• Stellar Bancorp, Inc. Reports Fourth Quarter 2022 Results

    Source: Nasdaq GlobeNewswire / 27 Jan 2023 07:00:53   America/New_York

    HOUSTON, Jan. 27, 2023 (GLOBE NEWSWIRE) -- Stellar Bancorp, Inc. (the “Company” or “Stellar”) (NASDAQ: STEL) today reported net income of $2.1 million, or $0.04 earnings per diluted share, for the fourth quarter 2022 and $51.4 million, or $1.47 earnings per diluted share, for the year ended December 31, 2022. The fourth quarter 2022 results for Stellar reflect 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 report our fourth quarter results as a combined institution. Our scale and resources enhance our ability to execute our business strategy focused on delivering exceptional customer service to increase shareholder value while continuing to honor our community values. The integration of our combined talents and expertise benefits our customers, employees, communities and shareholders. We are very grateful for the dedication and hard work of our team coming together and for the continued work as we implement an efficient system conversion in the first quarter of 2023,” said Robert R. Franklin, Jr., Stellar’s Chief Executive Officer.

    “As we approach 2023, we are excited about the opportunities created by our combination and also cautious about increasing interest rates and the resulting effects on our economy. We will focus our efforts in the coming year on credit quality, liquidity and capital management. We are convinced more than ever that there is a bright long-term future for Stellar,” concluded Mr. Franklin.

    Fourth Quarter 2022 Financial Highlights

    • Total assets were $10.90 billion at year-end reflecting combined scale from the Merger.
    • Tax equivalent net interest margin was 4.71% for the fourth quarter 2022. The tax equivalent net interest margin, excluding purchase accounting accretion, was 4.38% for the fourth quarter. Refer to the calculation of this non-GAAP financial measure on page 11.
    • Net income for the fourth quarter 2022 of $2.1 million and diluted earnings per share of $0.04. Pre-tax, pre-provision income of $46.6 million and adjusted pre-tax, pre-provision income of $53.0 million for the fourth quarter 2022. Refer to the calculation of this non-GAAP financial measure on page 11.
    • As a result of the Merger, the Company recorded a $28.2 million provision for credit losses on non-purchased credit deteriorated (“non-PCD”) loans and a $5.0 million provision for unfunded commitments for the Current Expected Credit Loss requirement, along with a $7.6 million allowance for credit losses on purchase credit deteriorated (“PCD”) loans. Acquisition and merger related expenses totaled $11.5 million in the fourth quarter 2022.

    Merger of Equals

    On October 1, 2022, the Merger of Allegiance with CBTX was completed pursuant to an Agreement and Plan of Merger dated November 5, 2021 (as amended, the “Merger Agreement”), with the surviving corporation renamed Stellar Bancorp, Inc. Pursuant to the Merger Agreement, each share of Allegiance common stock was converted into the right to receive 1.4184 shares of common stock of the Company for each share of Allegiance common stock.

    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 have been 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 may not be comparable to financial results prior to the Merger. Results of operations reflect the combined operations following the Merger for the fourth quarter 2022 and stand-alone Allegiance for all periods prior.

    Fourth Quarter 2022 Results

    Stellar’s net interest income in the fourth quarter 2022 increased $57.5 million, or 99.0%, to $115.6 million from $58.1 million for the fourth quarter 2021 and increased $54.9 million, or 90.5%, from $60.7 million for the third quarter 2022. These increases were primarily due to the Merger. The net interest margin on a tax equivalent basis increased 114 basis points to 4.71% for the fourth quarter 2022 from 3.57% for the fourth quarter 2021 and increased 86 basis points from 3.85% for the third quarter 2022. The increase in the margin over the prior quarter and the comparable quarter in the prior year were primarily due to dynamics relating to the Merger and increases in interest rates. During the quarter, net interest income benefited from $8.2 million in income from purchase accounting adjustments. Excluding purchase accounting adjustments, net interest income would have been $107.5 million and the tax equivalent net interest margin would have been 4.38%.

    Noninterest income for the fourth quarter 2022 was $10.6 million, an increase of $8.2 million, or 333.5%, compared to $2.5 million for the fourth quarter 2021 and an increase of $7.6 million, or 255.2%, compared to $3.0 million for the third quarter 2022. Noninterest income increased primarily due to nonrecurring gains on sale of securities, loans and assets held for sale totaling $4.0 million along with increased scale as a result of the Merger during the quarter.

    Noninterest expense for the fourth quarter 2022 increased $42.9 million, or 116.7%, to $79.6 million from $36.7 million for the fourth quarter 2021 and increased $35.6 million, or 80.8%, compared to the third quarter of 2022. These increases in noninterest expense over the prior periods were primarily due to increases in operating expenses due to the Merger, most significantly salaries and benefits due to increased scale, and the amortization of core deposit intangibles. Acquisition and merger-related expenses associated with the Merger totaled $11.5 million during the quarter.

    Stellar’s efficiency ratio increased to 65.14% for the fourth quarter 2022 compared to 60.68% for the fourth quarter 2021 and decreased from 69.18% for the third quarter 2022. Fourth quarter 2022 annualized returns on average assets, average equity and average tangible equity were 0.07%, 0.60% and 1.18%, respectively, compared to 1.23%, 10.60% and 15.05% for the fourth quarter 2021. Annualized returns on average assets, average equity and average tangible equity for the third quarter 2022 were 0.84%, 7.90% and 11.78%, respectively. Return on average tangible equity is a non-GAAP measure. Please refer to the non-GAAP reconciliation on page 11.  

    Year Ended December 31, 2022 Results

    Net interest income before provision for credit losses for the year ended December 31, 2022 increased $60.4 million, or 26.4%, to $289.0 million from $228.6 million for the year ended December 31, 2021 primarily due to the Merger. The net interest margin on a tax equivalent basis increased 4 basis points to 3.94% for the year ended December 31, 2022 from 3.90% for the year ended December 31, 2021. The increase in the margin over the prior year was primarily due to the increase in the average yield on interest-earning assets partially offset by increased funding costs. Excluding purchase accounting adjustments, net interest income would have been $280.6 million and the tax equivalent net interest margin would have been 3.83%.

    Noninterest income for the year ended December 31, 2022 was $20.4 million, an increase of $11.8 million, or 137.7%, compared to $8.6 million for the year ended December 31, 2021 due primarily to the Merger and nonrecurring gains on sale of assets.

    Noninterest expense for the year ended December 31, 2022 increased $56.5 million, or 40.5%, to $196.1 million from $139.6 million for the year ended December 31, 2021. The increase in noninterest expense over the year ended December 31, 2021 was primarily due to increased salaries and benefits, amortization of core deposit intangibles and acquisition and merger-related expenses associated with the Merger.

    Stellar’s efficiency ratio increased to 64.23% for the year ended December 31, 2022 from 58.86% for the year ended December 31, 2021. For the year ended December 31, 2022, returns on average assets, average equity and average tangible equity were 0.64%, 5.69% and 9.16%, respectively, compared to 1.24%, 10.38% and 14.93%, respectively, for the year ended December 31, 2021. Return on average tangible equity is a non-GAAP measure. Please refer to the non-GAAP reconciliation on page 11.

    Financial Condition

    Stellar’s total assets at December 31, 2022 increased $3.80 billion, or 53.4%, to $10.90 billion compared to $7.10 billion at December 31, 2021 and increased $4.17 billion, or 247.8% (annualized), compared to $6.73 billion at September 30, 2022.

    Total loans at December 31, 2022 increased $3.53 billion, or 83.7%, to $7.75 billion compared to $4.22 billion at December 31, 2021, and increased $3.16 billion, or 275.5% (annualized) compared to $4.59 billion at September 30, 2022, primarily due to the Merger. The Company recorded purchase accounting adjustments on loans of $166.5 million related to the Merger. At December 31, 2022, the remaining balance of the purchase accounting adjustments on loans was $154.8 million. Core loans, which exclude Paycheck Protection Program (PPP) loans, increased $3.67 billion, or 90.0%, to $7.74 billion at December 31, 2022 from $4.07 billion at December 31, 2021 and increased $3.17 billion, or 277.0% (annualized), from $4.57 billion at September 30, 2022.

    Deposits at December 31, 2022 increased $3.22 billion, or 53.2%, to $9.27 billion compared to $6.05 billion at December 31, 2021 and increased $3.61 billion, or 254.9% (annualized), compared to $5.66 billion at September 30, 2022.

    Asset Quality

    Stellar’s nonperforming assets totaled $45.0 million, or 0.41% of total assets, at December 31, 2022 compared to $24.1 million, or 0.34% of total assets, at December 31, 2021 and $21.6 million, or 0.32% of total assets at September 30, 2022. The allowance for credit losses on loans as a percentage of total loans was 1.20% at December 31, 2022, 1.14% at December 31, 2021 and 1.14% at September 30, 2022.

    The provision for credit losses for the fourth quarter 2022 was $44.8 million compared to the reversal of provision for credit losses of $2.6 million for the fourth quarter 2021 and the provision for credit losses of $2.0 million for the third quarter 2022. As a result of loans acquired in the merger, the fourth quarter includes a $28.2 million provision for credit losses on loans and a $5.0 million provision for unfunded commitments. Additionally, the Company recorded a $7.6 million allowance for credit losses on PCD loans acquired.

    Fourth quarter 2022 net charge-offs were $5.7 million, or 0.30% (annualized) of average loans, compared to net charge-offs of $1.4 million, or 0.13% (annualized) of average loans, for the fourth quarter 2021 and net recoveries of $245 thousand, or (0.02)% (annualized) of average loans, for the third 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 pages 11 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, January 27, 2023 at 8:00 a.m. Central Time (9:00 a.m. Eastern Time) to discuss fourth quarter 2022 results. Individuals and investment professionals may register for the conference call at https://register.vevent.com/register/BI70fcd05aee4348f7b0dc18ea083f2b2c 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/events-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, created by the merger of Allegiance Bank and CommunityBank of Texas, N.A. and to be renamed Stellar Bank upon system conversion, 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; 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 and the Joint Proxy Statement/Prospectus regarding the Merger that CBTX filed with the SEC on April 7, 2022 pursuant to Rule 424(b)(3) and CBTX’s Annual Report on Form 10-K and Allegiance’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.

     2022 2021
     December 31 September 30 June 30 March 31 December 31
      (Dollars in thousands)
    ASSETS         
    Cash and due from banks$                     67,063 $                     16,449 $                     17,547 $                     26,629 $                     23,961
    Interest-bearing deposits at other financial
        institutions    		                     304,642                      102,118                       275,290                      672,755                      733,548
    Total cash and cash equivalents                     371,705                      118,567                       292,837                      699,384                      757,509
    Available for sale securities, at fair value                  1,807,586                   1,618,995                   1,709,321                   1,790,707                   1,773,765
    Loans held for investment                  7,754,751                   4,591,912                   4,348,833                   4,283,514                   4,220,486
    Less: allowance for credit losses on loans                     (93,180)                      (52,147)                      (50,242)                      (49,215)                      (47,940)
    Loans, net                  7,661,571                   4,539,765                   4,298,591                   4,234,299                   4,172,546
    Accrued interest receivable                       44,743                        29,697                        29,882                        31,505                        33,392
    Premises and equipment, net                     126,803                        57,837                        58,482                        62,168                        63,708
    Federal Home Loan Bank stock                       15,058                        16,843                          4,078                          9,376                          9,358
    Bank owned life insurance                     103,094                        28,305                        28,170                        28,374                        28,240
    Goodwill                     497,260                      223,642                      223,642                      223,642                      223,642
    Core deposit intangibles, net                     143,525                        12,406                        13,156                        13,907                        14,658
    Other assets                     129,092                        84,285                        73,605                        56,001                        28,136
    Total assets$              10,900,437 $                6,730,342 $                6,731,764 $                7,149,363 $                7,104,954
    LIABILITIES AND SHAREHOLDERS’
        EQUITY    		         
    LIABILITIES:         
    Deposits:         
    Noninterest-bearing$                4,230,169 $                2,465,839 $                2,394,719 $                2,353,604 $                2,243,085
    Interest-bearing         
    Demand                  1,591,828                      956,920                   1,016,381                   1,070,855                      869,984
    Money market and savings                  2,575,923                   1,471,690                   1,510,008                   1,552,853                   1,643,745
    Certificates and other time                     869,712                      766,270                      959,524                   1,185,015                   1,290,825
    Total interest-bearing deposits                  5,037,463                   3,194,880                   3,485,913                   3,808,723                   3,804,554
    Total deposits                  9,267,632                   5,660,719                   5,880,632                   6,162,327                   6,047,639
    Accrued interest payable                         2,098                          2,673                          1,500                          3,086                          1,753
    Borrowed funds                       63,925                      257,000                               —                        89,959                        89,956
    Subordinated debt                     109,367                      109,241                      109,109                      108,978                      108,847
    Other liabilities                       74,239                        44,407                        35,194                        33,073                        40,291
    Total liabilities                  9,517,261                   6,074,040                   6,026,435                   6,397,423                   6,288,486
    SHAREHOLDERS’ EQUITY:         
    Common stock                            530                             281                             286                             290                             289
    Capital surplus                  1,222,761                      511,434                       524,033                      532,372                      530,845
    Retained earnings                     303,146                      307,975                      296,477                      282,896                      267,092
    Accumulated other comprehensive (loss) income                   (143,261)                    (163,388)                    (115,467)                      (63,618)                        18,242
    Total shareholders’ equity                  1,383,176                      656,302                      705,329                      751,940                      816,468
    TOTAL LIABILITIES AND
        SHAREHOLDERS’ EQUITY    		$              10,900,437 $                6,730,342 $                6,731,764 $                7,149,363 $                7,104,954


     Three Months Ended Years Ended
      2022  2021   2022  2021 
     December 31 September 30 June 30 March 31 December 31 December 31 December 31
     (Dollars in thousands, except per share data)
    INTEREST INCOME:             
    Loans, including fees$116,145  $58,025 $53,835  $52,370 $56,855  $280,375 $230,713 
    Securities:             
    Taxable 9,834   6,655  5,571   5,068  3,933   27,128  11,889 
    Tax-exempt 3,057   2,594  2,557   2,525  2,526   10,733  9,909 
    Deposits in other financial
    institutions    		 2,933   608  877   340  317   4,758  673 
    Total interest income 131,969   67,882  62,840   60,303  63,631   322,994  253,184 
                  
    INTEREST EXPENSE:             
    Demand, money market and
    savings deposits    		 12,406   3,527  1,859   1,347  1,277   19,139  5,365 
    Certificates and other time
    deposits    		 2,083   1,664  1,922   2,156  2,391   7,825  11,628 
    Borrowed funds 417   499  114   186  434   1,216  1,878 
    Subordinated debt 1,449   1,502  1,463   1,442  1,425   5,856  5,749 
    Total interest expense 16,355   7,192  5,358   5,131  5,527   34,036  24,620 
    NET INTEREST INCOME 115,614   60,690  57,482   55,172  58,104   288,958  228,564 
    Provision for credit losses 44,793   1,962  2,143   1,814  (2,577)   50,712  (2,322) 
    Net interest income after provision
    for credit losses    		 70,821   58,728  55,339   53,358  60,681   238,246  230,886 
                  
    NONINTEREST INCOME:             
    Nonsufficient funds fees 447   145  126   116  156   834  464 
    Service charges on deposit
    accounts    		 1,242   527  560   527  476   2,856  1,671 
    Gain (loss) on sale of assets 4,025   42  (17)   —  (321)   4,050  (272) 
    Bank owned life insurance 515   135  342   133  139   1,125  554 
    Debit card and ATM card income 1,897   869  880   819  834   4,465  2,996 
    Other 2,511   1,277  813   2,423  1,170   7,024  3,149 
    Total noninterest income 10,637   2,995  2,704   4,018  2,454   20,354  8,562 
                  
    NONINTEREST EXPENSE:             
    Salaries and employee benefits 40,949   22,013  21,864   22,728  22,918   107,554  90,177 
    Net occupancy and equipment 3,781   2,129  2,220   2,205  2,194   10,335  9,144 
    Depreciation 1,903   1,003  1,012   1,033  1,103   4,951  4,254 
    Data processing and software
    amortization    		 3,776   2,541  2,522   2,498  2,264   11,337  8,862 
    Professional fees 2,298   485  662   138  1,008   3,583  3,025 
    Regulatory assessments and
    FDIC insurance    		 1,263   1,134  1,256   1,261  949   4,914  3,407 
    Core deposit intangibles
    amortization    		 7,051   750  751   751  824   9,303  3,296 
    Communications 737   359  363   341  395   1,800  1,406 
    Advertising 1,130   385  483   462  481   2,460  1,692 
    Other real estate expense 152   93  65   59  69   369  548 
    Acquisition and merger-related
    expenses    		 11,469   10,551  1,667   451  1,408   24,138  2,011 
    Other 5,115   2,588  5,039   2,590  3,131   15,332  11,732 
    Total noninterest expense 79,624   44,031  37,904   34,517  36,744   196,076  139,554 
    INCOME BEFORE INCOME
    TAXES    		 1,834   17,692  20,139   22,859  26,391   62,524  99,894 
    Provision for income taxes (218)  3,406  3,702   4,202  4,833   11,092  18,341 
    NET INCOME$2,052  $14,286 $16,437  $18,657 $21,558  $51,432 $81,553 
                  
    EARNINGS PER SHARE             
    Basic$0.04  $0.51 $0.57  $0.65 $0.75  $1.48 $2.85 
    Diluted$0.04  $0.50 $0.56  $0.64 $0.74  $1.47 $2.82 


     Three Months Ended Years Ended
     2022 2021 2022 2021
     December 31 September 30 June 30  March 31 December 31 December 31  December 31
     (Dollars and share amounts in thousands, except per share data)
    Net income$            2,052 $          14,286 $          16,437 $          18,657 $          21,558 $          51,432 $          81,553
                  
    Earnings per share, basic$              0.04 $              0.51 $              0.57 $              0.65 $              0.75 $              1.48 $              2.85
    Earnings per share, diluted$              0.04 $              0.50 $              0.56 $              0.64 $              0.74 $              1.47 $              2.82
    Dividends per share$              0.13 $              0.10 $              0.10 $              0.10 $              0.08 $              0.43 $              0.34
                  
    Return on average assets(A)0.07%  0.84%  0.94%  1.04%  1.23%  0.64%  1.24% 
    Return on average equity(A)0.60%  7.90%  8.86%  9.40%  10.60%  5.69%  10.38% 
    Return on average tangible
        equity(A)(B)    		1.18%  11.78%  13.00%  13.35%  15.05%  9.16%  14.93% 
    Net interest margin
        (tax equivalent)(A)(C)    		4.71%  3.85%  3.53%  3.30%  3.57%  3.94%  3.90% 
    Net interest margin
        (tax equivalent) excluding PAA(A)(B)(C)    		4.38%  3.85%  3.52%  3.29%  3.56%  3.83%  3.89% 
    Efficiency ratio(D)65.14%  69.18%  62.96%  58.32%  60.68%  64.23%  58.86% 
                  
    Capital Ratios             
    Stellar Bancorp, Inc.(Consolidated)             
    Equity to assets12.69%  9.75%  10.48%  10.52%  11.49%  12.69%  11.49% 
    Tangible equity to tangible
        assets(B)    		7.24%  6.47%  7.21%  7.44%  8.42%  7.24%  8.42% 
    Estimated common equity
        tier 1 capital    		10.04%  11.39%  12.06%  12.28%  12.47%  10.04%  12.47% 
    Estimated tier 1 risk-based
        capital    		10.15%  11.58%  12.26%  12.49%  12.69%  10.15%  12.69% 
    Estimated total risk-based
        capital    		12.47%  14.66%  15.47%  15.76%  16.08%  12.47%  16.08% 
    Estimated tier 1 leverage
        capital    		8.55%  9.00%  8.65%  8.37%  8.53%  8.55%  8.53% 
    Allegiance Bank             
    Estimated common equity
        tier 1 capital    		10.46%  12.20%  12.51%  12.48%  12.63%  10.46%  12.63% 
    Estimated tier 1 risk-based
        capital    		10.46%  12.20%  12.51%  12.48%  12.63%  10.46%  12.63% 
    Estimated total risk-based
        capital    		12.10%  14.12%  14.50%  14.50%  14.71%  12.10%  14.71% 
    Estimated tier 1 leverage
        capital    		8.81%  9.49%  8.83%  8.37%  8.49%  8.81%  8.49% 
                  
    Other Data             
    Weighted average shares:             
    Basic            52,715             28,286             28,874             28,883             28,737             34,738             28,660
    Diluted            52,973             28,529             29,120             29,114             28,968             35,007             28,872
    Period end shares outstanding            52,955             28,137             28,586             28,904             28,846             52,955             28,846
    Book value per share$            26.12 $            23.33 $            24.67 $            26.02 $            28.30 $            26.12 $            28.30
    Tangible book value per share(B)$            14.02 $            14.94 $            16.39 $            17.80 $            20.04 $            14.02 $            20.04
    Employees - full-time equivalents              1,025                  562                  578                  586                  594               1,025                  594

     

    1. Interim periods annualized.
    2. Refer to the calculation of these non-GAAP financial measures and a reconciliation to their most directly comparable GAAP financial measures on page 11 of this Earnings Release.
    3. Net interest margin represents net interest income divided by average interest-earning assets.
    4. Represents total noninterest expense divided by the sum of net interest income plus noninterest income, excluding net gains on the sale of loans, securities and assets. Additionally, taxes and provision for credit losses are not part of this calculation.

     


     Three Months Ended
     December 31, 2022 September 30, 2022 December 31, 2021
     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$7,666,502 $116,145  6.01%  $4,456,174 $58,025 5.17%  $4,243,778 $56,855 5.32% 
    Securities    1,795,082        12,891 2.85%      1,709,470          9,249 2.15%      1,457,793          6,459 1.76% 
    Deposits in other financial institutions       354,117           2,933 3.29%         160,340             608 1.50%         843,808             317 0.15% 
    Total interest-earning assets    9,815,701 $131,969 5.33%      6,325,984 $67,882 4.26%      6,545,379 $63,631 3.86% 
    Allowance for credit losses on loans       (88,150)            (50,609)            (50,654)    
    Noninterest-earning assets    1,218,458            442,511             447,005    
    Total assets$10,946,009     $6,717,886     $6,941,730    
                      
    Liabilities and
        Shareholders' Equity    		                 
    Interest-Bearing Liabilities:                 
    Interest-bearing demand
        deposits    		$1,465,711  $5,422 1.47%  $978,531 $2,380 0.96%  $724,841 $388 0.21% 
    Money market and savings
        deposits    		    2,705,984          6,984 1.02%      1,500,083          1,147 0.30%      1,618,240             889 0.22% 
    Certificates and other time
        deposits    		       932,058          2,083 0.89%         877,231          1,664 0.75%      1,335,020          2,391 0.71% 
    Borrowed funds         37,824             417 4.37%           68,752             499 2.88%         138,747             434 1.24% 
    Subordinated debt       109,307          1,449 5.26%         109,177          1,502 5.46%         108,784          1,425 5.20% 
    Total interest-bearing
        liabilities    		    5,250,884 $16,355 1.24%      3,533,774 $7,192 0.81%      3,925,632 $5,527 0.56% 
                      
    Noninterest-Bearing
        Liabilities:    		                 
    Noninterest-bearing demand
        deposits    		    4,199,982         2,424,884         2,163,016    
    Other liabilities       147,205              41,792              46,141    
    Total liabilities    9,598,071         6,000,450         6,134,789    
    Shareholders' equity    1,347,938            717,436            806,941    
    Total liabilities and
        shareholders' equity    		$10,946,009     $6,717,886     $6,941,730    
                      
    Net interest rate spread    4.09%      3.45%      3.30% 
                      
    Net interest income and margin  $115,614  4.67%    $60,690 3.81%    $58,104 3.52% 
                      
    Net interest income and net
        interest margin (tax equivalent)    		  $116,574  4.71%    $61,418 3.85%    $58,838 3.57% 


     Years Ended December 31,
     2022 2021
     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$         5,171,944 $          280,375 5.42%  $         4,422,467 $          230,713 5.22% 
    Securities           1,779,425               37,861 2.13%             1,050,376               21,798 2.08% 
    Deposits in other financial institutions              462,075                 4,758 1.03%                458,190                    673 0.15% 
    Total interest-earning assets           7,413,444 $          322,994 4.36%             5,931,033 $          253,184 4.27% 
    Allowance for credit losses
        on loans    		              (59,099)                   (51,513)    
    Noninterest-earning assets              633,928                   680,191    
    Total assets$         7,988,273     $         6,559,711     
                
    Liabilities and Shareholders' Equity           
    Interest-Bearing Liabilities:           
    Interest-bearing demand deposits$         1,140,575 $              9,278 0.81%  $            574,079 $              1,409 0.25% 
    Money market and savings deposits           1,841,348                 9,861 0.54%             1,571,532                 3,956 0.25% 
    Certificates and other time deposits           1,034,491                 7,825 0.76%             1,349,216               11,628  0.86% 
    Borrowed funds                61,773                 1,216 1.97%                144,354                 1,878 1.30% 
    Subordinated debt              109,111                  5,856 5.37%                108,588                 5,749 5.29% 
    Total interest-bearing liabilities           4,187,298 $            34,036 0.81%             3,747,769               24,620 0.66% 
                
    Noninterest-Bearing Liabilities:           
    Noninterest-bearing demand deposits           2,833,865                1,983,934    
    Other liabilities                62,581                     41,972    
    Total liabilities           7,083,744                5,773,675    
    Shareholders' equity              904,529                   786,036    
    Total liabilities and shareholders' equity$         7,988,273     $         6,559,711     
                
    Net interest rate spread    3.55%      3.61% 
                
    Net interest income and margin  $          288,958 3.90%    $          228,564 3.85% 
                
    Net interest income and net interest
        margin (tax equivalent)    		  $          292,152 3.94%    $          231,315 3.90% 



     Three Months Ended
      2022   2021 
     December 31 September 30 June 30 March 31 December 31
     (Dollars in thousands)
    Period-end Loan Portfolio:         
    Commercial and industrial$        1,455,795  $        732,636  $        727,068  $        714,450  $        693,559 
    Paycheck Protection Program (PPP)         13,226           17,827           31,855           78,624           145,942 
    Real estate:         
    Commercial real estate (including
    multi-family residential)    		         3,931,480           2,407,039           2,265,155           2,197,502           2,104,621 
    Commercial real estate construction and
    land development    		         1,037,678           513,248           450,694           453,473           439,125 
    1-4 family residential (including home equity)         1,000,956           699,636           682,066           669,306           685,071 
    Residential construction         268,150           183,563           155,017           136,760           117,901 
    Consumer and other         47,466           37,963           36,978           33,399           34,267 
    Total loans held for investment$        7,754,751  $        4,591,912  $        4,348,833  $        4,283,514  $        4,220,486 
              
    Deposits:         
    Interest-bearing demand$        1,591,828  $        956,920  $        1,016,381  $        1,070,855  $        869,984 
    Money market and savings         2,575,923           1,471,690           1,510,008           1,552,853           1,643,745 
    Certificates and other time         869,712           766,270           959,524           1,185,015           1,290,825 
    Total interest-bearing deposits         5,037,463           3,194,880           3,485,913           3,808,723           3,804,554 
    Noninterest-bearing deposits         4,230,169           2,465,839           2,394,719           2,353,604           2,243,085 
    Total deposits$        9,267,632  $        5,660,719  $        5,880,632  $        6,162,327  $        6,047,639 
              
    Asset Quality:         
    Nonaccrual loans$        45,048  $        21,551  $        28,225  $        26,275  $        24,127 
    Accruing loans 90 or more days past due         —           —           —           —           — 
    Total nonperforming loans         45,048           21,551           28,225           26,275           24,127 
    Total nonperforming assets$        45,048  $        21,551  $        28,225  $        26,275  $        24,127 
              
    Net charge-offs (recoveries)$        5,707  $        (245) $        571  $        317  $        1,353 
              
    Nonaccrual loans:         
    Commercial and industrial$        25,402  $        6,916  $        9,145  $        7,809  $        8,358 
    Real estate:         
    Commercial real estate (including
    multi-family residential)    		         9,970           10,392           14,409           15,259           12,639 
    Commercial real estate construction and
    land development    		         —           241           1,511           —           63 
    1-4 family residential (including home equity)         9,404           3,854           3,040           3,065           2,875 
    Residential construction         —           —           —           —           — 
    Consumer and other         272           148           120           142           192 
    Total nonaccrual loans$        45,048  $        21,551  $        28,225  $        26,275  $        24,127 
              
    Asset Quality Ratios:         
    Nonperforming assets to total assets         0.41%          0.32%          0.42%          0.37%          0.34%
    Nonperforming loans to total loans         0.58 %          0.47%          0.65%          0.61%          0.57%
    Allowance for credit losses on loans to
    nonperforming loans    		         206.8 %          241.97%          178.01%          187.31%          198.70%
    Allowance for credit losses on loans to total loans         1.20 %          1.14%          1.16%          1.15%          1.14%
    Net charge-offs (recoveries) to average loans (annualized)         0.30 %          (0.02%)          0.05%          0.03%          0.13%

    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 Years Ended
      2022   2021   2022   2021 
     December 31 September 30 June 30 March 31 December 31 December 31 December 31
     (Dollars and share amounts in thousands, except per share data)
    Net income$2,052  $14,286  $16,437  $18,657  $21,558  $51,432  $81,553 
    Add: Provision for credit losses 44,793   1,962   2,143   1,814   (2,577)  50,712   (2,322)
    Add: Provision for income taxes (218)  3,406   3,702   4,202   4,833   11,092   18,341 
    Pre-tax, pre-provision income$46,627  $19,654  $22,282  $24,673  $23,814  $113,236  $97,572 
                  
    Total average assets$10,946,009  $6,717,886  $7,019,299  $7,257,498  $6,941,730  $7,988,273  $6,559,711 
                  
    Pre-tax, pre-provision return on average assets(B) 1.69%  1.16%  1.27%  1.38%  1.36%  1.42%  1.49%
                  
    Pre-tax, pre-provision income$46,627  $19,654  $22,282  $24,673  $23,814  $113,236  $97,572 
    Add: Acquisition and merger-related expenses 11,469   10,551   1,667   451   1,408   24,138   2,011 
    Add: Core deposit intangibles amortization 7,051   750   751   751   824   9,303   3,296 
    Less: Purchase accounting accretion 8,160   40   77   93   93   8,370   600 
    Less: Gain (loss) on sale of assets 4,025   42   (17)  —   (321)  4,050   (272)
    Adjusted pre-tax, pre-provision income$52,962  $30,873  $24,640  $25,782  $26,274  $134,257  $102,551 
                  
    Adjusted pre-tax, pre-provision return on average assets(B) 1.92%  1.82%  1.41%  1.44%  1.50%  1.68%  1.56%
                  
    Total noninterest expense$79,624  $44,031  $37,904  $34,517  $36,744  $196,076  $139,554 
    Less: Acquisition and merger-related expenses 11,469   10,551   1,667   451   1,408   24,138   2,011 
    Less: Core deposit intangibles amortization 7,051   750   751   751   824   9,303   3,296 
    Net interest income 115,614   60,690   57,482   55,172   58,104   288,958   228,564 
    Less: Purchase accounting accretion 8,160   40   77   93   93   8,370   600 
    Total noninterest income 10,637   2,995   2,704   4,018   2,454   20,354   8,562 
    Less: Gain (loss) on sale of assets 4,025   42   (17)  —   (321)  4,050   (272)
    Adjusted efficiency ratio(A) 53.57%  51.46%  59.02%  56.37%  56.78%  54.78%  56.69%
                  
    Total shareholders' equity$1,383,176  $656,302  $705,329  $751,940  $816,468  $1,383,176  $816,468 
    Less:  Goodwill and core deposit intangibles, net 640,785   236,048   236,798   237,549   238,300   640,785   238,300 
    Tangible shareholders’ equity$742,391  $420,254  $468,531  $514,391  $578,168  $742,391  $578,168 
                  
    Shares outstanding at end of period 52,955   28,137   28,586   28,904   28,846   52,955   28,846 
                  
    Tangible book value per share$14.02  $14.94  $16.39  $17.80  $20.04  $14.02  $20.04 
                  
    Average shareholders' equity$1,347,938  $717,436  $744,126  $804,704  $806,941  $904,529  $786,036 
    Less:  Average goodwill and core deposit intangibles, net 658,107   236,399   237,153   237,925   238,700   343,257   239,916 
    Average tangible shareholders’ equity$689,831  $481,037  $506,973  $566,779  $568,241  $561,272  $546,120 
                  
    Return on average tangible equity(B) 1.18%  11.78%  13.00%  13.35%  15.05%  9.16%  14.93%
                  
    Total assets$10,900,437  $6,730,342  $6,731,764  $7,149,363  $7,104,954  $10,900,437  $7,104,954 
    Less: Goodwill and core deposit intangibles, net 640,785   236,048   236,798   237,549   238,300   640,785   238,300 
    Tangible assets$10,259,652  $6,494,294  $6,494,966  $6,911,814  $6,866,654  $10,259,652  $6,866,654 
                  
    Tangible equity to tangible assets 7.24%  6.47%  7.21%  7.44%  8.42%  7.24%  8.42%
                  
    Net interest income (tax equivalent)$116,574  $61,418  $58,238  $55,922  $58,838  $292,152  $231,315 
    Less: Purchase accounting accretion 8,160   40   77   93   93   8,370   600 
    Adjusted net interest income (tax equivalent)$108,414  $61,378  $58,161  $55,829  $58,745  $283,782  $230,715 
                  
    Average earning assets$9,815,701  $6,325,984  $6,618,005  $6,873,708  $6,545,379  $7,413,444  $5,931,033 
                  
    Net interest margin
    (tax equivalent) excluding PAA    		 4.38%  3.85%  3.52%  3.29%  3.56%  3.83%  3.89%
    1. Represents total noninterest expense, excluding acquisition and merger-related expenses, core deposit intangibles amortization and write-down on assets moved to held for sale, divided by the sum of net interest income, excluding purchase accounting adjustments 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.
    2. Interim periods annualized.

     


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