Stellar Bancorp, Inc. Reports First Quarter 2026 Results

Stellar Bancorp, Inc. Reports First Quarter 2026 Results HOUSTON--( BUSINESS WIRE)--Stellar Bancorp, Inc. (the “Company” or “Stellar”) (NYSE: STEL) today reported net income of $27.0 million, or diluted earnings per share of $0.53, for the first quarter of 2026, compared to net income of $26.1 million, or diluted earnings per share of $0.51, for the fourth quarter of 2025.

“We are pleased to announce Stellar Bancorp’s first quarter results, building on the momentum that began in the second half of last year,” said Robert R. Franklin, Jr., Chief Executive Officer of Stellar Bancorp, Inc. “During the quarter, we grew our loan portfolio and expanded our net interest margin, driving improved core earnings for our shareholders. These results underscore the strength of our franchise and provide a strong foundation as we move forward with our proposed combination with Prosperity Bancshares.”

“We have received the required regulatory approvals and have scheduled a special meeting of shareholders for May 27, 2026 to consider the proposed transaction,” Franklin added. “Integration planning and consolidation discussions are progressing, and we believe the combination positions us to create a Texas banking platform with scale, enhanced capabilities and long‑term value. Our markets remain resilient, and we are optimistic about the opportunities ahead,” Franklin concluded.

Financial Highlights

Three Months Ended

2026

2025

March 31

December 31

September 30

June 30

March 31

(Dollars in thousands)

Net interest income

105,931

103,383

100,644

98,335

99,258

Pre-tax, pre-provision income (1)

35,877

36,733

32,488

34,122

34,597

Acquisition and merger-related expense

3,307

—

Adjusted pre-tax, pre-provision income (1)

39,184

36,733

32,488

34,122

34,597

Net income

26,966

26,148

25,670

26,352

24,702

Acquisition and merger-related expense, net of tax

2,613

—

Adjusted net income (1)

29,579

26,148

25,670

26,352

24,702

____________

(1) Refer to the calculation of this non-GAAP financial measure on pages 11 and 12 of this earnings release.

Three Months Ended

2026

2025

March 31

December 31

September 30

June 30

March 31

(Dollars in thousands, except per share data)

Earnings per share, diluted

0.53

0.51

0.50

0.51

0.46

Adjusted earnings per share, diluted (1)

0.58

0.51

0.50

0.51

0.46

Net interest margin (tax equivalent)

4.24

4.21

4.20

4.18

4.20

Net interest margin (tax equivalent) excluding PAA (1)

4.10

4.06

4.00

3.95

3.97

Loans held for investment

7,587,952

7,300,591

7,167,857

7,287,347

7,283,133

Merger Agreement with Prosperity Bancshares, Inc.

On January 27, 2026, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Prosperity Bancshares, Inc., a Texas corporation (“Prosperity”). The Merger Agreement provides that, upon the terms and subject to the conditions set forth therein, the Company will merge with and into Prosperity (the “Merger”), with Prosperity continuing as the surviving corporation in the Merger. Immediately following the Merger, Stellar Bank will merge with and into Prosperity’s wholly owned banking subsidiary, Prosperity Bank (the “Bank Merger”). Prosperity Bank will continue as the surviving bank in the Bank Merger. Upon the terms and subject to the conditions set forth in the Merger Agreement, at the effective time of the Merger (the “Effective Time”), each share of common stock, par value $0.01 per share, of the Company (“Stellar Common Stock”) outstanding immediately prior to the Effective Time, other than certain shares held by Prosperity or the Company and shares held by a holder of Stellar Common Stock who has properly exercised applicable dissenters’ rights in respect of such share, will be converted into the right to receive (i) 0.3803 shares of common stock, par value $1.00 per share, of Prosperity and (ii) an amount in cash equal to $11.36. On April 22, 2026, the Company and Prosperity announced the receipt of all regulatory approvals necessary to complete the merger. The closing of the Merger is expected to occur on or about July 1, 2026, subject to receipt of approval of the Company’s shareholders and satisfaction of customary closing conditions.

First Quarter 2026 Results

Net interest income in the first quarter of 2026 increased $2.5 million, or 2.5%, to $105.9 million from $103.4 million for the fourth quarter of 2025. The net interest margin on a tax equivalent basis increased to 4.24% for the first quarter of 2026 from 4.21% for the fourth quarter of 2025. The increase in net interest income from the prior quarter was primarily due to the increase in average securities, as a result of short-term investments made to support public funds seasonality during the quarter, and the yield on securities. Net interest income for the first quarter of 2026 benefited from $3.6 million of income from PAA compared to $3.8 million in the fourth quarter of 2025. Excluding PAA, net interest income (tax equivalent) for the first quarter of 2026 would have been $102.5 million (1) and the tax equivalent net interest margin would have been 4.10% (1).

Noninterest income for the first quarter of 2026 was $5.1 million, a decrease of $398 thousand, or 7.2%, compared to $5.5 million for the fourth quarter of 2025. Noninterest income decreased in the first quarter of 2026 compared to the fourth quarter of 2025 primarily due to a death benefit on bank-owned life insurance received during the fourth quarter of 2025.

Noninterest expense for the first quarter of 2026 increased $3.0 million, or 4.2%, to $75.2 million compared to $72.2 million for the fourth quarter of 2025. The increase in noninterest expense during the first quarter of 2026 compared to the fourth quarter of 2025 was primarily due to acquisition and merger-related expenses of $3.3 million related to the pending Merger with Prosperity.

The efficiency ratio was 63.27% (1) for the first quarter of 2026 compared to 61.64% (1) for the fourth quarter of 2025. When adjusted for acquisition and merger-related expenses, the efficiency ratio for the first quarter of 2026 was 60.29% (1). Annualized returns on average assets, average equity and average tangible equity were 0.98%, 6.51% and 11.23% (1) for the first quarter of 2026, respectively, compared to 0.97%, 6.23% and 10.90% (1) for the fourth quarter of 2025, respectively. When adjusted for acquisition and merger-related expenses, annualized returns on average assets, average equity and average tangible equity were 1.08% (1), 7.14% (1) and 12.18% (1) for the first quarter of 2026, respectively.

____________

(1) Refer to the calculation of this non-GAAP financial measure on pages 11 and 12 of this earnings release.

Financial Condition

Total assets at March 31, 2026 were $10.89 billion, an increase of $82.8 million compared to $10.81 billion at December 31, 2025. The increase in total assets was largely due to an increase in loans and interest-bearing deposits at other financial institutions partially offset by a decrease in securities.

Total loans at March 31, 2026 increased $287.4 million to $7.59 billion compared to $7.30 billion at December 31, 2025. At March 31, 2026, the remaining balance of the PAA on loans was $50.7 million.

Total deposits at March 31, 2026 decreased $39.5 million to $8.98 billion compared to $9.02 billion at December 31, 2025 primarily due to the decrease in noninterest-bearing deposits.

Asset Quality

Nonperforming assets totaled $70.1 million, or 0.64% of total assets, at March 31, 2026, compared to $60.0 million, or 0.56% of total assets, at December 31, 2025. The allowance for credit losses on loans as a percentage of total loans was 1.13% at March 31, 2026 compared to 1.15% at December 31, 2025.

The provision for credit losses was $2.5 million for the first quarter of 2026 compared to $5.1 million for the fourth quarter of 2025. Net charge-offs for the first quarter of 2026 were $1.4 million, or 0.07% (annualized) of average loans, compared to net charge-offs of $71 thousand for the fourth quarter of 2025.

GAAP Reconciliation of Non-GAAP Financial Measures

Stellar’s management uses certain non-GAAP financial measures to evaluate its performance. Please refer to the GAAP Reconciliation and

Management’s Explanation of Non-GAAP Financial Measures on pages 11 and 12 of this earnings release for a reconciliation of these non-GAAP financial measures.

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 Houston, Dallas, Beaumont and surrounding communities in Texas.

Forward-Looking Statements

This press release contains statements regarding the proposed transaction between Prosperity and Stellar; future financial and operating results; benefits and synergies of the proposed transaction; future opportunities for Prosperity; the issuance of common stock of Prosperity contemplated by the Merger Agreement; the expected timing of the closing of the proposed transaction contemplated by the Merger Agreement; the ability of the parties to complete the proposed transaction considering the various closing conditions and any other statements about future expectations that constitute forward-looking statements within the meaning of the federal securities laws, including the meaning of the Private Securities Litigation Reform Act of 1995, as amended, Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended. From time to time, oral or written forward-looking statements may also be included in other information released to the public. Such forward-looking statements are typically, but not exclusively, identified by the use in the statements of words or phrases such as “aim,” “anticipate,” “believe,” “estimate,” “expect,” “goal,” “guidance,” “intend,” “is anticipated,” “is expected,” “is intended,” “objective,” “plan,” “projected,” “projection,” “will affect,” “will be,” “will continue,” “will decrease,” “will grow,” “will impact,” “will increase,” “will incur,” “will reduce,” “will remain,” “will result,” “would be,” variations of such words or phrases (including where the word “could,” “may,” or “would” is used rather than the word “will” in a phrase) and similar words and phrases indicating that the statement addresses some future result, occurrence, plan or objective . Forward-looking statements include all statements other than statements of historical fact, including forecasts or trends, and are based on current expectations, assumptions, estimates, and projections about Prosperity, Stellar and their respective subsidiaries or related to the proposed transaction between Prosperity and Stellar and are subject to significant risks and uncertainties that could cause actual results to differ materially from the results expressed in such statements.

These forward-looking statements may include information about Prosperity’s and Stellar’s possible or assumed future economic performance or future results of operations, including future revenues, income, expenses, provision for loan losses, provision for taxes, effective tax rate, earnings per share and cash flows and Prosperity’s and Stellar’s future capital expenditures and dividends, future financial condition and changes therein, including changes in Prosperity’s and Stellar’s loan portfolio and allowance for loan losses, future capital structure or changes therein, as well as the plans and objectives of management for Prosperity’s and Stellar’s future operations, future or proposed acquisitions, the future or expected effect of acquisitions on Prosperity’s and Stellar’s operations, results of operations, financial condition, and future economic performance, statements about the anticipated benefits of the proposed transaction, and statements about the assumptions underlying any such statement.

These forward-looking statements are not guarantees of future performance and are based on expectations and assumptions Prosperity and Stellar currently believe to be valid. Because forward-looking statements relate to future results and occurrences, many of which are outside of the control of Prosperity and Stellar, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Many possible events or factors could adversely affect the future financial results and performance of Prosperity, Stellar or the combined company and could cause those results or performance to differ materially from those expressed in or implied by the forward-looking statements. Such risks and uncertainties include, among others: (1) the risk that the cost savings and synergies from the proposed transaction may not be fully realized or may take longer than anticipated to be realized, (2) disruption to Prosperity’s and Stellar’s businesses as a result of the announcements and pendency of the proposed transaction, (3) the risk that the integration of Stellar’s businesses and operations into Prosperity will be materially delayed or will be more costly or difficult than expected, or that Prosperity is otherwise unable to successfully integrate Stellar’s business into its own, including as a result of unexpected factors or events, (4) the failure to obtain the necessary approval by the shareholders of Stellar, (5) reputational risk and the reaction of each company’s customers, suppliers, employees or other business partners to the proposed transaction, (6) the failure of the closing conditions in the Merger Agreement to be satisfied, or any unexpected delay in closing the proposed transaction or the occurrence of any event, change or other circumstances that could give rise to the termination of the Merger Agreement, (7) the dilution caused by the issuances of additional shares of Prosperity’s common stock in the proposed transaction, (8) the possibility that the proposed transaction may be more expensive to complete than anticipated, including as a result of unexpected factors or events, (9) the outcome of any legal or regulatory proceedings that may be currently pending or later instituted against Prosperity before or after the proposed transaction, or against Stellar, (10) diversion of management’s attention from ongoing business operations and (11) general competitive, economic, political and market conditions and other factors that may affect future results of Prosperity and Stellar. Prosperity and Stellar disclaim any obligation to update such factors or to publicly announce the results of any revisions to any of the forward-looking statements included herein to reflect future events or developments. These and various other risks, uncertainties, assumptions, and factors are discussed in the Annual Reports on Form 10-K for the year ended December 31, 2025, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K, filed by Prosperity or Stellar and in other filings made by Prosperity and Stellar with the Securities and Exchange Commission (the “SEC”) from time to time.

Additional Information about the Transaction and Where to Find It

In connection with the proposed transaction, Prosperity has filed with the SEC a registration statement (the “Registration Statement”) on Form S-4 (File No. 333-294882) to register the shares of Prosperity common stock to be issued to the shareholders of Stellar in connection with the proposed transaction. The Registration Statement includes a prospectus of Prosperity and a proxy statement of Stellar included therein (the “proxy statement/prospectus”), which will be sent to the shareholders of Stellar in connection with the proposed transaction. The Registration Statement was declared effective on April 21, 2026, at which time Prosperity filed a final prospectus and Stellar filed a definitive proxy statement. The mailing of the proxy statement/prospectus to Stellar shareholders commenced on or about April 23, 2026. This communication is not a substitute for the Registration Statement, the proxy statement/prospectus or any other document that may be filed by Prosperity or Stellar with the SEC. INVESTORS AND SECURITY HOLDERS ARE URGED TO READ THE REGISTRATION STATEMENT, THE PROXY STATEMENT/PROSPECTUS INCLUDED WITHIN THE REGISTRATION STATEMENT AND ANY OTHER RELEVANT DOCUMENTS FILED WITH THE SEC IN CONNECTION WITH THE PROPOSED TRANSACTION OR INCORPORATED BY REFERENCE INTO THE PROXY STATEMENT/PROSPECTUS, AS WELL AS ANY AMENDMENTS OR SUPPLEMENTS TO THESE DOCUMENTS, CAREFULLY AND IN THEIR ENTIRETY, BECAUSE THEY CONTAIN OR WILL CONTAIN IMPORTANT INFORMATION. Investors and security holders may obtain the Registration Statement and the proxy statement/prospectus and other documents that are filed with the SEC by Prosperity or Stellar, as applicable, free of charge from the SEC’s website at https://www.sec.gov or through the investor relations section of Prosperity’s website at https://www.prosperitybankusa.com/investor-relations/ or Stellar’s website at https://ir.stellar.bank.

Participants in the Solicitation

Prosperity, Stellar and certain of their directors and executive officers and other employees may be deemed to be participants in the solicitation of proxies from Stellar’s shareholders in connection with the proposed transaction. Information about the directors and executive officers of Prosperity and their ownership of Prosperity common stock is contained in the definitive proxy statement for Prosperity’s 2026 annual meeting of shareholders (the “Prosperity Annual Meeting Proxy Statement”), which was filed with the SEC on March 16, 2026, including under the headings “Item 1. Election of Directors,” “Corporate Governance,” “Executive Compensation and Other Matters,” “Item 3. Advisory Vote on Executive Compensation,” and “Beneficial Ownership of Common Stock by Management of the Company and Principal Shareholders.” Information about the directors and executive officers of Stellar and their ownership of Stellar common stock is contained in Amendment No. 1 to the Annual Report on Form 10-K for the year ended December 31, 2025 of Stellar (the “Stellar 10-K/A”), which was filed with the SEC on April 17, 2026. Additional information regarding the persons who may, under the rules of the SEC, be deemed participants in the solicitation of the shareholders of Stellar in connection with the proposed transaction, including a description of their direct or indirect interests, by security holdings or otherwise, is included in the proxy statement/prospectus relating to the proposed transaction filed with the SEC. To the extent holdings of securities by potential participants (or the identity of such participants) have changed since the information printed in the Prosperity Annual Meeting Proxy Statement or the Stellar 10-K/A, such information has been or will be reflected on Statements of Change in Ownership on Forms 3 and 4 filed with the SEC, as applicable. Free copies of the proxy statement/prospectus relating to the proposed transaction and free copies of the other SEC filings to which reference is made in this paragraph may be obtained from the SEC’s website at https://www.sec.gov or through the investor relations section of Prosperity’s website at https://www.prosperitybankusa.com/investor-relations/ or Stellar’s website at https://ir.stellar.bank.

No Offer or Solicitation

This communication is for informational purposes only and is not intended to and does not constitute an offer to subscribe for, buy or sell, or the solicitation of an offer to subscribe for, buy or sell, or an invitation to subscribe for, buy or sell any securities or a solicitation of any vote or approval in any jurisdiction, nor shall there be any sale, issuance or transfer of securities in any jurisdiction in which such offer, invitation, sale or solicitation would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. No offer of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act, and otherwise in accordance with applicable law.

Stellar Bancorp, Inc.

Financial Highlights

(Unaudited)

2026

2025

March 31

December 31

September 30

June 30

March 31

(Dollars in thousands)

ASSETS:

Cash and due from banks

107,736

94,331

99,407

136,060

130,932

Interest-bearing deposits at other financial institutions

441,834

325,122

629,042

442,044

429,643

Total cash and cash equivalents

549,570

419,453

728,449

578,104

560,575

Available for sale securities, at fair value

1,864,710

2,198,459

1,842,268

1,729,684

1,719,371

Loans held for investment

7,587,952

7,300,591

7,167,857

7,287,347

7,283,133

Less: allowance for credit losses on loans

(85,431

)

(83,629

)

(78,924

)

(83,165

)

(83,746

)

Loans, net

7,502,521

7,216,962

7,088,933

7,204,182

7,199,387

Accrued interest receivable

36,589

35,869

34,865

35,537

37,669

Premises and equipment, net

99,861

106,118

107,803

108,615

109,750

Federal Reserve Bank and Federal Home Loan Bank stock

51,105

45,532

45,437

47,099

20,902

Bank-owned life insurance

110,103

109,477

109,358

108,726

108,108

Goodwill

497,318

Core deposit intangibles, net

66,137

71,018

75,929

81,468

87,007

Other assets

111,442

106,388

97,753

102,277

94,800

Total assets

10,889,356

10,806,594

10,628,113

10,493,010

10,434,887

LIABILITIES AND SHAREHOLDERS’ EQUITY

LIABILITIES:

Deposits:

Noninterest-bearing

3,210,579

3,407,865

3,210,948

3,183,693

3,205,619

Interest-bearing

Demand

2,171,968

2,114,997

1,960,857

1,941,156

1,863,752

Money market and savings

2,596,972

2,469,845

2,489,169

2,393,767

2,248,616

Certificates and other time

1,002,491

1,028,759

1,156,489

1,154,998

1,244,726

Total interest-bearing deposits

5,771,431

5,613,601

5,606,515

5,489,921

5,357,094

Total deposits

8,982,010

9,021,466

8,817,463

8,673,614

8,562,713

Accrued interest payable

5,240

5,508

9,429

7,607

9,856

Borrowed funds

135,000

—

69,925

119,923

Subordinated debt

40,256

40,226

70,196

70,165

70,135

Other liabilities

59,085

70,740

77,887

67,865

61,428

Total liabilities

9,221,591

9,137,940

8,974,975

8,889,176

8,824,055

SHAREHOLDERS’ EQUITY:

Common stock

509

512

514

521

Capital surplus

1,170,867

1,174,894

1,182,781

1,185,048

1,202,628

Retained earnings

585,403

566,216

547,717

529,216

510,072

Accumulated other comprehensive loss

(89,014

)

(72,965

)

(77,872

)

(110,944

)

(102,389

)

Total shareholders’ equity

1,667,765

1,668,654

1,653,138

1,603,834

1,610,832

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

10,889,356

10,806,594

10,628,113

10,493,010

10,434,887

Stellar Bancorp, Inc.

Financial Highlights

(Unaudited)

Three Months Ended

2026

2025

March 31

December 31

September 30

June 30

March 31

(Dollars in thousands, except per share data)

INTEREST INCOME:

Loans, including fees

119,783

119,866

122,557

121,814

120,640

Securities:

Taxable

19,623

17,619

16,278

15,293

16,148

Tax-exempt

805

808

810

812

Deposits in other financial institutions

4,884

5,745

5,770

4,782

4,720

Total interest income

145,095

144,038

145,413

142,699

142,320

INTEREST EXPENSE:

Demand, money market and savings deposits

29,644

29,484

32,376

31,097

27,574

Certificates and other time deposits

8,624

10,370

10,920

11,459

13,527

Borrowed funds

149

407

517

Subordinated debt

747

795

1,417

1,401

1,444

Total interest expense

39,164

40,655

44,769

44,364

43,062

NET INTEREST INCOME

105,931

103,383

100,644

98,335

99,258

Provision for credit losses

2,497

5,131

305

1,090

3,632

Net interest income after provision for credit losses

103,434

98,252

100,339

97,245

95,626

NONINTEREST INCOME:

Service charges on deposit accounts

1,635

1,592

1,545

1,561

1,584

(Loss) gain on sale/write-down of assets

(37

)

(171

)

(491

)

(57

)

417

Bank-owned life insurance

626

1,026

632

618

610

Debit card and interchange income

547

583

572

566

520

Other

2,339

2,478

2,728

3,103

2,374

Total noninterest income

5,110

5,508

4,986

5,791

5,505

NONINTEREST EXPENSE:

Salaries and employee benefits

43,931

42,913

43,175

40,927

41,792

Net occupancy and equipment

4,575

4,776

4,518

4,399

3,926

Depreciation

1,971

2,056

2,015

1,992

1,995

Data processing and software amortization

6,073

5,796

5,882

5,620

5,682

Professional fees

886

1,587

1,601

1,287

1,786

Regulatory assessments and FDIC insurance

1,639

1,205

1,688

1,561

1,733

Amortization of intangibles

4,886

4,930

5,554

5,548

Communications

759

872

855

861

847

Advertising

799

1,333

1,425

1,167

782

Acquisition and merger-related expenses

3,307

—

Other

6,338

6,690

6,429

6,642

6,075

Total noninterest expense

75,164

72,158

73,142

70,004

70,166

INCOME BEFORE INCOME TAXES

33,380

31,602

32,183

33,032

30,965

Provision for income taxes

6,414

5,454

6,513

6,680

6,263

NET INCOME

26,966

26,148

25,670

26,352

24,702

EARNINGS PER SHARE

Basic

0.53

0.51

0.50

0.51

0.46

Diluted

0.53

0.51

0.50

0.51

0.46

Stellar Bancorp, Inc.

Financial Highlights

(Unaudited)

Three Months Ended

2026

2025

March 31

December 31

September 30

June 30

March 31

(Dollars and share amounts in thousands, except per share data)

Net income

26,966

26,148

25,670

26,352

24,702

Earnings per share, basic

0.53

0.51

0.50

0.51

0.46

Earnings per share, diluted

0.53

0.51

0.50

0.51

0.46

Dividends per share

0.15

0.14

Return on average assets (A)

0.98

0.97

1.01

0.94

Return on average equity (A)

6.51

6.23

6.30

6.62

6.21

Return on average tangible equity (A)(B)

11.23

10.90

11.45

12.16

11.48

Net interest margin (tax equivalent) (A)(C)

4.24

4.21

4.20

4.18

4.20

Net interest margin (tax equivalent) excluding PAA (A)(B)(C)

4.10

4.06

4.00

3.95

3.97

Efficiency ratio (B)(D)

63.27

61.64

63.69

61.87

61.93

Capital Ratios

Stellar Bancorp, Inc. (Consolidated)

Equity to assets

15.32

15.44

15.55

15.28

15.44

Tangible equity to tangible assets (B)(D)

10.69

10.75

10.74

10.34

10.42

Estimated Total capital ratio (to risk-weighted assets)

15.48

15.73

16.33

15.98

15.97

Estimated Common equity Tier 1 capital (to risk weighted assets)

13.97

14.18

14.43

14.06

14.05

Estimated Tier 1 capital (to risk-weighted assets)

14.09

14.31

14.55

14.18

14.17

Estimated Tier 1 leverage (to average tangible assets)

11.29

11.52

11.60

11.44

11.20

Stellar Bank

Estimated Total capital ratio (to risk-weighted assets)

14.74

15.03

15.45

15.39

15.40

Estimated Common equity Tier 1 capital (to risk-weighted assets)

13.56

13.83

14.27

14.18

14.20

Estimated Tier 1 capital (to risk-weighted assets)

13.56

13.83

14.27

14.18

14.20

Estimated Tier 1 leverage (to average tangible assets)

10.86

11.14

11.37

11.44

11.22

Other Data

Weighted average shares:

Basic

50,829

51,083

51,283

51,529

53,146

Diluted

50,944

51,167

51,356

51,569

53,197

Period end shares outstanding

50,912

50,902

51,228

51,398

52,141

Book value per share

32.76

32.78

32.27

31.20

30.89

Tangible book value per share (B)

21.69

21.62

21.08

19.94

19.69

Employees - full-time equivalents

1,065

1,075

1,065

1,062

1,054

(A)

Interim periods annualized.

(B)

Refer to the calculation of these non-GAAP financial measures on page 11 of this Earnings Release.

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

(D)

The calculation of the efficiency ratio represents total noninterest expense less amortization of core deposits, divided by the sum of net interest income and noninterest income, excluding net gains and losses on the sale/write-down of assets.

Financial Highlights

(Unaudited)

Three Months Ended

March 31, 2026

December 31, 2025

March 31, 2025

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

7,462,404

119,783

6.51

7,198,899

119,866

6.61

7,344,298

120,640

6.66

Securities

2,145,882

20,428

3.86

1,976,112

18,427

3.70

1,817,286

16,960

3.78

Deposits in other financial institutions

530,947

4,884

3.73

578,480

5,745

3.94

430,621

4,720

4.45

Total interest-earning assets

10,139,233

145,095

5.80

9,753,491

144,038

5.86

9,592,205

142,320

6.02

Allowance for credit losses on loans

(83,396

)

(78,995

)

(81,166

)

Noninterest-earning assets

1,087,991

1,070,537

1,100,652

Total assets

11,143,828

10,745,033

10,611,691

Liabilities and Shareholders' Equity

Interest-bearing liabilities:

Interest-bearing demand deposits

2,333,522

13,860

2.41

2,008,416

13,281

2.62

1,911,625

12,392

2.63

Money market and savings deposits

2,594,999

15,784

2.47

2,546,538

16,203

2.52

2,234,571

15,182

2.76

Certificates and other time deposits

1,011,031

8,624

3.46

1,127,248

10,370

3.65

1,296,972

13,527

4.23

Borrowed funds

17,056

149

3.54

327

7.28

45,795

517

4.58

Subordinated debt

40,242

747

7.53

40,211

795

7.84

70,121

1,444

8.35

Total interest-bearing liabilities

5,996,850

39,164

2.65

5,722,740

40,655

2.82

5,559,084

43,062

3.14

Noninterest-bearing liabilities:

Noninterest-bearing demand deposits

3,387,638

3,269,053

3,346,066

Other liabilities

79,940

88,699

92,299

Total liabilities

9,464,428

9,080,492

8,997,449

Shareholders’ equity

1,679,400

1,664,541

1,614,242

Total liabilities and shareholders’ equity

11,143,828

10,745,033

10,611,691

Net interest rate spread

3.15

3.04

2.88

Net interest income and margin

105,931

4.24

103,383

4.21

99,258

4.20

Net interest income and margin (tax equivalent)

106,041

4.24

103,487

4.21

99,353

4.20

Cost of funds

1.69

1.79

1.96

Cost of deposits

1.66

1.77

1.90

Stellar Bancorp, Inc.

Financial Highlights

(Unaudited)

Three Months Ended

2026

2025

March 31

December 31

September 30

June 30

March 31

(Dollars in thousands)

Loan Portfolio:

Commercial and industrial

1,563,421

1,476,559

1,332,795

1,346,744

1,362,266

Real estate:

Commercial real estate (including multi-family residential)

3,844,629

3,766,294

3,733,293

3,840,981

3,854,607

Commercial real estate construction and land development

821,723

720,779

753,381

762,911

721,488

1-4 family residential (including home equity)

1,167,436

1,136,227

1,142,614

1,126,523

1,125,837

Residential construction

102,609

124,653

121,197

137,855

141,283

Consumer and other

88,134

76,079

84,577

72,333

77,652

Total loans held for investment

7,587,952

7,300,591

7,167,857

7,287,347

7,283,133

Deposits:

Noninterest-bearing

3,210,579

3,407,865

3,210,948

3,183,693

3,205,619

Interest-bearing

Demand

2,171,968

2,114,997

1,960,857

1,941,156

1,863,752

Money market and savings

2,596,972

2,469,845

2,489,169

2,393,767

2,248,616

Certificates and other time

1,002,491

1,028,759

1,156,489

1,154,998

1,244,726

Total interest-bearing deposits

5,771,431

5,613,601

5,606,515

5,489,921

5,357,094

Total deposits

8,982,010

9,021,466

8,817,463

8,673,614

8,562,713

Asset Quality:

Nonaccrual loans

60,590

52,548

46,250

50,505

54,518

Accruing loans 90 or more days past due

—

Total nonperforming loans

60,590

52,548

46,250

50,505

54,518

Foreclosed assets

9,489

7,492

7,939

7,652

5,154

Total nonperforming assets

70,079

60,040

54,189

58,157

59,672

Net charge-offs

1,358

3,323

206

163

Nonaccrual loans:

Commercial and industrial

10,488

7,616

5,594

13,395

11,471

Real estate:

Commercial real estate (including multi-family residential)

32,939

29,271

25,156

23,359

26,383

Commercial real estate construction and land development

905

1,838

2,899

3,412

2,027

1-4 family residential (including home equity)

15,920

13,333

12,083

9,965

14,550

Residential construction

292

448

457

176

—

Consumer and other

198

Total nonaccrual loans

60,590

52,548

46,250

50,505

54,518

Asset Quality Ratios:

Nonperforming assets to total assets

0.64

0.56

0.51

0.55

0.57

Nonperforming loans to total loans

0.80

0.72

0.65

0.69

0.75

Allowance for credit losses on loans to nonperforming loans

141.00

159.15

170.65

164.67

153.61

Allowance for credit losses on loans to total loans

1.13

1.15

1.10

1.14

1.15

Net charge-offs to average loans (annualized)

0.07

0.00

0.18

0.01

Stellar Bancorp, Inc.

GAAP Reconciliation and Management’s Explanation of Non-GAAP Financial Measures

(Unaudited)

Stellar’s management uses certain non-GAAP (generally accepted accounting principles) financial measures to evaluate its performance. Stellar believes that these non-GAAP financial measures provide meaningful supplemental information regarding its performance and that management and investors benefit from referring to these non-GAAP financial measures in assessing Stellar’s performance and when planning, forecasting, analyzing and comparing past, present and future periods. Specifically, Stellar reviews pre-tax, pre-provision income, pre-tax pre-provision ROAA, tangible book value per share, return on average tangible equity, tangible equity to tangible assets and net interest margin (tax equivalent) excluding PAA for internal planning and forecasting purposes. Stellar has included in this earnings release information relating to these non-GAAP financial measures for the applicable periods presented. These non-GAAP measures should not be considered in isolation or as a substitute for the most directly comparable or other financial measures calculated in accordance with GAAP. Moreover, the manner in which Stellar calculates the non-GAAP financial measures may differ from that of other companies reporting measures with similar names.

Three Months Ended

2026

2025

March 31

December 31

September 30

June 30

March 31

(Dollars and share amounts in thousands, except per share data)

Net income

26,966

26,148

25,670

26,352

24,702

Add: Provision for credit losses

2,497

5,131

305

1,090

3,632

Add: Provision for income taxes

6,414

5,454

6,513

6,680

6,263

Pre-tax, pre-provision income

35,877

36,733

32,488

34,122

34,597

Average total assets

11,143,828

10,745,033

10,518,865

10,464,157

10,611,691

Pre-tax, pre-provision return on average assets (A)

1.31

1.36

1.23

1.31

1.32

Total shareholders’ equity

1,667,765

1,668,654

1,653,138

1,603,834

1,610,832

Less: Goodwill and core deposit intangibles, net

(563,455

)

(568,336

)

(573,247

)

(578,786

)

(584,325

)

Tangible shareholders’ equity

1,104,310

1,100,318

1,079,891

1,025,048

1,026,507

Shares outstanding at end of period

50,912

50,902

51,228

51,398

52,141

Tangible book value per share

21.69

21.62

21.08

19.94

19.69

Average shareholders’ equity

1,679,400

1,664,541

1,617,511

1,595,540

1,614,242

Less: Average goodwill and core deposit intangibles, net

(565,769

)

(570,721

)

(575,836

)

(581,438

)

(586,895

)

Average tangible shareholders’ equity

1,113,631

1,093,820

1,041,675

1,014,102

1,027,347

Net income

26,966

26,148

25,670

26,352

24,702

Add: Core deposit intangibles amortization, net of tax

3,860

3,895

4,388

4,383

Net income plus core deposit intangibles amortization, net of tax

30,826

30,043

30,058

30,735

29,085

Return on average tangible equity (A)

11.23

10.90

11.45

12.16

11.48

Total assets

10,889,356

10,806,594

10,628,113

10,493,010

10,434,887

Less: Goodwill and core deposit intangibles, net

(563,455

)

(568,336

)

(573,247

)

(578,786

)

(584,325

)

Tangible assets

10,325,901

10,238,258

10,054,866

9,914,224

9,850,562

Tangible equity to tangible assets

10.69

10.75

10.74

10.34

10.42

Net interest income (tax equivalent)

106,041

103,487

100,739

98,427

99,353

Less: Purchase accounting accretion

(3,561

)

(3,781

)

(4,800

)

(5,344

)

(5,397

)

Net interest income (tax equivalent) excluding PAA

102,480

99,706

95,939

93,083

93,956

Average earning assets

10,139,233

9,753,491

9,525,017

9,448,589

9,592,205

Net interest margin (tax equivalent) excluding PAA (A)

4.10

4.06

4.00

3.95

3.97

Noninterest expense

75,164

72,158

73,142

70,004

70,166

Less: Core deposit intangibles amortization

(4,886

)

(4,930

)

(5,554

)

(5,548

)

(5,548

)

Noninterest expense less core deposit amortization

70,278

67,228

67,588

64,456

64,618

Net interest income

105,931

103,383

100,644

98,335

99,258

Noninterest income

5,110

5,508

4,986

5,791

5,505

Less: (Loss) gain on sale of assets

(37

)

(171

)

(491

)

(57

)

417

Adjusted noninterest income

5,147

5,679

5,477

5,848

5,088

Net interest income plus adjusted noninterest income

111,078

109,062

106,121

104,183

104,346

Efficiency ratio

63.27

61.64

63.69

61.87

61.93

(A)

Interim periods annualized.

Three Months Ended

2026

2025

March 31

December 31

September 30

June 30

March 31

(Dollars and share amounts in thousands, except per share data)

Net income

26,966

26,148

25,670

26,352

24,702

Add: Acquisition and merger-related expenses, net of tax

2,613

—

Adjusted net income

29,579

26,148

25,670

26,352

24,702

Weighted average shares, diluted

50,944

51,167

51,356

51,569

53,197

Adjusted earnings per share, diluted

0.58

0.51

0.50

0.51

0.46

Net income

26,966

26,148

25,670

26,352

24,702

Add: Provision for credit losses

2,497

5,131

305

1,090

3,632

Add: Provision for income taxes

6,414

5,454

6,513

6,680

6,263

Pre-tax, pre-provision income

35,877

36,733

32,488

34,122

34,597

Add: Acquisition and merger-related expenses

3,307

—

Adjusted pre-tax, pre-provision net income

39,184

36,733

32,488

34,122

34,597

Average assets

11,143,828

10,745,033

10,518,865

10,464,157

10,611,691

Adjusted pre-tax, pre-provision return on average assets (A)

1.43

1.36

1.23

1.31

1.32

Adjusted net income

29,579

26,148

25,670

26,352

24,702

Average total assets

11,143,828

10,745,033

10,518,865

10,464,157

10,611,691

Adjusted return on average assets (A)

1.08

0.97

1.01

0.94

Adjusted net income

29,579

26,148

25,670

26,352

24,702

Average shareholders’ equity

1,679,400

1,664,541

1,617,511

1,595,540

1,614,242

Adjusted return on average equity (A)

7.14

6.23

6.30

6.62

6.21

Average shareholders’ equity

1,679,400

1,664,541

1,617,511

1,595,540

1,614,242

Less: Average goodwill and core deposit intangibles, net

(565,769

)

(570,721

)

(575,836

)

(581,438

)

(586,895

)

Average tangible shareholders’ equity

1,113,631

1,093,820

1,041,675

1,014,102

1,027,347

Adjusted net income

29,579

26,148

25,670

26,352

24,702

Add: Core deposit intangibles amortization, net of tax

3,860

3,895

4,388

4,383

Adjusted net income plus core deposit intangibles amortization, net of tax

33,439

30,043

30,058

30,735

29,085

Adjusted return on average tangible equity (A)

12.18

10.90

11.45

12.16

11.48

Noninterest expense

75,164

72,158

73,142

70,004

70,166

Less: Core deposit intangibles amortization

(4,886

)

(4,930

)

(5,554

)

(5,548

)

(5,548

)

Noninterest expense less core deposit amortization

70,278

67,228

67,588

64,456

64,618

Less: Acquisition and merger-related expenses

(3,307

)

—

Adjusted noninterest expense

66,971

67,228

67,588

64,456

64,618

Net interest income

105,931

103,383

100,644

98,335

99,258

Noninterest income

5,110

5,508

4,986

5,791

5,505

Less: (Loss) gain on sale of assets

(37

)

(171

)

(491

)

(57

)

417

Adjusted noninterest income

5,147

5,679

5,477

5,848

5,088

Net interest income plus adjusted noninterest income

111,078

109,062

106,121

104,183

104,346

Adjusted efficiency ratio

60.29

61.64

63.69

61.87

61.93

(A)

Interim periods annualized.