Stellar Bancorp, Inc. Reports Fourth Quarter 2022 Results

Stellar Bancorp, Inc.

HOUSTON, Jan. 27, 2023 (GLOBE NEWSWIRE) -- Stellar Bancorp, Inc. (the “Company” or “Stellar”) (NASDAQ: STEL) today reported net income of $2.1 million, or $0.04 earnings per diluted share, for the fourth quarter 2022 and $51.4 million, or $1.47 earnings per diluted share, for the year ended December 31, 2022. The fourth quarter 2022 results for Stellar reflect the merger of equals (the “Merger”) between Allegiance Bancshares, Inc. (“Allegiance”) and CBTX, Inc. (“CBTX”), which became effective on October 1, 2022.

“We are pleased to report our fourth quarter results as a combined institution. Our scale and resources enhance our ability to execute our business strategy focused on delivering exceptional customer service to increase shareholder value while continuing to honor our community values. The integration of our combined talents and expertise benefits our customers, employees, communities and shareholders. We are very grateful for the dedication and hard work of our team coming together and for the continued work as we implement an efficient system conversion in the first quarter of 2023,” said Robert R. Franklin, Jr., Stellar’s Chief Executive Officer.

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

Fourth Quarter 2022 Financial Highlights

• Total assets were $10.90 billion at year-end reflecting combined scale from the Merger.

• Tax equivalent net interest margin was 4.71% for the fourth quarter 2022. The tax equivalent net interest margin, excluding purchase accounting accretion, was 4.38% for the fourth quarter. Refer to the calculation of this non-GAAP financial measure on page 11.

• Net income for the fourth quarter 2022 of $2.1 million and diluted earnings per share of $0.04. Pre-tax, pre-provision income of $46.6 million and adjusted pre-tax, pre-provision income of $53.0 million for the fourth quarter 2022. Refer to the calculation of this non-GAAP financial measure on page 11.

• As a result of the Merger, the Company recorded a $28.2 million provision for credit losses on non-purchased credit deteriorated (“non-PCD”) loans and a $5.0 million provision for unfunded commitments for the Current Expected Credit Loss requirement, along with a $7.6 million allowance for credit losses on purchase credit deteriorated (“PCD”) loans. Acquisition and merger related expenses totaled $11.5 million in the fourth quarter 2022.
  

Merger of Equals

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

The Merger was accounted for as a reverse acquisition using the acquisition method of accounting, with CBTX treated as the legal acquirer and Allegiance treated as the accounting acquirer for financial reporting purposes. Therefore, the historical financial statements of the Company prior to the Merger reflect the historical financial statement balances of Allegiance. In addition, the assets and liabilities of CBTX as of the date of the Merger have been recorded at estimated fair value and added to those of Allegiance. The Company’s valuations of CBTX's assets and liabilities are preliminary and may be refined for up to a year from the date of the Merger. The Merger had a significant impact on all aspects of the Company's financial statements, and as a result, financial results after the Merger may not be comparable to financial results prior to the Merger. Results of operations reflect the combined operations following the Merger for the fourth quarter 2022 and stand-alone Allegiance for all periods prior.

Fourth Quarter 2022 Results

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

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

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

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

Year Ended December 31, 2022 Results

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

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

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

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

Financial Condition

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

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

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

Asset Quality

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

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

Fourth quarter 2022 net charge-offs were $5.7 million, or 0.30% (annualized) of average loans, compared to net charge-offs of $1.4 million, or 0.13% (annualized) of average loans, for the fourth quarter 2021 and net recoveries of $245 thousand, or (0.02)% (annualized) of average loans, for the third quarter 2022. Fourth quarter net charge-offs included $4.6 million of charge-offs on loans sold during the fourth quarter 2022.

GAAP Reconciliation of Non-GAAP Financial Measures

Stellar’s management uses certain non-GAAP financial measures. Please refer to the GAAP Reconciliation and Management’s Explanation of Non-GAAP Financial Measures on pages 11 of this earnings release for a reconciliation of these non-GAAP financial measures.

Conference Call

As previously announced, Stellar’s management team will host a conference call and webcast on Friday, January 27, 2023 at 8:00 a.m. Central Time (9:00 a.m. Eastern Time) to discuss fourth quarter 2022 results. Individuals and investment professionals may register for the conference call at https://register.vevent.com/register/BI70fcd05aee4348f7b0dc18ea083f2b2c to receive the dial-in numbers and unique PIN to access the call. If you need assistance in obtaining a dial-in number, please contact IR@stellarbancorpinc.com. A simultaneous audio-only webcast may be accessed via the Investor Relations section of Stellar’s website at https://ir.stellarbancorpinc.com/events-and-presentations. If you are unable to participate during the live webcast, the webcast will be accessible via the Investor Relations section of Stellar’s website at ir.stellarbancorpinc.com.

About Stellar Bancorp, Inc.

Stellar Bancorp, Inc. is a bank holding company headquartered in Houston, Texas. Stellar’s principal banking subsidiary, created by the merger of Allegiance Bank and CommunityBank of Texas, N.A. and to be renamed Stellar Bank upon system conversion, provides a diversified range of commercial banking services primarily to small- to medium-sized businesses and individual customers across the Houston, Dallas, Beaumont and surrounding communities in Texas.

Investor relations
IR@stellarbancorpinc.com

Forward-Looking Statements

Certain statements in this press release which are not historical in nature are intended to be, and are hereby identified as, “forward-looking statements” for purposes of the safe harbor provided by Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements include, but are not limited to, statements about the benefits of the Merger, including future financial performance and operating results, the Company’s plans, business and growth strategies, objectives, expectations and intentions, and other statements that are not historical facts, including projections of macroeconomic and industry trends, which are inherently unreliable due to the multiple factors that impact economic trends, and any such variations may be material. Forward-looking statements may be identified by terminology such as “may,” “will,” “should,” “could,” “scheduled,” “plans,” “intends,” “projects,” “anticipates,” “expects,” “believes,” “estimates,” “potential,” “would,” or “continue” or negatives of such terms or other comparable terminology.

All forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties and other factors that may cause the actual results, performance or achievements of Stellar to differ materially from any results expressed or implied by such forward-looking statements. Such factors include, among others: the risk that the cost savings and any revenue synergies from the Merger may not be fully realized or may take longer than anticipated to be realized; disruption to our business as a result of the Merger; the risk that the integration of our operations following the merger will be materially delayed or will be more costly or difficult than we expected or that we are otherwise unable to successfully integrate our legacy businesses; the amount of the costs, fees, expenses and charges related to the Merger; reputational risk and the reaction of our customers, suppliers, employees or other business partners to the Merger; changes in the interest rate environment, the value of Stellar’s assets and obligations and the availability of capital and liquidity; general competitive, economic, political and market conditions; and other factors that may affect future results of Stellar including changes in asset quality and credit risk; the inability to sustain revenue and earnings growth; changes in interest rates and capital markets; inflation; customer borrowing, repayment, investment and deposit practices; the impact, extent and timing of technological changes; capital management activities; and other actions of the Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation and Texas Department of Banking and legislative and regulatory actions and reforms.

Additional factors which could affect the Company’s future results can be found in the Company’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K and the Joint Proxy Statement/Prospectus regarding the Merger that CBTX filed with the SEC on April 7, 2022 pursuant to Rule 424(b)(3) and CBTX’s Annual Report on Form 10-K and Allegiance’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K, in each case filed with the SEC and available on the SEC’s website at https:// www.sec.gov. We disclaim any obligation and do not intend to update or revise any forward-looking statements contained in this communication, which speak only as of the date hereof, whether as a result of new information, future events or otherwise, except as required by federal securities laws. As forward-looking statements involve significant risks and uncertainties, caution should be exercised against placing undue reliance on such statements.

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

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

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

1. Interim periods annualized.

2. Refer to the calculation of these non-GAAP financial measures and a reconciliation to their most directly comparable GAAP financial measures on page 11 of this Earnings Release.

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

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

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