REGULATORY CAPITAL MATTERS

6 Months Ended

Jun. 30, 2023

Regulatory Capital Matters [Abstract]

REGULATORY CAPITAL MATTERS

REGULATORY CAPITAL MATTERSThe Company and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies. Capital adequacy guidelines, and for banks, prompt corrective action regulations, involve quantitative measures of assets, liabilities and certain off balance sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by regulators about components, risk weightings and other factors. Failure to meet minimum capital requirements can cause regulators to initiate actions that, if undertaken, could have a direct material effect on the Company’s consolidated financial statements. The final rules implementing Basel Committee on Banking Supervision's capital guideline for U.S.

Banks (Basel III Rules) were fully phased in when the capital conservation buffer reached 2.5%. Management believes as of June 30, 2023 and December 31, 2022, the Company and the Bank met all capital adequacy requirements to which they were then subject.

Prompt corrective action regulations provide five classifications: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized, although these terms are not used to represent overall financial condition. If less than well capitalized, regulatory approval is required to accept brokered deposits. If undercapitalized, capital distributions are limited, as is asset growth and expansion, and capital restoration plans are required.

The following is a summary of the Company’s and the Bank’s actual and required capital ratios as of June 30, 2023 and December 31, 2022:

	Actual				Minimum Required for Capital Adequacy Purposes				Minimum Required Plus Capital Conservation Buffer				To Be Categorized As Well-Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio		Amount		Ratio		Amount		Ratio		Amount		Ratio
	(Dollars in thousands)
STELLAR BANCORP, INC.
(Consolidated)
As of June 30, 2023
Total Capital (to risk-weighted     assets)	$	1,175,829	13.03	%	$	722,193	8.00	%	$	947,878	10.50	%	N/A		N/A
Common Equity Tier 1 Capital (to     risk-weighted assets)	963,620		10.67	%	406,234		4.50	%	631,919		7.00	%	N/A		N/A
Tier 1 Capital (to risk-weighted     assets)	973,518		10.78	%	541,645		6.00	%	767,330		8.50	%	N/A		N/A
Tier 1 Leverage (to average tangible     assets)	973,518		9.51	%	409,420		4.00	%	409,420		4.00	%	N/A		N/A
As of December 31, 2022
Total Capital (to risk-weighted     assets)	$	1,092,618	12.39	%	$	705,765	8.00	%	$	926,317	10.50	%	N/A		N/A
Common Equity Tier 1 Capital (to     risk-weighted assets)	885,652		10.04	%	396,993		4.50	%	617,545		7.00	%	N/A		N/A
Tier 1 Capital (to risk-weighted     assets)	895,520		10.15	%	529,324		6.00	%	749,876		8.50	%	N/A		N/A
Tier 1 Leverage (to average tangible     assets)	895,520		8.55	%	418,720		4.00	%	418,720		4.00	%	N/A		N/A
STELLAR BANK
As of June 30, 2023
Total Capital (to risk-weighted     assets)	$	1,153,970	12.80	%	$	721,471	8.00	%	$	946,931	10.50	%	$	901,839	10.00	%
Common Equity Tier 1 Capital (to     risk-weighted assets)	1,011,659		11.22	%	405,827		4.50	%	631,287		7.00	%	586,195		6.50	%
Tier 1 Capital (to risk-weighted     assets)	1,011,659		11.22	%	541,103		6.00	%	766,563		8.50	%	721,471		8.00	%
Tier 1 Leverage (to average tangible     assets)	1,011,659		9.89	%	409,051		4.00	%	409,051		4.00	%	511,313		5.00	%
As of December 31, 2022
Total Capital (to risk-weighted     assets)	$	1,059,313	12.02	%	$	705,120	8.00	%	$	925,470	10.50	%	$	881,400	10.00	%
Common Equity Tier 1 Capital (to     risk-weighted assets)	921,714		10.46	%	396,630		4.50	%	616,980		7.00	%	572,910		6.50	%
Tier 1 Capital (to risk-weighted     assets)	921,714		10.46	%	528,840		6.00	%	749,190		8.50	%	705,120		8.00	%
Tier 1 Leverage (to average tangible     assets)	921,714		8.81	%	418,388		4.00	%	418,388		4.00	%	522,984		5.00	%