REGULATORY CAPITAL MATTERS

12 Months Ended

Dec. 31, 2023

Regulatory Capital Requirements under Banking Regulations [Abstract]

REGULATORY CAPITAL MATTERS

REGULATORY CAPITAL MATTERS

The 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 initiate actions by regulators that, if undertaken, could have a direct material effect on the Company’s consolidated financial statements. Management believes as of December 31, 2023 and 2022, the Company and the Bank met all capital adequacy requirements to which they were 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. At year-end 2023 and 2022, the most recent regulatory notifications categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. There are no conditions or events since that notification that management believes have changed the institution’s category.

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

	Actual				Minimum Required for Capital Adequacy Purposes				Minimum Required Plus Capital Conservation Buffer				To Be Categorize d 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 December 31, 2023
Total Capital (to risk weighted assets)	$	1,221,060	14.02	%	$	696,529	8.00	%	$	914,195	10.50	%	N/A		N/A
Common Equity Tier 1 Capital (to risk weighted assets)	1,025,076		11.77	%	391,798		4.50	%	604,463		7.00	%	N/A		N/A
Tier 1 Capital (to risk weighted assets)	1,034,974		11.89	%	522,397		6.00	%	740,062		8.50	%	N/A		N/A
Tier 1 Capital (to average tangible assets)	1,034,974		10.18	%	406,859		4.00	%	406,859		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 Capital (to average tangible assets)	895,520		8.55	%	418,720		4.00	%	418,720		4.00	%	N/A		N/A
STELLAR BANK
As of December 31, 2023
Total Capital (to risk weighted assets)	$	1,186,710	13.65	%	$	695,746	8.00	%	$	913,167	10.50	%	$	869,683	10.00	%
Common Equity Tier 1 Capital (to risk weighted assets)	1,060,624		12.20	%	391,357		4.50	%	608,778		7.00	%	565,294		6.50	%
Tier 1 Capital (to risk weighted assets)	1,060,624		12.20	%	521,810		6.00	%	739,231		8.50	%	695,746		8.00	%
Tier 1 Capital (to average tangible assets)	1,060,624		10.44	%	406,453		4.00	%	406,453		4.00	%	508,066		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 Capital (to average tangible assets)	921,714		8.81	%	418,388		4.00	%	418,388		4.00	%	522,984		5.00	%

Dividend Restrictions

The Company’s principal source of funds for dividend payments is dividends received from the Bank. Banking regulations limit the amount of dividends that may be paid without prior approval of regulatory agencies. In addition, the Company’s credit agreement with another financial institution also limits its ability to pay dividends. Under applicable banking regulations, the amount of dividends that may be paid by the Bank in any calendar year is limited to the current year’s net profits combined with the retained net profits of the preceding two years, subject to the capital requirements described above.