Form 8-K - Current report

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 28, 2023

Stellar Bancorp, Inc.

(Exact Name of Registrant as Specified in Charter)


Texas	001-38280	20-8339782
(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 share

STEL

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 28, 2023, Stellar Bancorp, Inc. (the “Company”), issued a press release announcing its financial results for the second quarter of 2023. 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 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, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

Item 9.01. Financial Statements and Exhibits.

(d) Exhibits. The following are furnished as exhibits to this Current Report on Form 8-K:


Exhibit Number			Description of Exhibit
99.1			Press Release issued dated July 28, 2023
99.2			Second Quarter 2023 Earnings Presentation dated July 28, 202 3
104			Cover 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 28, 2023	By:	/s/ Paul P. Egge
		Paul P. Egge
		Chief Financial Officer

Exhibit 99.1

PRESS RELEASE

STELLAR BANCORP, INC. REPORTS

SECOND QUARTER 2023 RESULTS

HOUSTON, July 28, 2023 - Stellar Bancorp, Inc. (the “Company” or “Stellar”) (NYSE: STEL) today reported net income of $35.2 million and diluted earnings per share of $0.66 for the second quarter 2023 compared to net income of $37.1 million and diluted earnings per share of $0.70 for the first quarter 2023.

“We are pleased to announce our second quarter operating results. We remain focused on capital, credit and liquidity and that focus is reflected in our results for the quarter that include our continued capital build, good credit quality and growth of loans in a measured way,” said Robert R. Franklin, Jr., Stellar’s Chief Executive Officer.

“The Federal Reserve continues to increase interest rates which has put pressure on deposit rates and net interest margin across the industry and the deposit rate environment remains very competitive. However, we’ve been able to maintain our high percentage of noninterest-bearing deposits while staying competitive with our interest-bearing deposit rates. Our relationship driven model continued to provide us with a very healthy margin. We are working to remain disciplined to position Stellar for long-term success as we manage through the current economic environment, thankful to be operating in what we believe to be the best commercial banking region in the country. The long-term future for Stellar remains bright,” concluded Mr. Franklin.

Second Quarter 2023 Financial Highlights

•Strong Profitability: Second quarter 2023 net income of $35.2 million and diluted earnings per share of $0.66 translated into an annualized return on average assets of 1.31% and an annualized return on average tangible equity of 17.05%(1).

•Continued Regulatory Capital Build: Total risk-based capital ratio increased to 13.03% at June 30, 2023 from 12.39% at December 31, 2022 and Tier 1 leverage ratio increased to 9.51% at June 30, 2023 from 8.55% at December 31, 2022.

•Excellent Credit Performance: Net charge-offs of $428 thousand, or 0.01%, for the year-to-date 2023, while nonperforming assets remained stable.

•Solid Margin: Tax equivalent net interest margin was 4.49% for the second quarter of 2023 as compared to 4.80% in the first quarter of 2023. The tax equivalent net interest margin, excluding purchase accounting accretion (“PAA”), was 3.97%(1) for the second quarter of 2023 and 4.38%(1) for the first quarter of 2023.

•Advantageous Funding Profile: Noninterest-bearing deposit balances decreased from the first quarter but remained a significant portion of our deposit funding base at 42.4% at the end of the second quarter 2023 compared to 44.4% at the end of the first quarter 2023.

Merger of Equals

The merger of equals (the “Merger”) between Allegiance Bancshares, Inc. (“Allegiance”) and CBTX, Inc. (“CBTX”), which became effective on October 1, 2022, 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 and second quarters of 2023 and the fourth quarter 2022 and stand-alone Allegiance for all periods prior to October 1, 2022.

_____________________

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

Second Quarter 2023 Results

Stellar’s net interest income in the second quarter 2023 decreased $7.5 million, or 6.5%, from $115.8 million for the first quarter 2023. The net interest margin on a tax equivalent basis decreased 31 basis points to 4.49% for the second quarter 2023 from 4.80% for the first quarter 2023. 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 2023 benefited from $12.6 million of income from purchase accounting adjustments compared to $10.1 million in the first quarter of 2023. Excluding purchase accounting adjustments, a non-GAAP measure that is reconciled on page 10 of this earnings release, net interest income for the second quarter 2023 would have been $95.9 million and the tax equivalent net interest margin would have been 3.97%.

Noninterest income for the second quarter 2023 was $5.5 million, a decrease of $2.0 million, or 26.9%, compared to $7.5 million for the first quarter 2023. Noninterest income decreased in the second quarter of 2023 compared to the first quarter of 2023 primarily due to Small Business Investment Company income recognized in the first quarter of 2023.

Noninterest expense for the second quarter 2023 decreased $3.4 million, or 4.7%, to $69.2 million compared to $72.6 million for the first quarter of 2023. The decrease in noninterest expense in the second quarter of 2023 compared to the first quarter of 2023 was primarily due to a decrease in acquisition and merger-related expenses which totaled $2.9 million for the second quarter of 2023 compared to $6.2 million in the first quarter of 2023.

Stellar’s efficiency ratio was 60.83% for the second quarter 2023 compared to 58.96% for the first quarter 2023. Second quarter 2023 annualized returns on average assets, average equity and average tangible equity were 1.31%, 9.67% and 17.05%, respectively, compared to 1.38%, 10.62% and 19.32%, respectively, for the first quarter 2023. Return on average tangible equity is a non-GAAP measure. Please refer to the non-GAAP reconciliation on page 10 of this earnings release.

Financial Condition

Total loans at June 30, 2023 increased $182.7 million to $8.07 billion compared to $7.89 billion at March 31, 2023. At June 30, 2023, the remaining balance of the purchase accounting adjustments on loans was $131.4 million.

Total deposits at June 30, 2023 increased $27.5 million to $8.77 billion compared to $8.74 billion at March 31, 2023, driven in part by increased CDs more than offsetting decreases in noninterest-bearing and money market balances. 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 $4.75 billion and estimated uninsured deposits net of collateralized deposits of $936 million were $3.82 billion, or 43.5%, of total deposits at June 30, 2023.

Total assets at June 30, 2023 were $10.78 billion, an increase of $173.6 million, compared to $10.60 billion at March 31, 2023.

Asset Quality

Nonperforming assets totaled $43.3 million, or 0.40% of total assets, at June 30, 2023 compared to $43.5 million, or 0.41% of total assets, at March 31, 2023. The allowance for credit losses on loans as a percentage of total loans was 1.24% at June 30, 2023 and 1.22% at March 31, 2023.

The provision for credit losses for the second quarter 2023 was $1.9 million compared to $3.7 million for the first quarter 2023. Second quarter 2023 net charge-offs were $236 thousand, or 0.01% (annualized) of average loans, compared to net charge-offs of $192 thousand, or 0.01% (annualized) of average loans, for the first quarter 2023.

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 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 28, 2023 at 8:00 a.m. Central Time (9:00 a.m. Eastern Time) to discuss second quarter 2023 results. Individuals and investment professionals may register for the conference call at https://register.vevent.com/register/BI2481d74e1f5a4577b2eff534eef7c8b7 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 operations will be materially delayed or will be more costly or difficult than we expected or that we are otherwise unable to successfully integrate our legacy businesses; the amount of the costs, fees, expenses and charges related to the Merger; reputational risk and the reaction of our customers, suppliers, employees or other business partners to the Merger; changes in the interest rate environment, the value of Stellar’s assets and obligations and the availability of capital and liquidity; general competitive, economic, political and market conditions; and other factors that may affect future results of Stellar including changes in asset quality and credit risk; the inability to sustain revenue and earnings growth; changes in interest rates and capital markets; inflation; customer borrowing, repayment, investment and deposit practices; the impact, extent and timing of technological changes; capital management activities; disruptions to the economy and the U.S. banking system caused by recent bank failures, risks associated with uninsured deposits and responsive measures by federal or state governments or banking regulators, including increases in the cost of our deposit insurance assessments and other actions of the Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation and Texas Department of Banking and legislative and regulatory actions and reforms.

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

Stellar Bancorp, Inc.

Financial Highlights

(Unaudited)


	2023				2022
	June 30		March 31		December 31		September 30		June 30
	(Dollars in thousands)
ASSETS
Cash and due from banks	$	105,913	$	99,231	$	67,063	$	16,449	$	17,547
Interest-bearing deposits at other financial institutions	198,176		164,102		304,642		102,118		275,290
Total cash and cash equivalents	304,089		263,333		371,705		118,567		292,837

Available for sale securities, at fair value	1,478,222		1,519,175		1,807,586		1,618,995		1,709,321

Loans held for investment	8,068,718		7,886,044		7,754,751		4,591,912		4,348,833
Less: allowance for credit losses on loans	(100,195)		(96,188)		(93,180)		(52,147)		(50,242)
Loans, net	7,968,523		7,789,856		7,661,571		4,539,765		4,298,591

Accrued interest receivable	42,051		42,405		44,743		29,697		29,882
Premises and equipment, net	119,142		124,723		126,803		57,837		58,482
Federal Home Loan Bank stock	24,478		19,676		15,058		16,843		4,078
Bank-owned life insurance	104,148		103,616		103,094		28,305		28,170
Goodwill	497,260		497,260		497,260		223,642		223,642
Core deposit intangibles, net	129,805		136,665		143,525		12,406		13,156
Other assets	110,633		108,009		129,092		84,285		73,605
Total assets	$	10,778,351	$	10,604,718	$	10,900,437	$	6,730,342	$	6,731,764


LIABILITIES AND SHAREHOLDERS’ EQUITY

LIABILITIES:
Deposits:
Noninterest-bearing	$	3,713,536	$	3,877,859	$	4,230,169	$	2,465,839	$	2,394,719
Interest-bearing
Demand	1,437,509		1,394,244		1,591,828		956,920		1,016,381
Money market and savings	2,174,073		2,401,840		2,575,923		1,471,690		1,510,008
Certificates and other time	1,441,251		1,064,932		869,712		766,270		959,524
Total interest-bearing deposits	5,052,833		4,861,016		5,037,463		3,194,880		3,485,913
Total deposits	8,766,369		8,738,875		9,267,632		5,660,719		5,880,632

Accrued interest payable	4,555		3,875		2,098		2,673		1,500
Borrowed funds	369,963		238,944		63,925		257,000		—
Subordinated debt	109,566		109,420		109,367		109,241		109,109
Other liabilities	69,218		67,388		74,239		44,407		35,194
Total liabilities	9,319,671		9,158,502		9,517,261		6,074,040		6,026,435

SHAREHOLDERS’ EQUITY:
Common stock	533		533		530		281		286
Capital surplus	1,228,532		1,225,596		1,222,761		511,434		524,033
Retained earnings	361,619		333,368		303,146		307,975		296,477
Accumulated other comprehensive loss	(132,004)		(113,281)		(143,261)		(163,388)		(115,467)
Total shareholders’ equity	1,458,680		1,446,216		1,383,176		656,302		705,329

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	10,778,351	$	10,604,718	$	10,900,437	$	6,730,342	$	6,731,764

Stellar Bancorp, Inc.

Financial Highlights

(Unaudited)


	Three Months Ended										Six Months Ended
	2023				2022						2023		2022
	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	$	133,931	$	125,729	$	116,145	$	58,025	$	53,835	$	259,660	$	106,205
Securities:
Taxable	9,726		9,653		9,834		6,655		5,571		19,379		10,639
Tax-exempt	436		1,262		3,057		2,594		2,557		1,698		5,082
Deposits in other financial institutions	2,865		3,771		2,933		608		877		6,636		1,217
Total interest income	146,958		140,415		131,969		67,882		62,840		287,373		123,143

INTEREST EXPENSE:
Demand, money market and savings deposits	20,708		18,037		12,406		3,527		1,859		38,745		3,206
Certificates and other time deposits	9,622		3,307		2,083		1,664		1,922		12,929		4,078
Borrowed funds	6,535		1,317		417		499		114		7,852		300
Subordinated debt	1,812		1,927		1,449		1,502		1,463		3,739		2,905
Total interest expense	38,677		24,588		16,355		7,192		5,358		63,265		10,489
NET INTEREST INCOME	108,281		115,827		115,614		60,690		57,482		224,108		112,654
Provision for credit losses	1,915		3,666		44,793		1,962		2,143		5,581		3,957
Net interest income after provision for credit losses	106,366		112,161		70,821		58,728		55,339		218,527		108,697

NONINTEREST INCOME:
Nonsufficient funds fees	418		406		447		145		126		824		242
Service charges on deposit accounts	1,157		943		1,242		527		560		2,100		1,087
(Loss) gain on sale of assets	(6)		198		4,025		42		(17)		192		(17)
Bank-owned life insurance	532		522		515		135		342		1,054		475
Debit card and ATM card income	1,821		1,698		1,897		869		880		3,519		1,699
Other	1,561		3,731		2,511		1,277		813		5,292		3,236
Total noninterest income	5,483		7,498		10,637		2,995		2,704		12,981		6,722

NONINTEREST EXPENSE:
Salaries and employee benefits	37,300		39,775		40,949		22,013		21,864		77,075		44,592
Net occupancy and equipment	3,817		4,088		3,781		2,129		2,220		7,905		4,425
Depreciation	1,841		1,836		1,903		1,003		1,012		3,677		2,045
Data processing and software amortization	4,674		5,054		3,776		2,541		2,522		9,728		5,020
Professional fees	1,564		1,527		2,298		485		662		3,091		800
Regulatory assessments and FDIC insurance	2,755		1,294		1,263		1,134		1,256		4,049		2,517
Amortization of intangibles	6,881		6,879		7,051		750		751		13,760		1,502
Communications	689		701		737		359		363		1,390		704
Advertising	907		839		1,130		385		483		1,746		945
Acquisition and merger-related expenses	2,897		6,165		11,469		10,551		1,667		9,062		2,118
Other	5,882		4,440		5,267		2,681		5,104		10,322		7,753
Total noninterest expense	69,207		72,598		79,624		44,031		37,904		141,805		72,421
INCOME BEFORE INCOME TAXES	42,642		47,061		1,834		17,692		20,139		89,703		42,998
Provision for income taxes	7,467		9,913		(218)		3,406		3,702		17,380		7,904
NET INCOME	$	35,175	$	37,148	$	2,052	$	14,286	$	16,437	$	72,323	$	35,094

EARNINGS PER SHARE
Basic	$	0.66	$	0.70	$	0.04	$	0.51	$	0.57	$	1.36	$	1.22
Diluted	$	0.66	$	0.70	$	0.04	$	0.50	$	0.56	$	1.36	$	1.21

Stellar Bancorp, Inc.

Financial Highlights

(Unaudited)


	Three Months Ended															Six Months Ended
	2023						2022									2023			2022
	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	$	35,175		$	37,148		$	2,052		$	14,286		$	16,437		$	72,323		$	35,094

Earnings per share, basic	$	0.66		$	0.70		$	0.04		$	0.51		$	0.57		$	1.36		$	1.22
Earnings per share, diluted	$	0.66		$	0.70		$	0.04		$	0.50		$	0.56		$	1.36		$	1.21
Dividends per share	$	0.13		$	0.13		$	0.13		$	0.10		$	0.10		$	0.26		$	0.20

Return on average assets(A)	1.31		%	1.38		%	0.07		%	0.84		%	0.94		%	1.35		%	0.99		%
Return on average equity(A)	9.67		%	10.62		%	0.60		%	7.90		%	8.86		%	10.14		%	9.14		%
Return on average tangible equity(A)(B)	17.05		%	19.32		%	1.16		%	11.78		%	13.00		%	18.14		%	13.19		%
Net interest margin (tax equivalent)(A)(C)	4.49		%	4.80		%	4.71		%	3.85		%	3.53		%	4.64		%	3.41		%
Net interest margin (tax equivalent) excluding PAA(A)(B)(C)	3.97		%	4.38		%	4.38		%	3.85		%	3.52		%	4.18		%	3.41		%
Efficiency ratio(D)	60.83		%	58.96		%	65.14		%	69.18		%	62.96		%	59.86		%	60.66		%

Capital Ratios
Stellar Bancorp, Inc. (Consolidated)
Equity to assets	13.53		%	13.64		%	12.69		%	9.75		%	10.48		%	13.53		%	10.48		%
Tangible equity to tangible assets(B)	8.19		%	8.15		%	7.24		%	6.47		%	7.21		%	8.19		%	7.21		%
Total capital ratio (to risk-weighted assets)	13.03		%	12.72		%	12.39		%	14.66		%	15.47		%	13.03		%	15.47		%
Common equity Tier 1 capital (to risk weighted assets)	10.67		%	10.39		%	10.04		%	11.39		%	12.06		%	10.67		%	12.06		%
Tier 1 capital (to risk-weighted assets)	10.78		%	10.50		%	10.15		%	11.58		%	12.26		%	10.78		%	12.26		%
Tier 1 leverage (to average tangible assets)	9.51		%	9.01		%	8.55		%	9.00		%	8.65		%	9.51		%	8.65		%

Stellar Bank
Total capital ratio (to risk-weighted assets)	12.80		%	12.42		%	12.02		%	14.12		%	14.50		%	12.80		%	14.50		%
Common equity Tier 1 capital (to risk-weighted assets)	11.22		%	10.87		%	10.46		%	12.20		%	12.51		%	11.22		%	12.51		%
Tier 1 capital (to risk-weighted assets)	11.22		%	10.87		%	10.46		%	12.20		%	12.51		%	11.22		%	12.51		%
Tier 1 leverage (to average tangible assets)	9.89		%	9.35		%	8.81		%	9.49		%	8.83		%	9.89		%	8.83		%

Other Data
Weighted average shares:
Basic	53,297			53,021			52,715			28,286			28,874			53,160			28,879
Diluted	53,375			53,138			52,973			28,529			29,120			53,261			29,108
Period end shares outstanding	53,303			53,296			52,955			28,137			28,586			53,303			28,586
Book value per share	$	27.37		$	27.14		$	26.12		$	23.33		$	24.67		$	27.37		$	24.67
Tangible book value per share(B)	$	15.60		$	15.24		$	14.02		$	14.94		$	16.39		$	15.60		$	16.39
Employees - full-time equivalents	1,004			1,055			1,025			562			578			1,004			578

(A)Interim periods annualized.

(B)Refer to the calculation of these non-GAAP financial measures and a reconciliation to their most directly comparable GAAP financial measures on page 10 of this Earnings Release.

(C)Net interest margin represents net interest income divided by average interest-earning assets.

(D)Represents total noninterest expense divided by the sum of net interest income plus noninterest income, excluding net gains and losses on the sale of loans, securities and assets. Additionally, taxes and provision for credit losses are not part of this calculation.

Stellar Bancorp, Inc.

Financial Highlights

(Unaudited)


	Three Months Ended
	June 30, 2023						March 31, 2023						June 30, 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	$	7,980,856	$	133,931	6.73	%	$	7,847,011	$	125,729	6.50	%	$	4,303,714	$	53,835	5.02	%
Securities	1,502,949		10,162		2.71	%	1,604,011		10,915		2.76	%	1,778,745		8,128		1.83	%
Deposits in other financial institutions	209,722		2,865		5.48	%	364,781		3,771		4.19	%	535,546		877		0.66	%
Total interest-earning assets	9,693,527		$	146,958	6.08	%	9,815,803		$	140,415	5.80	%	6,618,005		$	62,840	3.81	%
Allowance for credit losses on loans	(96,414)						(93,331)						(49,290)
Noninterest-earning assets	1,143,025						1,160,061						450,584
Total assets	$	10,740,138					$	10,882,533					$	7,019,299

Liabilities and Shareholders' Equity
Interest-Bearing Liabilities:
Interest-bearing demand deposits	$	1,387,604	$	9,343	2.70	%	$	1,650,273	$	8,382	2.06	%	$	1,044,493	$	927	0.36	%
Money market and savings deposits	2,220,827		11,365		2.05	%	2,490,889		9,655		1.57	%	1,566,376		932		0.24	%
Certificates and other time deposits	1,225,834		9,622		3.15	%	861,595		3,307		1.56	%	1,088,664		1,922		0.71	%
Borrowed funds	479,896		6,535		5.46	%	105,191		1,317		5.08	%	50,116		114		0.91	%
Subordinated debt	109,499		1,812		6.64	%	109,415		1,927		7.14	%	109,045		1,463		5.38	%
Total interest-bearing liabilities	5,423,660		$	38,677	2.86	%	5,217,363		$	24,588	1.91	%	3,858,694		$	5,358	0.56	%

Noninterest-Bearing Liabilities:
Noninterest-bearing demand deposits	3,779,594						4,166,265						2,382,230
Other liabilities	78,411						80,823						34,249
Total liabilities	9,281,665						9,464,451						6,275,173
Shareholders' equity	1,458,473						1,418,082						744,126
Total liabilities and shareholders' equity	$	10,740,138					$	10,882,533					$	7,019,299

Net interest rate spread					3.22	%					3.89	%					3.25	%

Net interest income and margin			$	108,281	4.48	%			$	115,827	4.79	%			$	57,482	3.48	%

Net interest income and net interest margin (tax equivalent)			$	108,509	4.49	%			$	116,119	4.80	%			$	58,238	3.53	%

Cost of funds					1.69	%					1.06	%					0.34	%
Cost of deposits					1.41	%					0.94	%					0.25	%

Stellar Bancorp, Inc.

Financial Highlights

(Unaudited)


	Six Months Ended June 30,
	2023						2022
	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	$	7,914,303	$	259,660	6.62	%	$	4,267,810	$	106,205	5.02	%
Securities	1,553,200		21,077		2.74	%	1,807,024		15,721		1.75	%
Deposits in other financial institutions	286,823		6,636		4.67	%	670,316		1,217		0.37	%
Total interest-earning assets	9,754,326		$	287,373	5.94	%	6,745,150		$	123,143	3.68	%
Allowance for credit losses on loans	(94,881)						(48,819)
Noninterest-earning assets	1,151,497						441,390
Total assets	$	10,810,942					$	7,137,721

Liabilities and Shareholders' Equity
Interest-Bearing Liabilities:
Interest-bearing demand deposits	$	1,518,213	$	17,725	2.35	%	$	1,057,678	$	1,476	0.28	%
Money market and savings deposits	2,355,112		21,020		1.80	%	1,575,325		1,730		0.22	%
Certificates and other time deposits	1,044,721		12,929		2.50	%	1,166,490		4,078		0.70	%
Borrowed funds	293,578		7,852		5.39	%	69,868		300		0.87	%
Subordinated debt	109,458		3,739		6.89	%	108,979		2,905		5.38	%
Total interest-bearing liabilities	5,321,082		$	63,265	2.40	%	3,978,340		10,489		0.53	%

Noninterest-Bearing Liabilities:
Noninterest-bearing demand deposits	3,971,862						2,347,366
Other liabilities	79,609						37,767
Total liabilities	9,372,553						6,363,473
Shareholders' equity	1,438,389						774,248
Total liabilities and shareholders' equity	$	10,810,942					$	7,137,721

Net interest rate spread					3.54	%					3.15	%

Net interest income and margin			$	224,108	4.63	%			$	112,654	3.37	%

Net interest income and net interest margin (tax equivalent)			$	224,628	4.64	%			$	114,160	3.41	%

Cost of funds					1.37	%					0.33	%
Cost of deposits					1.17	%					0.24	%

Stellar Bancorp, Inc.

Financial Highlights

(Unaudited)


	Three Months Ended
	2023						2022
	June 30			March 31			December 31			September 30			June 30
	(Dollars in thousands)
Period-end Loan Portfolio:
Commercial and industrial	$	1,512,476		$	1,477,340		$	1,455,795		$	732,636		$	727,068
Paycheck Protection Program (PPP)	8,027			11,081			13,226			17,827			31,855
Real estate:
Commercial real estate (including multi-family residential)	4,038,487			4,014,609			3,931,480			2,407,039			2,265,155
Commercial real estate construction and land development	1,136,124			1,034,538			1,037,678			513,248			450,694
1-4 family residential (including home equity)	1,009,439			1,008,362			1,000,956			699,636			682,066
Residential construction	311,208			292,143			268,150			183,563			155,017
Consumer and other	52,957			47,971			47,466			37,963			36,978
Total loans held for investment	$	8,068,718		$	7,886,044		$	7,754,751		$	4,591,912		$	4,348,833

Deposits:
Noninterest-bearing	$	3,713,536		$	3,877,859		$	4,230,169		$	2,465,839		$	2,394,719
Interest-bearing
Demand	1,437,509			1,394,244			1,591,828			956,920			1,016,381
Money market and savings	2,174,073			2,401,840			2,575,923			1,471,690			1,510,008
Certificates and other time	1,441,251			1,064,932			869,712			766,270			959,524
Total interest-bearing deposits	5,052,833			4,861,016			5,037,463			3,194,880			3,485,913
Total deposits	$	8,766,369		$	8,738,875		$	9,267,632		$	5,660,719		$	5,880,632

Asset Quality:
Nonaccrual loans	$	43,349		$	43,413		$	45,048		$	21,551		$	28,225
Accruing loans 90 or more days past due	—			—			—			—			—
Total nonperforming loans	43,349			43,413			45,048			21,551			28,225
Other repossessed assets	—			124			—			—			—
Total nonperforming assets	$	43,349		$	43,537		$	45,048		$	21,551		$	28,225

Net charge-offs (recoveries)	$	236		$	192		$	5,707		$	(245)		$	571

Nonaccrual loans:
Commercial and industrial	$	22,968		$	23,329		$	25,402		$	6,916		$	9,145
Real estate:
Commercial real estate (including multi-family residential)	8,221			9,026			9,970			10,392			14,409
Commercial real estate construction and land development	388			27			—			241			1,511
1-4 family residential (including home equity)	10,880			10,586			9,404			3,854			3,040
Residential construction	665			195			—			—			—
Consumer and other	227			250			272			148			120
Total nonaccrual loans	$	43,349		$	43,413		$	45,048		$	21,551		$	28,225

Asset Quality Ratios:
Nonperforming assets to total assets	0.40		%	0.41		%	0.41		%	0.32		%	0.42		%
Nonperforming loans to total loans	0.54		%	0.55		%	0.58		%	0.47		%	0.65		%
Allowance for credit losses on loans to nonperforming loans	231.14		%	221.56		%	206.85		%	241.97		%	178.01		%
Allowance for credit losses on loans to total loans	1.24		%	1.22		%	1.20		%	1.14		%	1.16		%
Net charge-offs (recoveries) to average loans (annualized)	0.01		%	0.01		%	0.30		%	(0.02		%)	0.05		%

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															Six Months Ended
	2023						2022									2023			2022
	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	$	35,175		$	37,148		$	2,052		$	14,286		$	16,437		$	72,323		$	35,094
Add: Provision for credit losses	1,915			3,666			44,793			1,962			2,143			5,581			3,957
Add: Provision for income taxes	7,467			9,913			(218)			3,406			3,702			17,380			7,904
Pre-tax, pre-provision income	$	44,557		$	50,727		$	46,627		$	19,654		$	22,282		$	95,284		$	46,955

Total average assets	$	10,740,138		$	10,882,533		$	10,946,009		$	6,717,886		$	7,019,299		$	10,810,942		$	7,137,721

Pre-tax, pre-provision return on average assets(B)	1.66		%	1.89		%	1.69		%	1.16		%	1.27		%	1.78		%	1.33		%

Pre-tax, pre-provision income	$	44,557		$	50,727		$	46,627		$	19,654		$	22,282		$	95,284		$	46,955
Add: Acquisition and merger-related expenses	2,897			6,165			11,469			10,551			1,667			9,062			2,118
Add: Amortization of intangibles	6,881			6,879			7,051			750			751			13,760			1,502
Less: Purchase accounting accretion	12,572			10,104			8,160			40			77			22,676			170
Less: (Loss) gain on sale of assets	(6)			198			4,025			42			(17)			192			(17)
Adjusted pre-tax, pre-provision income	$	41,769		$	53,469		$	52,962		$	30,873		$	24,640		$	95,238		$	50,422

Adjusted pre-tax, pre-provision return on average assets(B)	1.56		%	1.99		%	1.92		%	1.82		%	1.41		%	1.78		%	1.42		%

Total noninterest expense	$	69,207		$	72,598		$	79,624		$	44,031		$	37,904		$	141,805		$	72,421
Less: Acquisition and merger-related expenses	2,897			6,165			11,469			10,551			1,667			9,062			2,118
Less: Amortization of intangibles	6,881			6,879			7,051			750			751			13,760			1,502
Net interest income	108,281			115,827			115,614			60,690			57,482			224,108			112,654
Less: Purchase accounting accretion	12,572			10,104			8,160			40			77			22,676			170
Total noninterest income	5,483			7,498			10,637			2,995			2,704			12,981			6,722
Less: (Loss) gain on sale of assets	(6)			198			4,025			42			(17)			192			(17)
Adjusted efficiency ratio(A)	58.73%			52.69%			53.57%			51.46%			59.02%			55.54%			57.71%

Total shareholders' equity	$	1,458,680		$	1,446,216		$	1,383,176		$	656,302		$	705,329		$	1,458,680		$	705,329
Less: Goodwill and core deposit intangibles, net	627,065			633,925			640,785			236,048			236,798			627,065			236,798
Tangible shareholders’ equity	$	831,615		$	812,291		$	742,391		$	420,254		$	468,531		$	831,615		$	468,531

Shares outstanding at end of period	53,303			53,296			52,955			28,137			28,586			53,303			28,586

Tangible book value per share	$	15.60		$	15.24		$	14.02		$	14.94		$	16.39		$	15.60		$	16.39

Average shareholders' equity	$	1,458,473		$	1,418,082		$	1,347,938		$	717,436		$	744,126		$	1,438,389		$	774,248
Less: Average goodwill and core deposit intangibles, net	630,854			638,110			658,107			236,399			237,153			634,462			237,537
Average tangible shareholders’ equity	$	827,619		$	779,972		$	689,831		$	481,037		$	506,973		$	803,927		$	536,711

Return on average tangible equity(B)	17.05		%	19.32		%	1.18		%	11.78		%	13.00		%	18.14		%	13.19		%

Total assets	$	10,778,351		$	10,604,718		$	10,900,437		$	6,730,342		$	6,731,764		$	10,778,351		$	6,731,764
Less: Goodwill and core deposit intangibles, net	627,065			633,925			640,785			236,048			236,798			627,065			236,798
Tangible assets	$	10,151,286		$	9,970,793		$	10,259,652		$	6,494,294		$	6,494,966		$	10,151,286		$	6,494,966

Tangible equity to tangible assets	8.19		%	8.15		%	7.24		%	6.47		%	7.21		%	8.19		%	7.21		%

Net interest income (tax equivalent)	$	108,509		$	116,119		$	116,574		$	61,418		$	58,238		$	224,628		$	114,160
Less: Purchase accounting accretion	12,572			10,104			8,160			40			77			22,676			170
Adjusted net interest income (tax equivalent)	$	95,937		$	106,015		$	108,414		$	61,378		$	58,161		$	201,952		$	113,990

Average earning assets	$	9,693,527		$	9,815,803		$	9,815,701		$	6,325,984		$	6,618,005		$	9,754,326		$	6,745,150
Net interest margin (tax equivalent) excluding PAA	3.97		%	4.38		%	4.38		%	3.85		%	3.52		%	4.18		%	3.41		%

(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.

Second Quarter 2023 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 merger of equals (the “Merger”) between Allegiance Bancshares, Inc. and CBTX, Inc. 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; adjusted pre-tax, pre-provision income; adjusted pre-tax, pre-provision ROAA; adjusted efficiency ratio; 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. Stellar Bancorp, Inc. - Snapshot Combination of the Houston region’s two largest regionally-focused banks  Valuable franchise in one of the best markets in the U.S.  Strong core earnings power and capital position  Principal banking subsidiary renamed Stellar Bank upon successful system conversion in February June 30, 2023 March 31, 2023 Total assets 10,778$ 10,605$ Total loans 8,069 7,886 Total deposits 8,766 8,739 Total loans to total deposits 92.04% 90.24% Equity to assets 13.53% 13.64% Tangible equity to tangible assets (1) 8.19% 8.15% (Dollars in millions)  Combination delivers scale, growth opportunities, and talent depth  Merger-of-equals between CBTX, Inc. and Allegiance Bancshares, Inc. became effective October 1, 2022 (NYSE: STEL)

Unparalleled Focus on Houston Region Total Assets Houston Region(1) Percent of Company Name ($B) Deposits ($B) Deposits (%) JPMorgan $3,841 $188.0 7.6% Wells Fargo 1,881 34.3 2.4% BofA 3,112 29.7 1.5% Zions 87.8 14.1 17.8% PNC 541 11.9 2.7% Stellar 11.1 9.5 98.1% Frost 51.8 8.4 18.4% Capital One 440 8.0 2.6% Cadence 47.7 7.6 18.9% Prosperity 37.4 6.8 22.6% Allegiance 6.7 5.9 100.0% Woodforest 9.6 5.9 70.4% Comerica 86.9 3.9 5.1% CBTX 4.3 3.6 95.1% Texas Capital 32.3 2.9 11.3% Truist 545 2.9 0.7% 4 Houston Region Market Share(1) Deposits ($B) $34.3 $29.7 $14.1 $11.9 $9.5 $8.4 $8.0 $7.6 $6.8 $5.9 $5.9 $3.9 $3.6 $2.9 $2.9 JPMorgan Wells Fargo BofA Zions PNC Stellar Frost Capital One Cadence Prosperity Allegiance Woodforest Comerica CBTX Texas Capital Truist $188.0 Stellar Allegianc CBT Note: Deposit market share based on FDIC data as of June 30, 2022; Stellar deposits in the Houston Region are combined deposits as of June 30, 2022. (1) Houston Region defined as the Houston-The Woodlands-Sugar Land and Beaumont-Port Arthur MSAs. Source: S&P Capital IQ Pro; Excludes non-retail branches.

5 Second Quarter Financial 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) Adjusted results exclude acquisition and merger-related expenses, core deposit intangible amortization, purchase accounting adjustments and gains and losses on the sale of assets. (3) Annualized (4) Represents total noninterest expense divided by the sum of net interest income and noninterest income, excluding gains and losses on the sale of assets.  Reported second quarter 2023 net income of $35.2 million, or $0.66 per diluted share, as compared to net income of $37.1 million, or $0.70 per share, for the first quarter 2023. The second quarter and first quarter 2023 results reflect significant nonrecurring items related to the Merger.  Core Earnings Power: Return on average assets (“ROAA”) of 1.31% and pre-tax, pre-provision (“PTPP”) ROAA of 1.66%. (1)(4)  Adjusted for merger and nonrecurring adjustments, PTPP ROAA would have been 1.56%. (1)(2)(4)  Net Interest Margin (“NIM”): 4.49% and NIM excluding purchase accounting adjustments (“PAA”) of 3.97%. (1)  Core Funding: 42.4% noninterest-bearing deposits, 1.41% cost of deposits and 1.69% cost of funds.  Regulatory Capital Build: Total risk based capital ratio increased to 13.03% at June 30, 2023 from 12.39% at December 31, 2022 and Tier 1 leverage ratio increased to 9.51% at June 30, 2023 from 8.55% at December 31, 2022. Q2 2023 Q1 2023 Actual Adjusted(1) Adjusted(1) Net interest margin (tax equivalent)(3) 4.49% 3.97% 4.80% 4.38% Pre-tax, pre-provision income 44,557$ (1) 41,769$ (2) 50,727$ (1) 53,469$ (2) Pre-tax, pre-provision ROAA (3) 1.66% (1) 1.56% (2) 1.89% (1) 1.99% (2) Efficiency ratio(4) 60.83% 58.73% (2) 58.96% 52.69% (2) Actual (Dollars in thousands)

Second Quarter Deposit Summary 6 Deposit Mix Deposits (in millions) Maintaining Discipline Navigating Competitive Deposit Market As of June 30, 2023: • Retained favorable mix: 42.4% noninterest-bearing deposits • Estimated uninsured deposits, net of collateralized municipal deposits: 43.5% • Average account size of $86 thousand, excluding municipal deposits • 92.0% loan to deposit ratio • Brokered deposits increased from $203.4 million to $537.8 million from March 31, 2023 to June 30, 2023 . (1) Q2 2023 Q1 2023 Noninterest-bearing ("NIB") 3,713,536$ 3,877,859$ Interest-bearing demand ("IB") 1,437,509 1,394,244 Money market and savings ("Sav & MMDA") 2,174,073 2,401,840 Certificates and other time ("CDs") 1,441,251 1,064,932 Total deposits 8,766,369$ 8,738,875$ Cost of deposits 1.41% 0.94% Cost of interest-bearing deposits 2.52% 1.73% (Dollars in thousands) NIB 42.4% IB Demand 16.4% MMDA & Sav. 24.8% CD's 16.4%

Second Quarter 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 Quality Loan Portfolio • Commercial Real Estate (“CRE”): 45.8% of CRE portfolio was owner-occupied (“OO”) and the average funded loan size was approximately $1.1 million • Construction & Development (“C&D”): $1.4 billion portfolio with $311.2 million, or 21.5%, 1-4 family, $197.2 million, or 13.6%, was owner-occupied and the average funded loan size was approximately $844 thousand (1) (1) Average Yield / Rate Excl. PAA(1) Average Yield / Rate Excl. PAA(1) Interest-Earning Assets: Loans 7,980,856$ 133,931$ 6.73% 6.10% 7,847,011$ 125,729$ 6.50% 5.98% Securities 1,502,949 10,162 2.71% 1,604,011 10,915 2.76% Deposits in other financial institutions 209,722 2,865 5.48% 364,781 3,771 4.19% Total interest-earning assets 9,693,527$ 146,958$ 6.08% 5.56% 9,815,803$ 140,415$ 5.80% 5.38% (Dollars in thousands) Q2 2023 Q1 2023 Average Outstanding Balance Interest Earned / Interest Paid Average Outstanding Balance Interest Earned / Interest Paid 1-4 Fam. 12.5% C&D 17.9% Multi. 5.3% CRE 21.8% OO CRE 22.9% C&I 19.0% Other 0.6%

Second Quarter Asset Quality Summary 8 Nonperforming Loans by Type (1) Combined represents the simple addition of legacy balances for 2022; estimated. Nonperforming assets decreased and net charge-offs were minimal in Q2 2023 Allowance for credit losses on loans: • As of June 30, 2023, was $100.2 million, or 1.24% of total loans compared to $96.2 million, or 1.22% of total loans as of March 31, 2023 Allowance for credit losses on loans to nonperforming loans: • As of June 30, 2023, was 231.14% compared to 221.56% as of March 31, 2023 Nonaccrual Loans with No Related Allowance Nonaccrual Loans with Related Allowance Total Nonaccrual Loans Commercial and industrial 1,487$ 21,313$ 22,800$ Paycheck protection program (PPP) 168 — 168 Commercial real estate (including multi-family residential) 6,983 1,238 8,221 Commercial real estate construction and land development 388 — 388 1-4 family residential (including home equity) 7,300 3,580 10,880 Residential construction 665 — 665 Consumer and other 60 167 227 17,051$ 26,298$ 43,349$ (Dollars in thousands) Q2 2023 Q1 2023 Total nonperforming loans 43,349$ 43,413$ Nonperforming loans to total loans 0.54% 0.55% Total nonperforming assets 43,349$ 43,537$ Nonperforming assets to total assets 0.40% 0.41% Net charge-offs 236$ 192$ Net charge-offs to average loans (annualized) 0.01% 0.01% (Dollars in thousands) C&I 52.6% CRE 19.0% PPP 0.4% 1-4 Family 25.1% Other 2.9%

Regulatory Capital Ratios 9 (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. Year-to-date regulatory capital ratios have grown meaningfully Minimum Required Plus Capital Conservation Buffer Consolidated Capital Ratios Total Capital Ratio (to risk-weighted assets) 13.03% 12.39% 10.50% Common Equity Tier 1 Capital Ratio (to risk-weighted assets) 10.67% 10.04% 7.00% Tier 1 Capital Ratio (to risk-weighted assets) 10.78% 10.15% 8.50% Tier 1 Leverage Ratio (to average tangible assets) 9.51% 8.55% 4.00% Tangible equity to tangible assets (1) 8.19% 7.24% N/A Bank Capital Ratios Total Capital Ratio (to risk-weighted assets) 12.80% 12.02% 10.50% Common Equity Tier 1 Capital Ratio (to risk-weighted assets) 11.22% 10.46% 7.00% Tier 1 Capital Ratio (to risk-weighted assets) 11.22% 10.46% 8.50% Tier 1 Leverage Ratio (to average tangible assets) 9.89% 8.81% 4.00% Q2 2023 Q4 2022

10 Strong Liquidity Profile Stellar is well-positioned to manage through current environment Sources of Liquidity at June 30, 2023 Sources of Liquidity Estimated Uninsured Deposits at June 30, 2023 (1) Brokered deposit capacity is governed by internal policy limits. (Dollars in millions) Cash 304$ Unpledged securities 410 Total on-balance sheet 714 FHLB available capacity 2,901 Discount window available capacity 911 Total immediate available liquidity 4,526 Available brokered deposit capacity(1) 1,233 Total available liquidity 5,759$ Amount (Dollars in millions) Total deposits 8,766$ Estimated uninsured deposits 4,751 Less: collateralized municipal deposits (936) Estimated uninsured, net of collateralized municipal deposits 3,815$ Percent of total deposits 43.5% Amount 118.6% 151.0% Immediate available liquidity coverage of estimated uninsured deposits, net of collateralized deposits Total available liquidity coverage of estimated uninsured deposits, net of collateralized deposits

11 Key Takeaways Excellent core funding profile Merger scale brings strong combined earnings power and franchise value in one of the best markets in the U.S. Key success factor for 2023: Credit performance and risk management Significant financial flexibility Positioned for rapid capital-build

4.8% 4.1% 2.1% Houston MSA Texas USA 34.3 29.7 14.1 11.9 9.5 8.4 8.0 7.6 6.8 JP Morgan Wells Fargo BofA Zions PNC Stellar Frost Capital One Cadence Prosperity Diverse and Strong Markets 12 Houston is Diverse, with Significant Economic Tailwinds Greater Houston Market  Houston is the #1 most diverse city in the U.S. based on socioeconomic factors, according to Wallet Hub  26th largest economy in the world – if ranked as a country − 15th largest population in the U.S – if ranked as a state  Port of Houston is the largest Gulf Coast container port, handling 70% of U.S. Gulf Coast container traffic  Houston is home to the Texas Medical Center, which has 10 million annual patient encounters  Business friendly: #3 among U.S. metro areas in Fortune 500 headquarters (24)  Major business clusters in Beaumont-Port Arthur area include chemical and petroleum manufacturing, materials manufacturing and transportation Top 10 Bank by Deposits in Houston Region(1)(2) ($B) 1) Houston Region defined as the Houston-The Woodlands-Sugar Land and Beaumont-Port Arthur MSAs; Excludes non-retail branches. 2) Stellar’s deposits reflect proforma combined deposits $188 Est. Population Growth ’23-’28 Est. Number of Households Growth ’23-’28 5.0% 4.4% 2.4% Houston MSA Texas USA Population Change (’18-’23) Median Household Income (’23) Significant Deposit Share Houston MSA: 5.5% Texas: 5.4% / U.S: 2.4% Houston MSA: $74,325 Texas: $71,347 / U.S: $73,503 Stellar had over $9.5 billion in deposits in the Houston region(1) Houston HQ Bank Source: S&P Capital IQ Pro, Houston.org, Texas Medical Center and Wallet Hub Note: deposit market share based on FDIC data as of June 30, 2022.

Professional and Business Services 17% Government 14% Education and Health Services 13% Leisure and Hospitality 10% Retail Trade 9% Manufacturing 7% Construction 7% Transportation and Utilities 6% Financial Activities 6% Wholesale Trade 5% Other Services 4% Mining and Logging 2% Information 1% 7.4% 5.9% 5.8% 5.6% 5.5% 5.0% 4.9% 4.9% 4.6% 4.3% 3.1% 2.1% 0.6% (0.5)% 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 Diversified and Growing Economy 13 1) Data is preliminary as of February 2023, from the U.S. Bureau of Labor Statistics Houston vs. U.S. Job Change by Industry (Feb ‘22 – Feb. ‘23)(1) Diversified Economy by Job Sector(1) Commentary  While Houston remains the Energy Capital of the World, its economy and employment has become much more diversified  Houston's largest job sector, professional and business services, has grown at a significantly faster rate than the U.S.  Houston has the second highest concentration of Fortune 100 companies in the U.S. United States Houston MSA

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’s Resilience and Growth 14  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 870 thousand jobs since 2007 P o p u la tio n (M ) O il P ri ce D ec li n e G re a t R ec es si o n Ik e H a rv ey C O V ID -1 9 E m p lo y m e n t (M ) Employment Population1) Data is preliminary as of February 2023, from the U.S. Bureau of Labor Statistics, Texas Workforce Commission

302,570 (300,000) (200,000) (100,000) 0 100,000 200,000 300,000 400,000 H o u st o n D a ll a s N ew Y o rk A tl a n ta P h o en ix M ia m i T a m p a S ea tt le R iv er si d e B o st o n D en v er W a sh in g to n S a n F ra n ci sc o M in n ea p o li s P h il a d el p h ia S a n D ie g o B a lt im o re D et ro it L o s A n g el es C h ic a g o Houston’s Growth Projected to Continue 15 Source: S&P Capital IQ Pro as of June 30, 2022; Oxford Economics, December 2022, CBRE Research. 2010-2023 Population Change (%) Houston has the highest projected net migration 20 most populated metros 5.20% 1.35% 0.46% 24.61% 24.45% 19.57% 8.34% 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 growth is not expected to stop any time soon either, as it is projected to see the largest net migration compared to the top 30 most populated metros • The continued growth of the Houston metro will strengthen and diversify the greater economy, benefiting the businesses and constituents Houston is projected to add over 302,000 people by net migration in the next 5 years – a 60,500/year average

$92,662 $86,611 $83,193 $81,625 $74,325 $71,347 $73,503 New York MSA Los Angeles MSA Chicago MSA Dallas MSA Houston MSA Texas U.S. $787,500 $978,000 $335,000 $385,000 $330,000 $341,700 $400,528 New York MSA Los Angeles MSA Chicago MSA Dallas MSA Houston MSA Texas U.S. 8.5x 11.3x 4.0x 4.7x 4.4x 4.8x 5.4x New York MSA Los Angeles MSA Chicago MSA Dallas MSA Houston MSA Texas U.S. Housing Market and Cost of Living 16 • Cost of living in Houston is 8.3% less than that of the U.S. market average while the median household income is above the U.S. median • Houston is #2 in U.S. annual new home starts and closing, only behind Dallas 2 0 2 3 M e d ia n H o u s e h o ld I n c o m e 2 0 2 3 M e d ia n H o m e P r ic e H H I t o M e d ia n H o m e P r ic e R a ti o

Appendix: Non-GAAP Reconciliation(1) 17 (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) Annualized. Net income $ 35,175 $ 37,148 (+) Provision for credit losses 1,915 3,666 (+) Provision for income taxes 7,467 9,913 Pre-tax, pre-provision Income $ 44,557 $ 50,727 Total average assets $ 10,740,138 $ 10,882,533 Pre-tax, pre-provision return on average assets (2) 1.66% 1.89% Pre-tax, pre-provision income $ 44,557 $ 50,727 (+) Acquisition and merger-related expenses 2,897 6,165 (+) Amortization of intangibles 6,881 6,879 (-) Purchase accounting accretion 12,572 10,104 (-) (Loss) gain on sale of assets (6) 198 Adjusted pre-tax, pre-provision net income $ 41,769 $ 53,469 Adjusted pre-tax, pre-provision return on average assets (2) 1.56% 1.99% Total noninterest expense $ 69,207 $ 72,598 (+) Acquisition and merger-related expenses 2,897 6,165 (+) Amortization of intangibles 6,881 6,879 Net interest income 108,281 115,827 (-) Purchase accounting accretion 12,572 10,104 Total noninterest income 5,483 7,498 (-) (Loss) gain on sale of assets (6) 198 Adjusted efficiency ratio 58.73% 52.69% Q2 2023 Q1 2023 (Dollars in thousands) Total shareholders' equity $ 1,458,680 $ 1,446,216 (-) Goodw ill and core deposit intangibles, net 627,065 633,925 Tangible shareholders' equity $ 831,615 $ 812,291 Total assets $ 10,778,351 $ 10,604,718 (-) Goodw ill and core deposit intangibles, net 627,065 633,925 Tangible assets $ 10,151,286 $ 9,970,793 Tangible equity to tangible assets 8.19% 8.15% Net interest income (tax equivalent) $ 108,509 $ 116,119 (-) Purchase accounting accretion 12,572 10,104 Adjusted net interest income (tax equivalent) $ 95,937 $ 106,015 Average earning assets $ 9,693,527 $ 9,815,803 Net interest margin (tax equivalent)(2) 4.49% 4.80% Net interest margin (tax equivalent) excluding PAA (2) 3.97% 4.38% Interest on loans, as reported $ 133,931 $ 125,729 (-) Purchase accounting accretion (loans) 12,572 10,104 Interest on loans w ithout loan discount accretion $ 121,359 $ 115,625 Average loans $ 7,980,856 $ 7,847,011 Loan yield, as reported 6.73% 6.50% Loan yield, w ithout discount accretion 6.10% 5.98% Q2 2023 Q1 2023 (Dollars in thousands)

18 NYSE: STEL

Cover	Jul. 28, 2023
Cover [Abstract]
Document Type	8-K
Amendment Flag	false
Document Period End Date	Jul. 28, 2023
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