 9.75 | % | 10.48 | % | 10.52 | % | |||||||||
| Tangible equity to tangible assets(B) | 8.15 | % | 7.24 | % | 6.47 | % | 7.21 | % | 7.44 | % | |||||||||
| Estimated Common equity tier 1 capital | 10.39 | % | 10.04 | % | 11.39 | % | 12.06 | % | 12.28 | % | |||||||||
| Estimated Tier 1 risk-based capital | 10.50 | % | 10.15 | % | 11.58 | % | 12.26 | % | 12.49 | % | |||||||||
| Estimated Total risk-based capital | 12.72 | % | 12.39 | % | 14.66 | % | 15.47 | % | 15.76 | % | |||||||||
| Estimated Tier 1 leverage capital | 9.01 | % | 8.55 | % | 9.00 | % | 8.65 | % | 8.37 | % | |||||||||
| Stellar Bank | |||||||||||||||||||
| Estimated Common equity tier 1 capital | 10.87 | % | 10.46 | % | 12.20 | % | 12.51 | % | 12.48 | % | |||||||||
| Estimated Tier 1 risk-based capital | 10.87 | % | 10.46 | % | 12.20 | % | 12.51 | % | 12.48 | % | |||||||||
| Estimated Total risk-based capital | 12.42 | % | 12.02 | % | 14.12 | % | 14.50 | % | 14.50 | % | |||||||||
| Estimated Tier 1 leverage capital | 9.35 | % | 8.81 | % | 9.49 | % | 8.83 | % | 8.37 | % | |||||||||
| Other Data | |||||||||||||||||||
| Weighted average shares: | |||||||||||||||||||
| Basic | 53,021 | 52,715 | 28,286 | 28,874 | 28,883 | ||||||||||||||
| Diluted | 53,138 | 52,973 | 28,529 | 29,120 | 29,114 | ||||||||||||||
| Period end shares outstanding | 53,296 | 52,955 | 28,137 | 28,586 | 28,904 | ||||||||||||||
| Book value per share | $ | 27.14 | $ | 26.12 | $ | 23.33 | $ | 24.67 | $ | 26.02 | |||||||||
| Tangible book value per share(B) | $ | 15.24 | $ | 14.02 | $ | 14.94 | $ | 16.39 | $ | 17.80 | |||||||||
| Employees - full-time equivalents | 1,055 | 1,025 | 562 | 578 | 586 | ||||||||||||||
(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 9 of this Earnings Release.
(C) Net interest margin represents net interest income divided by average interest-earning assets.
(D) Represents total noninterest expense divided by the sum of net interest income plus noninterest income, excluding net gains and losses on the sale of loans, securities and assets. Additionally, taxes and provision for credit losses are not part of this calculation.
| Stellar Bancorp, Inc. | |||||||||||||||||||||||||||||
| Financial Highlights | |||||||||||||||||||||||||||||
| (Unaudited) | |||||||||||||||||||||||||||||
| Three Months Ended | |||||||||||||||||||||||||||||
| March 31, 2023 | December 31, 2022 | March 31, 2022 | |||||||||||||||||||||||||||
| 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 | $ | 7,847,011 | $ | 125,729 | 6.50 | % | $ | 7,666,502 | $ | 116,145 | 6.01 | % | $ | 4,231,507 | $ | 52,370 | 5.02 | % | |||||||||||
| Securities | 1,604,011 | 10,915 | 2.76 | % | 1,795,082 | 12,891 | 2.85 | % | 1,835,618 | 7,593 | 1.68 | % | |||||||||||||||||
| Deposits in other financial institutions | 364,781 | 3,771 | 4.19 | % | 354,117 | 2,933 | 3.29 | % | 806,583 | 340 | 0.17 | % | |||||||||||||||||
| Total interest-earning assets | 9,815,803 | $ | 140,415 | 5.80 | % | 9,815,701 | $ | 131,969 | 5.33 | % | 6,873,708 | $ | 60,303 | 3.56 | % | ||||||||||||||
| Allowance for credit losses on loans | (93,331 | ) | (88,150 | ) | (48,343 | ) | |||||||||||||||||||||||
| Noninterest-earning assets | 1,160,061 | 1,218,458 | 432,133 | ||||||||||||||||||||||||||
| Total assets | $ | 10,882,533 | $ | 10,946,009 | $ | 7,257,498 | |||||||||||||||||||||||
| Liabilities and Shareholders' Equity | |||||||||||||||||||||||||||||
| Interest-Bearing Liabilities: | |||||||||||||||||||||||||||||
| Interest-bearing demand deposits | $ | 1,650,273 | $ | 8,382 | 2.06 | % | $ | 1,465,711 | $ | 5,422 | 1.47 | % | $ | 1,071,010 | $ | 549 | 0.21 | % | |||||||||||
| Money market and savings deposits | 2,490,889 | 9,655 | 1.57 | % | 2,705,984 | 6,984 | 1.02 | % | 1,584,373 | 798 | 0.20 | % | |||||||||||||||||
| Certificates and other time deposits | 861,595 | 3,307 | 1.56 | % | 932,058 | 2,083 | 0.89 | % | 1,245,180 | 2,156 | 0.70 | % | |||||||||||||||||
| Borrowed funds | 105,191 | 1,317 | 5.08 | % | 37,824 | 417 | 4.37 | % | 89,880 | 186 | 0.84 | % | |||||||||||||||||
| Subordinated debt | 109,415 | 1,927 | 7.14 | % | 109,307 | 1,449 | 5.26 | % | 108,913 | 1,442 | 5.37 | % | |||||||||||||||||
| Total interest-bearing liabilities | 5,217,363 | $ | 24,588 | 1.91 | % | 5,250,884 | $ | 16,355 | 1.24 | % | 4,099,356 | $ | 5,131 | 0.51 | % | ||||||||||||||
| Noninterest-Bearing Liabilities: | |||||||||||||||||||||||||||||
| Noninterest-bearing demand deposits | 4,166,265 | 4,199,982 | 2,312,114 | ||||||||||||||||||||||||||
| Other liabilities | 80,823 | 147,205 | 41,324 | ||||||||||||||||||||||||||
| Total liabilities | 9,464,451 | 9,598,071 | 6,452,794 | ||||||||||||||||||||||||||
| Shareholders' equity | 1,418,082 | 1,347,938 | 804,704 | ||||||||||||||||||||||||||
| Total liabilities and shareholders' equity | $ | 10,882,533 | $ | 10,946,009 | $ | 7,257,498 | |||||||||||||||||||||||
| Net interest rate spread | 3.89 | % | 4.09 | % | 3.05 | % | |||||||||||||||||||||||
| Net interest income and margin | $ | 115,827 | 4.79 | % | $ | 115,614 | 4.67 | % | $ | 55,172 | 3.26 | % | |||||||||||||||||
| Net interest income and net interest margin (tax equivalent) | $ | 116,119 | 4.80 | % | $ | 116,574 | 4.71 | % | $ | 55,922 | 3.30 | % | |||||||||||||||||
| Stellar Bancorp, Inc. | |||||||||||||||||||
| Financial Highlights | |||||||||||||||||||
| (Unaudited) | |||||||||||||||||||
| Three Months Ended | |||||||||||||||||||
| 2023 | 2022 | ||||||||||||||||||
| March 31 | December 31 | September 30 | June 30 | March 31 | |||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||
| Period-end Loan Portfolio: | |||||||||||||||||||
| Commercial and industrial | $ | 1,477,340 | $ | 1,455,795 | $ | 732,636 | $ | 727,068 | $ | 714,450 | |||||||||
| Paycheck Protection Program (PPP) | 11,081 | 13,226 | 17,827 | 31,855 | 78,624 | ||||||||||||||
| Real estate: | |||||||||||||||||||
| Commercial real estate (including multi-family residential) | 4,014,609 | 3,931,480 | 2,407,039 | 2,265,155 | 2,197,502 | ||||||||||||||
| Commercial real estate construction and land development | 1,034,538 | 1,037,678 | 513,248 | 450,694 | 453,473 | ||||||||||||||
| 1-4 family residential (including home equity) | 1,008,362 | 1,000,956 | 699,636 | 682,066 | 669,306 | ||||||||||||||
| Residential construction | 292,143 | 268,150 | 183,563 | 155,017 | 136,760 | ||||||||||||||
| Consumer and other | 47,971 | 47,466 | 37,963 | 36,978 | 33,399 | ||||||||||||||
| Total loans held for investment | $ | 7,886,044 | $ | 7,754,751 | $ | 4,591,912 | $ | 4,348,833 | $ | 4,283,514 | |||||||||
| Deposits: | |||||||||||||||||||
| Interest-bearing demand | $ | 1,394,244 | $ | 1,591,828 | $ | 956,920 | $ | 1,016,381 | $ | 1,070,855 | |||||||||
| Money market and savings | 2,401,840 | 2,575,923 | 1,471,690 | 1,510,008 | 1,552,853 | ||||||||||||||
| Certificates and other time | 1,064,932 | 869,712 | 766,270 | 959,524 | 1,185,015 | ||||||||||||||
| Total interest-bearing deposits | 4,861,016 | 5,037,463 | 3,194,880 | 3,485,913 | 3,808,723 | ||||||||||||||
| Noninterest-bearing deposits | 3,877,859 | 4,230,169 | 2,465,839 | 2,394,719 | 2,353,604 | ||||||||||||||
| Total deposits | $ | 8,738,875 | $ | 9,267,632 | $ | 5,660,719 | $ | 5,880,632 | $ | 6,162,327 | |||||||||
| Asset Quality: | |||||||||||||||||||
| Nonaccrual loans | $ | 43,413 | $ | 45,048 | $ | 21,551 | $ | 28,225 | $ | 26,275 | |||||||||
| Accruing loans 90 or more days past due | — | — | — | — | — | ||||||||||||||
| Total nonperforming loans | 43,413 | 45,048 | 21,551 | 28,225 | 26,275 | ||||||||||||||
| Other repossessed assets | 124 | — | — | — | — | ||||||||||||||
| Total nonperforming assets | $ | 43,537 | $ | 45,048 | $ | 21,551 | $ | 28,225 | $ | 26,275 | |||||||||
| Net charge-offs (recoveries) | $ | 192 | $ | 5,707 | $ | (245 | ) | $ | 571 | $ | 317 | ||||||||
| Nonaccrual loans: | |||||||||||||||||||
| Commercial and industrial | $ | 23,329 | $ | 25,402 | $ | 6,916 | $ | 9,145 | $ | 7,809 | |||||||||
| Real estate: | |||||||||||||||||||
| Commercial real estate (including multi-family residential) | 9,026 | 9,970 | 10,392 | 14,409 | 15,259 | ||||||||||||||
| Commercial real estate construction and land development | 27 | — | 241 | 1,511 | — | ||||||||||||||
| 1-4 family residential (including home equity) | 10,586 | 9,404 | 3,854 | 3,040 | 3,065 | ||||||||||||||
| Residential construction | 195 | — | — | — | — | ||||||||||||||
| Consumer and other | 250 | 272 | 148 | 120 | 142 | ||||||||||||||
| Total nonaccrual loans | $ | 43,413 | $ | 45,048 | $ | 21,551 | $ | 28,225 | $ | 26,275 | |||||||||
| Asset Quality Ratios: | |||||||||||||||||||
| Nonperforming assets to total assets | 0.41 | % | 0.41 | % | 0.32 | % | 0.42 | % | 0.37 | % | |||||||||
| Nonperforming loans to total loans | 0.55 | % | 0.58 | % | 0.47 | % | 0.65 | % | 0.61 | % | |||||||||
| Allowance for credit losses on loans to nonperforming loans | 221.56 | % | 206.85 | % | 241.97 | % | 178.01 | % | 187.31 | % | |||||||||
| Allowance for credit losses on loans to total loans | 1.22 | % | 1.20 | % | 1.14 | % | 1.16 | % | 1.15 | % | |||||||||
| Net charge-offs (recoveries) to average loans (annualized) | 0.01 | % | 0.30 | % | (0.02 | %) | 0.05 | % | 0.03 | % | |||||||||
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, adjusted pre-tax, pre-provision income, adjusted pre-tax, pre-provision ROAA, adjusted efficiency ratio, 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 | |||||||||||||||||||
| 2023 | 2022 | ||||||||||||||||||
| March 31 | December 31 | September 30 | June 30 | March 31 | |||||||||||||||
| (Dollars and share amounts in thousands, except per share data) | |||||||||||||||||||
| Net income | $ | 37,148 | $ | 2,052 | $ | 14,286 | $ | 16,437 | $ | 18,657 | |||||||||
| Add: Provision for credit losses | 3,666 | 44,793 | 1,962 | 2,143 | 1,814 | ||||||||||||||
| Add: Provision for income taxes | 9,913 | (218 | ) | 3,406 | 3,702 | 4,202 | |||||||||||||
| Pre-tax, pre-provision income | $ | 50,727 | $ | 46,627 | $ | 19,654 | $ | 22,282 | $ | 24,673 | |||||||||
| Total average assets | $ | 10,882,533 | $ | 10,946,009 | $ | 6,717,886 | $ | 7,019,299 | $ | 7,257,498 | |||||||||
| Pre-tax, pre-provision return on average assets(B) | 1.89 | % | 1.69 | % | 1.16 | % | 1.27 | % | 1.38 | % | |||||||||
| Pre-tax, pre-provision income | $ | 50,727 | $ | 46,627 | $ | 19,654 | $ | 22,282 | $ | 24,673 | |||||||||
| Add: Acquisition and merger-related expenses | 6,165 | 11,469 | 10,551 | 1,667 | 451 | ||||||||||||||
| Add: Amortization of intangibles | 6,879 | 7,051 | 750 | 751 | 751 | ||||||||||||||
| Less: Purchase accounting accretion | 10,104 | 8,160 | 40 | 77 | 93 | ||||||||||||||
| Less: Gain (loss) on sale of assets | 198 | 4,025 | 42 | (17 | ) | — | |||||||||||||
| Adjusted pre-tax, pre-provision income | $ | 53,469 | $ | 52,962 | $ | 30,873 | $ | 24,640 | $ | 25,782 | |||||||||
| Adjusted pre-tax, pre-provision return on average assets(B) | 1.99 | % | 1.92 | % | 1.82 | % | 1.41 | % | 1.44 | % | |||||||||
| Total noninterest expense | $ | 72,598 | $ | 79,624 | $ | 44,031 | $ | 37,904 | $ | 34,517 | |||||||||
| Less: Acquisition and merger-related expenses | 6,165 | 11,469 | 10,551 | 1,667 | 451 | ||||||||||||||
| Less: Amortization of intangibles | 6,879 | 7,051 | 750 | 751 | 751 | ||||||||||||||
| Net interest income | 115,827 | 115,614 | 60,690 | 57,482 | 55,172 | ||||||||||||||
| Less: Purchase accounting accretion | 10,104 | 8,160 | 40 | 77 | 93 | ||||||||||||||
| Total noninterest income | 7,498 | 10,637 | 2,995 | 2,704 | 4,018 | ||||||||||||||
| Less: Gain (loss) on sale of assets | 198 | 4,025 | 42 | (17 | ) | — | |||||||||||||
| Adjusted efficiency ratio(A) | 52.69 | % | 53.57 | % | 51.46 | % | 59.02 | % | 56.37 | % | |||||||||
| Total shareholders' equity | $ | 1,446,216 | $ | 1,383,176 | $ | 656,302 | $ | 705,329 | $ | 751,940 | |||||||||
| Less: Goodwill and core deposit intangibles, net | 633,925 | 640,785 | 236,048 | 236,798 | 237,549 | ||||||||||||||
| Tangible shareholders’ equity | $ | 812,291 | $ | 742,391 | $ | 420,254 | $ | 468,531 | $ | 514,391 | |||||||||
| Shares outstanding at end of period | 53,296 | 52,955 | 28,137 | 28,586 | 28,904 | ||||||||||||||
| Tangible book value per share | $ | 15.24 | $ | 14.02 | $ | 14.94 | $ | 16.39 | $ | 17.80 | |||||||||
| Average shareholders' equity | $ | 1,418,082 | $ | 1,347,938 | $ | 717,436 | $ | 744,126 | $ | 804,704 | |||||||||
| Less: Average goodwill and core deposit intangibles, net | 638,110 | 658,107 | 236,399 | 237,153 | 237,925 | ||||||||||||||
| Average tangible shareholders’ equity | $ | 779,972 | $ | 689,831 | $ | 481,037 | $ | 506,973 | $ | 566,779 | |||||||||
| Return on average tangible equity(B) | 19.32 | % | 1.18 | % | 11.78 | % | 13.00 | % | 13.35 | % | |||||||||
| Total assets | $ | 10,604,718 | $ | 10,900,437 | $ | 6,730,342 | $ | 6,731,764 | $ | 7,149,363 | |||||||||
| Less: Goodwill and core deposit intangibles, net | 633,925 | 640,785 | 236,048 | 236,798 | 237,549 | ||||||||||||||
| Tangible assets | $ | 9,970,793 | $ | 10,259,652 | $ | 6,494,294 | $ | 6,494,966 | $ | 6,911,814 | |||||||||
| Tangible equity to tangible assets | 8.15 | % | 7.24 | % | 6.47 | % | 7.21 | % | 7.44 | % | |||||||||
| Net interest income (tax equivalent) | $ | 116,119 | $ | 116,574 | $ | 61,418 | $ | 58,238 | $ | 55,922 | |||||||||
| Less: Purchase accounting accretion | 10,104 | 8,160 | 40 | 77 | 93 | ||||||||||||||
| Adjusted net interest income (tax equivalent) | $ | 106,015 | $ | 108,414 | $ | 61,378 | $ | 58,161 | $ | 55,829 | |||||||||
| Average earning assets | $ | 9,815,803 | $ | 9,815,701 | $ | 6,325,984 | $ | 6,618,005 | $ | 6,873,708 | |||||||||
| Net interest margin (tax equivalent) excluding PAA | 4.38 | % | 4.38 | % | 3.85 | % | 3.52 | % | 3.29 | % | |||||||||
(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.
