Enhabit Reports First Quarter 2025 Financial Results
'Enhabit's first quarter 2025 results are a product of steadfast execution of our strategies,' said Barb Jacobsmeyer, president and CEO of Enhabit. 'Home health census grew 3.7% sequentially and hospice census grew 12.3% year over year. The combination of strong growth, improved profitability and continued balance sheet improvements resulted in a leverage ratio now below 4.5 times. This enables us to formally exit the covenant relief period restrictions in our credit agreement and allows us to benefit from improved pricing on our debt and added flexibility going forward.'
QUARTERLY PERFORMANCE - CONSOLIDATED
Net service revenue of $259.9 million
Net income attributable to Enhabit, Inc. of $17.8 million, which includes a gain on sale of investment of $14.7 million, net of tax
Adjusted EBITDA of $26.6 million
Earnings per share of $0.35
Adjusted diluted earnings per share of $0.10
RECENT COMPANY HIGHLIGHTS
Home health non-Medicare admissions increased 7.4% with total admissions growth of 0.7% year over year. When normalizing for leap year and branches closed in Q1, total admission growth was 2.5%.
Sequential home health Medicare ADC growth of 1.5%, marking the second consecutive quarter of growth
Total home health ADC sequential growth of 3.7% and exited Q1 2025 with ADC above prior year
Home health cost per patient day decreased 2.4% year over year
Hospice average daily census increased 12.3% year over year
Average daily census increased sequentially every month since January 2024
Hospice admissions increased 8.0% year over year
Hospice Adjusted EBITDA increased 64.8% year over year
Hospice cost per patient day decreased 0.8% year over year
One Hospice de novo branch opened in Q1
Consolidated Adjusted EBITDA grew 5.1% year over year and 6.0% sequentially to $26.6 million.
Reduced bank debt by $25.0 million in the quarter
Bank debt down $60.0 million year over year
Leverage ratio below 4.5 times, one quarter earlier than credit agreement required
Home office G&A expenses decreased 1.3% due to cost control initiatives
FINANCIAL RESULTS
Consolidated
SEGMENT RESULTS
Home health
($ in millions)
Q1
'25 vs. '24
2025
2024
Net service revenue:
Medicare
$114.2
$128.3
(11.0) %
Non-Medicare
84.4
82.6
2.2 %
Private duty (1)
2.0
2.3
(13.0) %
Home health net service revenue
200.6
213.2
(5.9) %
Cost of service
103.4
109.9
(5.9) %
Gross margin
48.5 %
48.5 %
General and administrative expenses
58.4
59.5
(1.8) %
Net income attributable to noncontrolling interests
0.5
0.6
(16.7) %
Adjusted EBITDA
$38.3
$43.2
(11.3) %
% Adj. EBITDA margin
19.1 %
20.3 %
Operational metrics (actual amounts)
Medicare:
Admissions
24,044
25,944
(7.3) %
Recertifications
15,734
17,652
(10.9) %
Completed episodes
38,266
43,171
(11.4) %
Average daily census
20,110
21,709
(7.4) %
Visits
547,690
632,047
(13.3) %
Visits per episode
14.3
14.6
(2.1) %
Revenue per episode
$2,984
$2,972
0.4 %
Non-Medicare:
Admissions
33,178
30,881
7.4 %
Recertifications
13,133
13,489
(2.6) %
Average daily census
21,126
20,541
2.8 %
Visits
542,526
571,289
(5.0) %
Total:
Admissions
57,222
56,825
0.7 %
Same-store total admissions growth
0.7 %
Recertifications
28,867
31,141
(7.3) %
Same-store total recertifications growth
(7.3) %
Average daily census
41,236
42,250
(2.4) %
Visits
1,090,216
1,203,336
(9.4) %
Visits per episode
13.9
14.9
(6.7) %
Cost per visit
$93.5
$90.0
3.9 %
Revenue per patient day
$54.1
$55.5
(2.5) %
Cost per patient day
$27.9
$28.6
(2.4) %
(1) Private duty represents long-term comprehensive hourly nursing medical care.
Expand
Hospice
($ in millions)
Q1
'25 vs. '24
2025
2024
Net service revenue
$59.3
$49.2
20.5 %
Cost of service
26.8
24.3
10.3 %
Gross margin
54.8 %
50.6 %
General and administrative expenses
17.4
15.7
10.8 %
Net income attributable to noncontrolling interests
0.1
0.1
— %
Adjusted EBITDA
$15.0
$9.1
64.8 %
% Adj. EBITDA margin
25.3 %
18.5 %
Operational metrics (actual amounts)
Total admissions
3,274
3,032
8.0 %
Same-store total admissions growth
5.2 %
Patient days
342,784
308,542
11.1 %
Discharged average length of stay
101
104
(2.9) %
Average daily census
3,809
3,391
12.3 %
Revenue per patient day
$173.0
$159.6
8.4 %
Cost per patient day
$78.2
$78.8
(0.8) %
Expand
GUIDANCE
The Company reaffirmed its full-year 2025 guidance as of May 7, 2025:
For additional considerations regarding the Company's 2025 guidance ranges, see the supplemental information posted on the Company's website at http://investors.ehab.com.
CONFERENCE CALL INFORMATION
The Company will host an investor conference call at 10 a.m. EDT on May 8, 2025 to discuss its results for the first quarter of 2025. To access the live call by phone, dial toll-free (888) 660-6150 or international (929) 203-0843; the conference ID is 5248158. A simultaneous webcast of the call, along with supplemental information, may be accessed by visiting https://events.q4inc.com/attendee/885393432. Following the call, a replay will be available on the Company's website at http://investors.ehab.com.
ABOUT ENHABIT HOME HEALTH & HOSPICE
Enhabit Home Health & Hospice (Enhabit, Inc.) is a leading national home health and hospice provider working to expand what's possible for patient care in the home. Enhabit's team of clinicians supports patients and their families where they are most comfortable, with a nationwide footprint spanning 251 home health locations and 113 hospice locations across 34 states. Enhabit leverages advanced technology and compassionate teams to deliver extraordinary patient care. For more information, visit ehab.com.
OTHER INFORMATION
The financial data contained in this press release and supplemental information includes non-GAAP (generally accepted accounting principles (GAAP)) financial measures as defined in Regulation G under the Securities Exchange Act of 1934, including Adjusted EBITDA, Adjusted EBITDA margin, Adjusted EPS, and Adjusted free cash flow. For 2025, the Company has modified its methodology of calculating Adjusted free cash flow to exclude the impact of unusual or nonrecurring items on cash income taxes and changes in working capital. The change was made to conform to the Adjusted free cash flow measure with the current definition used by management and the Board of Directors to manage cash flow and evaluate performance. Prior periods presented herein have been recast to conform with the new methodology.
The Company believes the non-GAAP financial measures are useful to investors because they facilitate evaluation of core business operating results over multiple periods unaffected by differences in unusual or nonrecurring items. See 'Supplemental Non-GAAP Information' for reconciliations of the non-GAAP financial measures to the most directly comparable financial measures calculated and presented in accordance with GAAP. Additionally, our Form 10-Q for the three months ended March 31, 2025, provides further information regarding 'unusual or nonrecurring items that are not typical of ongoing operations,' a reconciliation item in our Adjusted EBITDA calculation. Such non-GAAP financial measures exclude significant components in understanding and assessing financial performance and should therefore not be considered superior to, as a substitute for or alternative to the GAAP financial measures presented in this press release. The non-GAAP financial measures in the press release may differ from similar measures used by other companies.
The Company is unable to reconcile the guidance for Adjusted EBITDA and Adjusted EPS to their corresponding GAAP measures without unreasonable effort due to the inherent difficulty in predicting, with reasonable certainty, the future impact of items that are outside the control of the Company or otherwise non-indicative of its ongoing operating performance. Accordingly, the Company relies on the exception provided by Item 10(e)(1)(i)(B) of Regulation S-K. Such items include, but are not limited to, gains or losses related to hedging instruments; loss on early extinguishment of debt; adjustments to its income tax provision (such as valuation allowance adjustments and settlements of income tax claims); items related to corporate and facility restructurings; and professional fees and other costs or income related to items the Company believes to not be indicative of its ongoing operations. For the same reasons, the Company is unable to address the probable significance of the unavailable information.
Note regarding presentation of same-store comparisons
The Company uses 'same-store' comparisons to explain the changes in certain performance metrics and line items within its financial statements. Same-store comparisons are calculated based on home health and hospice locations open throughout both the full current period and the immediately prior period presented. These comparisons include the financial results of market consolidation transactions in existing markets, as it is difficult to determine, with precision, the incremental impact of these transactions on the Company's results of operations.
Enhabit, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
(in millions)
March 31,
2 025
December 31,
2 024
Assets
Current assets:
Cash and cash equivalents
$
39.5
$
28.4
Restricted cash
1.3
1.9
Accounts receivable, net of allowances
160.9
149.2
Prepaid expenses and other current assets
9.6
13.2
Total current assets
211.3
192.7
Property and equipment, net
16.1
17.7
Operating lease right-of-use assets
52.1
52.8
Goodwill
900.0
900.0
Intangible assets, net
53.6
58.1
Other long-term assets
2.8
4.7
Total assets
$
1,235.9
$
1,226.0
Liabilities and Stockholders' Equity
Current liabilities:
Current portion of long-term debt
$
22.5
$
22.8
Current operating lease liabilities
12.8
12.3
Accounts payable
8.0
6.7
Accrued payroll
49.4
37.1
Accrued medical insurance
7.8
5.5
Other current liabilities
41.0
41.8
Total current liabilities
141.5
126.2
Long-term debt, net of current portion
467.3
492.6
Long-term operating lease liabilities, net of current portion
41.0
41.8
Deferred income tax liabilities
12.8
11.5
Total liabilities
662.6
672.1
Commitments and contingencies (See Note 7)
Redeemable noncontrolling interests
5.0
5.0
Stockholders' equity:
Total Enhabit, Inc. stockholders' equity
543.2
523.5
Noncontrolling interests
25.1
25.4
Total stockholders' equity
568.3
548.9
Total liabilities and stockholders' equity
$
1,235.9
$
1,226.0
Expand
Enhabit, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Three Months Ended
March 31,
(in millions)
2025
2024
Cash flows from operating activities:
Net income
$
18.4
$
0.9
Adjustments to reconcile net income to net cash provided by operating activities—
Depreciation and amortization
6.3
7.8
Amortization of debt-related costs
0.4
0.4
Gain on sale of investment
(19.3
)
—
Stock-based compensation
4.0
1.8
Deferred income taxes
1.2
(0.5
)
Other
—
(0.3
)
Changes in assets and liabilities, net of acquisitions—
Accounts receivable, net of allowances
(11.7
)
(9.7
)
Prepaid expenses and other assets
4.1
3.7
Accounts payable
1.4
1.4
Accrued payroll
11.6
10.7
Other liabilities
1.5
1.1
Net cash provided by operating activities
17.9
17.3
Cash flows from investing activities:
Purchases of property and equipment, including capitalized software costs
(0.3
)
(1.8
)
Proceeds from sale of investment
21.0
—
Other
0.1
0.7
Net cash provided by (used in) investing activities
20.8
(1.1
)
Cash flows from financing activities:
Principal payments on debt
(25.0
)
(5.0
)
Principal payments under finance lease obligations
(0.8
)
(1.0
)
Distributions paid to noncontrolling interests of consolidated affiliates
(0.9
)
—
Other
(1.5
)
(0.6
)
Net cash used in financing activities
(28.2
)
(6.6
)
Increase in cash, cash equivalents, and restricted cash
10.5
9.6
Cash, cash equivalents, and restricted cash at beginning of period
30.3
29.8
Cash, cash equivalents, and restricted cash at end of period
$
40.8
$
39.4
Expand
Enhabit, Inc.
Supplemental Non-GAAP Information
(Unaudited)
Three Months Ended March 31,
2025
2024
Diluted earnings per share, as reported
$
0.35
$
0.01
Adjustments, net of tax:
Gain on sale of investment and loss on disposal of assets
(0.29
)
—
Unusual or nonrecurring items that are not typical of ongoing operations (1)
0.01
0.06
Income tax adjustments (2)
0.03
0.01
Adjusted earnings per share (3)
$
0.10
$
0.07
Expand
(1)
Unusual or nonrecurring items in the three months ended March 31, 2025 include costs associated with restructuring activities and severance and nonroutine litigation; in the three months ended March 31, 2024, they include costs associated with the strategic review process, nonroutine litigation, standalone transition costs and shareholder activism.
(2)
Income tax adjustments include the effect of permanent book-tax differences attributable to stock-based compensation and the effect of a valuation allowance recorded against a portion of our deferred tax assets.
(3)
Adjusted diluted EPS may not sum due to rounding.
Expand
Three Months Ended March 31,
2025
Adjustments
($ in millions, except per share data)
As
Reported
Gain on Sale
of Investment
and Loss on
Disposal of
Assets
Unusual or
Nonrecurring
Items That
are Not
Typical of
Ongoing
Operations
Income tax
Adjustments (4)
As Adjusted
Adjusted EBITDA (1)
$
26.6
$
—
$
—
$
—
$
26.6
Interest expense and amortization of debt discounts and fees
(9.4
)
—
—
—
(9.4
)
Depreciation and amortization
(6.3
)
—
—
—
(6.3
)
Gain on sale of investment and loss on disposal of assets (2)
19.3
(19.3
)
—
—
—
Stock-based compensation
(4.0
)
—
—
—
(4.0
)
Unusual or nonrecurring items that are not typical of ongoing operations (3)
(1.0
)
—
1.0
—
—
Income before income taxes
25.2
(19.3
)
1.0
—
6.9
Income tax (expense) benefit
(7.4
)
4.6
(0.3
)
1.4
(1.7
)
Net income attributable to Enhabit, Inc.
$
17.8
$
(14.7
)
$
0.7
$
1.4
$
5.2
Adjusted diluted EPS (5)
$
0.35
$
(0.29
)
$
0.01
$
0.03
$
0.10
Adjusted diluted shares
50.8
50.8
Expand
(1)
Reconciliation to GAAP provided below.
(2)
Gain on sale of investment resulted from the sale of Medalogix investment.
(3)
Unusual or nonrecurring items in Q1 2025 include costs associated with restructuring activities and severance and nonroutine litigation.
(4)
Income tax adjustments include the effect of permanent book-tax differences attributable to stock-based compensation and the effect of a valuation allowance recorded against a portion of our deferred tax assets.
(5)
Adjusted diluted EPS may not sum due to rounding.
Expand
Three Months Ended March 31,
2024
Adjustments
Adjusted EBITDA (1)
$
25.3
$
—
$
—
$
25.3
Interest expense and amortization of debt discounts and fees
(11.1
)
—
—
(11.1
)
Depreciation and amortization
(7.8
)
—
—
(7.8
)
Gain on disposal of assets
0.2
—
—
0.2
Stock-based compensation
(1.8
)
—
—
(1.8
)
Unusual or nonrecurring items that are not typical of ongoing operations (2)
(3.7
)
3.7
—
—
Income before income taxes
1.1
3.7
—
4.8
Income tax (expense) benefit
(0.9
)
(0.9
)
0.6
(1.2
)
Net income attributable to Enhabit, Inc.
$
0.2
$
2.8
$
0.6
$
3.6
Adjusted diluted EPS (4)
$
0.01
$
0.06
$
0.01
$
0.07
Adjusted diluted shares
50.4
50.4
Expand
(1)
Reconciliation to GAAP provided below.
(2)
Unusual or nonrecurring items in Q1 2024 include costs associated with the strategic review process, nonroutine litigation, standalone transition costs and shareholder activism.
(3)
Income tax adjustments include the effect of permanent book-tax differences attributable to stock-based compensation.
(4)
Adjusted diluted EPS may not sum due to rounding.
Expand
Reconciliation of Net Income to Adjusted EBITDA
Three Months
Ended
March 31,
($ in millions)
2025
2024
Net income
$
18.4
$
0.9
Interest expense and amortization of debt discounts and fees
9.4
11.1
Provision for income taxes
7.4
0.9
Depreciation and amortization
6.3
7.8
Gain on sale of investment and disposal of assets
(19.3
)
(0.2
)
Stock-based compensation
4.0
1.8
Net income attributable to noncontrolling interests
(0.6
)
(0.7
)
Unusual or nonrecurring items that are not typical of ongoing operations (1)
1.0
3.7
Adjusted EBITDA
$
26.6
$
25.3
Expand
(1)
Unusual or nonrecurring items in the three months ended March 31, 2025 include costs associated with restructuring activities and severance and nonroutine litigation; in the three months ended March 31, 2024, they include costs associated with the strategic review process, nonroutine litigation, standalone transition costs and shareholder activism.
Expand
Reconciliation of Net Cash Provided by Operating Activities to Adjusted EBITDA
Three Months Ended
March 31,
($ in millions)
2025
2024
Net cash provided by operating activities
$
17.9
$
17.3
Interest expense, excluding amortization of debt discounts and fees
9.0
10.7
Current portion of income tax expense
6.2
1.4
Change in assets and liabilities
(6.9
)
(7.2
)
Net income attributable to noncontrolling interests
(0.6
)
(0.7
)
Unusual or nonrecurring items that are not typical of ongoing operations (1)
1.0
3.7
Other
—
0.1
Adjusted EBITDA
$
26.6
$
25.3
Expand
(1)
Unusual or nonrecurring items in the three months ended March 31, 2025 include costs associated with restructuring activities and severance and nonroutine litigation; in the three months ended March 31, 2024, they include costs associated with the strategic review process, nonroutine litigation, standalone transition costs and shareholder activism.
Expand
(1)
Unusual or nonrecurring items in the three months ended March 31, 2025 include costs associated with restructuring activities and severance and nonroutine litigation; in the three months ended March 31, 2024, they include costs associated with the strategic review process, nonroutine litigation, standalone transition costs and shareholder activism.
(2)
For 2025 and going forward, adjusted free cash flow will exclude the cash impact of unusual and nonrecurring items from both cash income tax payments (refunds), net and working capital and other. The 2024 calculations have been conformed to the current methodology, which has an impact of less than $0.1 for both Q1 and the full year.
Expand
(1)
Unusual or nonrecurring items in the three months ended March 31, 2025 include costs associated with restructuring activities and severance and nonroutine litigation; in the three months ended March 31, 2024, they include costs associated with the strategic review process, nonroutine litigation, standalone transition costs and shareholder activism.
Expand
FORWARD-LOOKING STATEMENTS
This press release contains historical information, as well as forward-looking statements (within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the 'Exchange Act')) that involve known and unknown risks and relate to, among other things, future events, projections, financial guidance, legislative or regulatory developments, strategy or growth opportunities, our future financial performance, our projected business results, or our projected capital expenditures. All statements other than statements of historical fact are, or may be deemed to be, forward-looking statements. In some cases, the reader can identify forward-looking statements by terminology such as 'may,' 'will,' 'should,' 'could,' 'expects,' 'plans,' 'anticipates,' 'believes,' 'estimates,' 'predicts,' 'targets,' 'potential,' or 'continue' or the negative of these terms or other comparable terminology. Any forward-looking statement speaks only as of the date of this presentation, and the Company undertakes no duty to publicly update or revise such forward-looking information, whether as a result of new information, future events, or otherwise. Such forward-looking statements are necessarily estimates based upon current information and involve a number of risks and uncertainties, many of which are beyond our control. Actual events or results may differ materially from the results anticipated in these forward-looking statements as a result of a variety of factors. While it is impossible to identify all such factors, factors which could cause actual events or results to differ materially from those estimated by the Company include, but are not limited to, our ability to execute on our strategic plans; regulatory and other developments impacting the markets for our services; changes in reimbursement rates; general economic conditions; changes in the episodic versus non-episodic mix of our payers, the case mix of our patients, and payment methodologies; our ability to attract and retain key management personnel and healthcare professionals; potential disruptions or breaches of our or our vendors', payers', and other contract counterparties' information systems; the outcome of litigation; quality performance and ratings; our ability to successfully complete and integrate de novo locations, acquisitions, investments, and joint ventures; our ability to successfully integrate technology in our operations; and our ability to control costs, particularly labor and employee benefit costs. Additional information regarding risks and factors that could cause actual results to differ materially from those expressed or implied by any forward-looking statement in this release are described in reports filed with the SEC, including our annual report on Form 10-K and subsequent quarterly reports on Form 10-Q, copies of which are available on the Company's website at http://investors.ehab.com.
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Away from public scrutiny, the committee obtained assets worth more than $1.6 billion. That tally is based on accounts of people familiar with its deals to acquire business stakes and cash seizures, including at least $1.5 billion in assets taken from three businessmen and firms in a conglomerate once controlled by Assad's inner circle. Chart of the day With Fed policy under a microscope, attention switches to the labor market next week - culminating in the release of the national employment report on Friday. Economists polled by Reuters expect the economy added 102,000 non-farm payrolls this month - which would be the lowest monthly tally since February. However, the U.S. Labor Department on Thursday showed jobless claims last week fell to 217,000 - well below estimates - signaling continued resilience in the job market. Today's events to watch * U.S. June durable goods orders (8:30 AM EDT) * U.S. corporate earnings: Aon, HCA Healthcare, Charter Communications, Phillips 66, Centene * South Korea's Finance Minister Koo Yun-cheol and Minister for Trade Yeo Han-koo meet U.S. Treasury Secretary Scott Bessent and Trade Representative Jamieson Greer in Washington * U.S. President Donald Trump makes private visit to Scotland -- Want to receive the Morning Bid in your inbox every weekday morning? Sign up for the newsletter here. You can find ROI on the Reuters website, and you can follow us on LinkedIn Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias. (by Mike Dolan; editing by) Sign in to access your portfolio
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Lakeland Financial Reports Record Second Quarter Performance; Net Income Grows by 20% to $27.0 Million, as Net Interest Income Expands by 14%
WARSAW, Ind., July 25, 2025 (GLOBE NEWSWIRE) -- Lakeland Financial Corporation (Nasdaq Global Select/LKFN), parent company of Lake City Bank, today reported record second quarter net income of $27.0 million for the three months ended June 30, 2025, which represents an increase of $4.4 million, or 20%, compared with net income of $22.5 million for the three months ended June 30, 2024. Diluted earnings per share were $1.04 for the second quarter of 2025 and increased $0.17, or 20%, compared to $0.87 for the second quarter of 2024. On a linked quarter basis, net income increased $6.9 million, or 34%, from $20.1 million. Diluted earnings per share increased $0.26, or 33%, from $0.78 on a linked quarter basis. Pretax pre-provision earnings, which is a non-GAAP measure, were $35.9 million for the three months ended June 30, 2025, an increase of $528,000, or 1%, compared to $35.4 million for the three months ended June 30, 2024. Adjusted core operational profitability, a non-GAAP measure that excludes the impact of certain non-routine operating events that occurred during 2024, improved by $7.8 million, or 41%, from $19.2 million to $27.0 million for the three months ended June 30, 2024 and 2025, respectively. The company further reported net income of $47.1 million for the six months ended June 30, 2025, versus $46.0 million for the comparable period of 2024, an increase of $1.1 million, or 2%. Diluted earnings per share also increased 2% to $1.82 for the six months ended June 30, 2025, versus $1.78 for the comparable period of 2024. Pretax pre-provision earnings were $67.0 million for the six months ended June 30, 2025, an increase of $2.2 million, or 3%, compared to $64.7 million for the six months ended June 30, 2024. Adjusted core operational profitability improved by $5.2 million, or 12%, from $41.8 million to $47.1 million for the six months ended June 30, 2024 and 2025, respectively. 'We are pleased to report strong earnings momentum for the second quarter of 2025, which has benefited from double digit growth of net interest income and contributed to good overall performance in the first half of 2025,' observed David M. Findlay, Chairman and CEO. 'Importantly, our Lake City Bank Team continues to generate healthy loan and deposit growth. It's been a rewarding first six months of 2025 with this strong financial performance, healthy balance sheet growth and continued success on the business development front for all of our revenue producing teams.' Quarterly Financial Performance Second Quarter 2025 versus Second Quarter 2024 highlights: Return on average equity of 15.52%, compared to 14.19% Return on average assets of 1.57%, compared to 1.37% Tangible book value per share grew by $2.14, or 8%, to $27.48 Average loans grew by $194.8 million, or 4%, to $5.23 billion Core deposits grew by $423.9 million, or 8%, to $6.03 billion Net interest margin improved 25 basis points to 3.42% versus 3.17% Net interest income increased by $6.6 million, or 14% Provision expense of $3.0 million, compared to $8.5 million Watch list loans as a percentage of total loans improved to 3.67% from 5.31% Nonaccrual loans declined 46% to $30.6 million compared to $57.1 million Common equity tier 1 capital ratio improved to 14.73%, compared to 14.28% Total risk-based capital ratio improved to 15.86%, compared to 15.53% Tangible capital ratio improved to 10.15%, compared to 9.91% Average equity increased by $58.0 million, or 9% Second Quarter 2025 versus First Quarter 2025 highlights: Return on average equity of 15.52%, compared to 11.70% Return on average assets of 1.57%, compared to 1.20% Average loans grew by $43.7 million, or 1%, to $5.23 billion Core deposits grew by $191.6 million, or 3%, to $6.03 billion Net interest margin improved 2 basis points to 3.42% versus 3.40% Net interest income increased by $2.0 million, or 4% Pretax, pre-provision earnings increased $4.9 million, or 16% Provision expense of $3.0 million, compared to $6.8 million Nonaccrual loans declined 47% to $30.6 million compared to $57.4 million Watch list loans as a percentage of total loans improved to 3.67% from 4.13% Common equity tier 1 capital ratio of 14.73%, compared to 14.51% Total risk-based capital ratio of 15.86%, compared to 15.77% Tangible capital ratio of 10.15%, compared to 10.09% Capital Strength The company's total capital as a percentage of risk-weighted assets improved to 15.86% at June 30, 2025, compared to 15.53% at June 30, 2024 and 15.77% at March 31, 2025. These capital levels significantly exceeded the 10.00% regulatory threshold required to be characterized as "well capitalized" and reflect the company's robust capital base. The company's tangible common equity to tangible assets ratio, which is a non-GAAP financial measure, improved to 10.15% at June 30, 2025, compared to 9.91% at June 30, 2024 and 10.09% at March 31, 2025. Unrealized losses from available-for-sale investment securities were $185.3 million at June 30, 2025, compared to $194.9 million at June 30, 2024 and $188.3 million at March 31, 2025. Excluding the impact of accumulated other comprehensive income (loss) on tangible common equity and tangible assets, the company's ratio of adjusted tangible common equity to adjusted tangible assets, a non-GAAP financial measure, was 12.17% at June 30, 2025, compared to 12.18% at June 30, 2024, and 12.19% at March 31, 2025. As announced on July 8, 2025, the board of directors approved a cash dividend for the second quarter of $0.50 per share, payable on August 5, 2025, to shareholders of record as of July 25, 2025. The second quarter dividend per share represents a 4% increase from the $0.48 dividend per share paid for the second quarter of 2024. The company utilized its share repurchase program during the second quarter of 2025 and repurchased 30,300 shares of its common stock for $1.7 million at a weighted average price per share of $55.94. The company has $28.3 million of remaining availability under the board-approved share repurchase program. 'Our capital position is strong and provides capacity for continued organic growth of our balance sheet as well as continued growth of our common stock dividend to shareholders,' stated Kristin L. Pruitt, President. 'While we did utilize our share repurchase program during the second quarter, our priority for capital is to continue capital retention to support loan growth in our Indiana markets and provide for continued balance sheet growth opportunities.' Loan Portfolio Average total loans of $5.23 billion in the second quarter of 2025 increased $194.8 million, or 4%, from $5.03 billion for the second quarter of 2024 and increased $43.7 million, or 1%, from $5.19 billion for the first quarter of 2025. Average total loans for the six months ended June 30, 2025 were $5.21 billion, an increase of $205.0 million, or 4%, from $5.00 billion for the six months ended June 30, 2024. Total loans, excluding deferred fees and costs, increased by $173.8 million, or 3%, from $5.06 billion as of June 30, 2024, to $5.23 billion as of June 30, 2025. The increase in loans occurred across much of the portfolio, with our commercial real estate and multi-family residential loan portfolio growing by $177.0 million, or 7%, our consumer 1-4 family mortgage loan portfolio growing by $46.2 million, or 10%, and our other consumer loan portfolio growing by $6.0 million, or 6%. These increases were offset by contractions to our commercial and industrial loan portfolio of $32.5 million, or 2%, and our agri-business and agricultural loan portfolio of $21.6 million, or 6%. On a linked quarter basis, total loans, excluding deferred fees and costs, increased by $3.4 million, or less than 1%, from $5.23 billion at March 31, 2025. The linked quarter increase was primarily a result of growth in total commercial real estate and multi-family residential loans of $59.6 million, or 2%, and growth in total consumer loans of $17.5 million, or 3%. This growth was offset by contractions in total agri-business and agricultural loans of $44.3 million, or 12%, and total commercial and industrial loans of $29.8 million, or 2%. Commercial loan originations for the second quarter included approximately $390.0 million in loan originations, offset by approximately $404.0 million in commercial loan pay downs. Line of credit usage increased to 44% as of June 30, 2025, compared to 41% at June 30, 2024 and 43% as of March 31, 2025. Total available lines of credit contracted by $48.0 million, or 1%, as compared to a year ago, and line usage increased by $100.0 million, or 5%, over that period. The company has limited exposure to commercial office space borrowers, all of which are in the bank's Indiana markets. Loans totaling $106.9 million for this sector represented 2% of total loans at June 30, 2025, an increase of $6.4 million, or 6%, from March 31, 2025. Commercial real estate loans secured by multi-family residential properties and secured by non-farm non-residential properties were approximately 221% of total risk-based capital at June 30, 2025. 'We are pleased that commercial line utilization continues to improve with a utilization rate of 44% at the end of the second quarter 2025,' added Findlay. 'This marks the highest line utilization rate since 2020, and we are encouraged that borrower demand for working lines of capital has increased. During the second quarter, construction loans migrated as planned to the CRE multi-family segment. In addition, loan payoffs received during the second quarter impacted the owner occupied CRE and Agriculture segments.' Diversified Deposit Base The bank's diversified deposit base has grown on a year-over-year basis and on a linked quarter basis. (in thousands) June 30, 2025 March 31, 2025 June 30, 2024 Retail $ 1,755,750 28.4 % $ 1,787,992 30.0 % $ 1,724,777 29.9 % Commercial 2,256,620 36.6 2,336,910 39.2 2,150,127 37.3 Public funds 2,014,047 32.6 1,709,883 28.7 1,727,593 30.0 Core deposits 6,026,417 97.6 5,834,785 97.9 5,602,497 97.2 Brokered deposits 150,416 2.4 125,409 2.1 161,040 2.8 Total $ 6,176,833 100.0 % $ 5,960,194 100.0 % $ 5,763,537 100.0 % Total deposits increased $413.3 million, or 7%, from $5.76 billion as of June 30, 2024, to $6.18 billion as of June 30, 2025. The increase in total deposits was driven by an increase in core deposits (which excludes brokered deposits) of $423.9 million, or 8%. Total core deposits at June 30, 2025 were $6.03 billion and represented 98% of total deposits, as compared to $5.60 billion and 97% of total deposits at June 30, 2024. The increase in core deposits since June 30, 2024, reflects growth in all three core deposit segments. Public funds deposits grew annually by $286.5 million, or 17%, to $2.01 billion. Public funds deposits as a percentage of total deposits were 33%, up from 30% a year ago. Growth in public funds was positively impacted by the addition of new public funds customers in the Lake City Bank footprint, including their operating accounts. Commercial deposits grew annually by $106.5 million, or 5%, to $2.26 billion and remained at 37% as a percentage of total deposits. Retail deposits grew by $31.0 million, or 2%, to $1.76 billion. Retail deposits as a percentage of total deposits was 28% of total deposits, down from 30% a year ago. On a linked quarter basis, total deposits increased $216.6 million, or 4%, from $5.96 billion at March 31, 2025, to $6.18 billion at June 30, 2025. Core deposits increased by $191.6 million, or 3%, while brokered deposits increased by $25.0 million, or 20%. The linked quarter growth in core deposits, was positively impacted by the addition of new public funds customers. Offsetting this increase was a decrease in commercial deposits of $80.3 million, or 3%, and a decrease in retail deposits of $32.2 million, or 2%. Average total deposits were $6.10 billion for the second quarter of 2025, an increase of $276.5 million, or 5%, from $5.82 billion for the second quarter of 2024. Average interest-bearing deposits drove the increase in average total deposits and increased by $263.4 million, or 6%. Contributing to the overall growth of interest-bearing deposits was an increase to average interest-bearing checking accounts of $492.4 million, or 15%. Offsetting this increase was a reduction in average time deposits of $225.9 million, or 22%, and a decrease to average savings deposits of $3.2 million, or 1%. Average noninterest-bearing demand deposits increased by $13.2 million, or 1% to $1.2 billion. On a linked quarter basis, average total deposits increased by $221.8 million, or 4%, from $5.87 billion for the first quarter of 2025 to $6.10 billion for the second quarter of 2025. Average interest bearing deposits drove the increase to total average deposits, which increased by $236.1 million, or 5%. Average interest bearing checking accounts were responsible for the increase, growing by $281.5 million, or 8%. Offsetting this increase were decreases to total average time deposits of $47.4 million, or 6%, and average noninterest bearing demand deposits decreased by $14.3 million, or 1%. Checking account trends as of June 30, 2025 compared to June 30, 2024 include growth of $352.1 million, or 23%, in aggregate public fund checking account balances, growth of $93.4 million, or 5%, in aggregate commercial checking account balances, and growth of $52.2 million, or 6%, in aggregate retail checking account balances. The number of accounts has also grown for all three segments, with growth of 9% for public funds accounts, 2% for commercial accounts and 1% for retail accounts during the prior twelve months. 'Deposit growth is strong in many measurable ways. All deposit segments have grown on a year over year basis, and the bank continues to add new public fund customers and their operating accounts,' commented Lisa M. O'Neill, Executive Vice-President and Chief Financial Officer. Deposits not covered by FDIC deposit insurance as a percentage of total deposits were 59% as of June 30, 2025, compared to 57% at March 31, 2025, and 58% at June 30, 2024, reflecting growth in public fund deposits over those periods. Deposits not covered by FDIC deposit insurance or the Indiana Public Deposit Insurance Fund, which insures public funds deposits in Indiana, were 27% of total deposits at June 30, 2025, compared to 29% at March 31, 2025, and 29% at June 30, 2024. At June 30, 2025, 98% of deposit accounts had deposit balances less than $250,000. Net Interest Margin Net interest margin was 3.42% for the second quarter of 2025, representing a 25 basis point increase from 3.17% for the second quarter of 2024. This improvement was driven by a reduction in the company's funding costs, with interest expense as a percentage of average earning assets falling by 49 basis points from 2.90% for the second quarter of 2024 to 2.41% for the second quarter of 2025. Offsetting the decrease in funding costs was a decrease to earning asset yields of 24 basis points from 6.07% for the second quarter of 2024 to 5.83% for the second quarter of 2025. During the second quarter of 2025, the company recorded a prepayment fee of $541,000 from the early payment of a fixed rate commercial loan, which was recorded as part of interest income. The prepayment fee benefited net interest margin by 3 basis points for the second quarter. Excluding the impact of the prepayment penalty, net interest margin improved by 22 basis points. The easing of monetary policy by the Federal Reserve Bank, which began in September of 2024, drove the reduction in funding costs that provided for the net interest margin expansion through deposit repricing as compared to the prior year quarter. Net interest margin expanded by 2 basis points to 3.42% for the second quarter of 2025, compared to 3.40% for the linked first quarter of 2025. Average earning asset yields increased by 6 basis points from 5.77% to 5.83% on a linked quarter basis and interest expense as a percentage of average earning assets increased 4 basis points from 2.37% to 2.41%. Excluding the impact of the prepayment penalty, net interest margin contracted by 1 basis point compared to the linked first quarter. The cumulative loan beta for the current rate-easing cycle that began in September 2024 is 29% compared to the deposit beta of 50% and has resulted in net interest margin expansion which has benefited net interest income. Net interest income was $54.9 million for the second quarter of 2025, representing an increase of $6.6 million, or 14%, as compared to $48.3 million for the second quarter of 2024. On a linked quarter basis, net interest income increased $2.0 million, or 4%, from $52.9 million for the first quarter of 2025. Net interest income increased by $12.0 million, or 13%, from $95.7 million for the six months ended June 30, 2024, to $107.8 million for the six months ended June 30, 2025. O'Neill noted, 'We are pleased to report healthy net interest margin expansion of 25 basis points as compared to a year ago. In this higher-for-longer interest rate environment, we continue to benefit from fixed rate loan repricing and new loan origination activity. In addition, we are pleased that our core deposits represent 98% of our total funding needs compared to 97% a year ago. Core deposit growth has outpaced our loan growth in 2025, which has strengthened our liquidity position. We have begun to reinvest some maturing investment securities into higher yielding investment securities with short duration, which is also benefiting net interest margin.' Asset Quality The company recorded a provision for credit losses of $3.0 million in the second quarter of 2025, a decrease of $5.5 million as compared to $8.5 million in the second quarter of 2024. On a linked quarter basis, the provision expense decreased by $3.8 million, from $6.8 million for the first quarter of 2025. Provision expense for the second quarter and for the six months ended June 30, 2025, was primarily driven by an increase in the specific allocation for a previously disclosed $43.3 million nonperforming credit for an industrial company in Northern Indiana as well as loan growth. During the second quarter of 2025, the non-performing borrower reached an agreement to sell and liquidate the business to two unrelated entities. The transactions are expected to close in the third quarter of 2025. As a result of the pending sale and liquidation, the company recognized a charge off of $28.6 million during the second quarter, which was fully allocated at the time of the charge off. The company expects to collect the remainder of the outstanding principal balance from sale and liquidation proceeds and proceeds from the personal guarantee from the borrower. The ratio of allowance for credit losses to total loans was 1.27% at June 30, 2025, down from 1.60% at June 30, 2024, and 1.77% at March 31, 2025. The decrease in the allowance coverage was due to a significant reduction of 46%, or $26.5 million, in nonaccrual loans, which were $30.6 million at June 30, 2025 versus $57.1 million at June 30, 2024. Net charge offs in the second quarter of 2025 were $28.9 million, compared to $949,000 in the second quarter of 2024 and $327,000 during the linked first quarter of 2025. Annualized net charge offs to average loans were 2.22% for the second quarter of 2025, compared to 0.08% for the second quarter of 2024 and 0.03% for the linked first quarter of 2025. Annualized net charge offs to average loans were 1.13% for the six months ended June 30, 2025 compared to 0.05% for the six months ended June 30, 2024. Nonperforming assets decreased $26.5 million, or 46%, to $31.1 million as of June 30, 2025, versus $57.6 million as of June 30, 2024. On a linked quarter basis, nonperforming assets decreased $26.8 million, or 46%, compared to $57.9 million as of March 31, 2025. The ratio of nonperforming assets to total assets at June 30, 2025 decreased to 0.45% from 0.88% at June 30, 2024, and decreased from 0.84% at March 31, 2025. Total individually analyzed and watch list loans decreased by $76.6 million, or 29%, to $191.6 million as of June 30, 2025, versus $268.3 million as of June 30, 2024. On a linked quarter basis, total individually analyzed and watch list loans decreased by $23.9 million, or 11%, from $215.6 million at March 31, 2025. Watch list loans as a percentage of total loans were 3.67% at June 30, 2025, a decrease of 164 basis points compared to 5.31% at June 30, 2024, and 46 basis points from 4.13% at March 31, 2025. 'We are pleased to have reached a resolution on the nonperforming loan that we have been working through for the past several quarters,' stated Findlay. 'Importantly, our semi-annual loan portfolio reviews with all loan officers of the bank affirmed that asset quality is stable and that economic conditions in our footprint are contributing to new business development opportunities. We continue to monitor the impact of tariffs on our borrowers. It is too early to quantify the impact of U.S. trade policy on our borrowers' businesses, although there appears to be less concern on the impact of tariffs that we heard from borrowing clients previously.' Investment Portfolio Overview Total investment securities were $1.13 billion at June 30, 2025, reflecting an increase of $5.5 million, or less than 1%, as compared to $1.12 billion at June 30, 2024. Investment securities represented 16% of total assets on June 30, 2025, as compared to 17% and June 30, 2024 and March 31, 2025. The company anticipates receiving principal and interest cash flows of approximately $54.5 million during the remainder of 2025 from the investment securities portfolio and plans to use that liquidity to fund loan growth as well as to fund reinvestments to the investment securities portfolio. Tax equivalent adjusted effective duration for the investment portfolio was 5.9 years at June 30, 2025, compared to 6.5 years at June 30, 2024 and unchanged from 5.9 years at March 31, 2025. Noninterest Income The company's noninterest income decreased $9.0 million, or 44%, to $11.5 million for the second quarter of 2025, compared to $20.4 million for the second quarter of 2024. Noninterest income was elevated during the second quarter of 2024 as compared to the second quarter of 2025 as a result of the net gain on Visa shares of $9.0 million that was recorded in the second quarter of 2024. Adjusted core noninterest income, a non-GAAP financial measure that excludes the effect of the net gain on Visa shares and an insurance recovery, increased $58,000, or less than 1%, from $11.4 million during the second quarter of 2024. Bank owned life insurance income increased $150,000, or 17%, primarily as a result of increased general account bank owned life insurance income from the purchase of insurance policies during the second quarter of 2025. Mortgage banking income increased $101,000 due to growth in the company's mortgage pipeline, which favorably impacted secondary market loan sale gains and mortgage rate lock income. Wealth advisory fees increased $70,000, or 3%, driven by continued growth in customers and assets under management. Investment brokerage fees increased $72,000, or 15%, due to increased volume and product mix. Offsetting these increases was a decrease to other income of $296,000, or 43%, primarily driven by reduced limited partnership investment income. Noninterest income for the second quarter of 2025 increased by $558,000, or 5%, on a linked quarter basis from $10.9 million during the first quarter of 2025. Bank owned life insurance income increased $718,000, or 223%, primarily as a result of improved market performance of the bank's variable owned life insurance policies and increased general account bank owned life insurance income from the purchase of insurance policies during the second quarter of 2025. Loan and service fee income increased $122,000, or 4%, from increased interchange fee income. Mortgage banking income increased $175,000, as a result of income derived from secondary mortgage sales and pipeline growth. Investment brokerage fees income increased $98,000, or 22%. Offsetting these increases was a decrease to other income of $460,000, or 54%, primarily a result of reduced limited partnership investment income. Wealth advisory fees, which benefited in the linked first quarter of 2025 from significant estate settlement fee income decreased $200,000, or 7%. 'The linked quarter improvement of noninterest income of 5% is encouraging as we continue to focus on growing our fee-based businesses,' noted Findlay. 'We are particularly pleased with the continued growth of our Wealth Advisory Management area, which has recently added revenue generating employees in our footprint with a focus in Indianapolis. Assets under management in this area have reached nearly $3.0 billion at quarter end.' Noninterest income decreased by $10.6 million, or 32%, to $22.4 million for the six months ended June 30, 2025, compared to $33.1 million for the prior year six-month period. Noninterest income was elevated during the first six months of 2024 as compared to the comparable period of 2025 primarily because of the net gain on Visa shares of $9.0 million and a $1.0 million insurance recovery. Adjusted core noninterest income, a non-GAAP financial measure that excludes the impact of these non-routine events, declined $626,000, or 3%, from $23.0 million for the six months ended June 30, 2024. Other income decreased $1.6 million, or 56%, as other income during the first six months of 2024 benefited from the $1.0 million insurance recovery. Reduced limited partnership investment income further contributed to the decline between the periods. Bank owned life insurance income decreased $564,000, or 29%, primarily as a result of reduced market performance from the bank's variable bank owned life insurance policies, which correlate to returns in the equities markets. Offsetting these decreases were increases to wealth advisory fees of $482,000, or 10%, and service charges on deposit accounts of $104,000, or 2%. The increase in wealth advisory fees was primarily driven by continued growth in customers and assets under management. Noninterest Expense Noninterest expense decreased $2.9 million, or 9%, to $30.4 million for the second quarter of 2025, compared to $33.3 million during the second quarter of 2024. Noninterest expense was elevated during the second quarter of 2024 as compared to 2025 due to a $4.5 million accrual that was recorded from the resolution of a legal matter. Adjusted core noninterest expense, which excludes the impact of the legal accrual, increased $1.6 million, or 6%, from $28.8 million for the second quarter of 2024. Salaries and benefits expense increased by $938,000, or 6%. The primary drivers for the increase to salaries and benefits expense were increased salaries expense of $756,000 and increased health insurance expense of $127,000. Additionally, data processing fees and supplies expense increased $340,000, or 9%, from continued investment in customer-facing and operational technology solutions. Offsetting these increases were decreases to other expense of $3.8 million, or 62%, professional fees of $417,000, or 20%, and corporate and business development expense of $105,000, or 8%. The decrease to other expense was driven by the legal accrual recorded during the second quarter of 2024. The decrease to professional fees was primarily driven by reduced technology implementation consulting fees and swap collateral fees. Corporate and business development expense decreased primarily as a result of lower advertising expense. On a linked quarter basis, noninterest expense decreased by $2.3 million, or 7%, from $32.8 million during the first quarter of 2025. The primary drivers for the decrease to noninterest expense was a decrease to salaries and employee benefits of $806,000, or 5%, due to a reduction in HSA contributions expense of $441,000, resulting from the timing of the annual employer contribution to employee accounts, and a reduction in performance-based compensation accruals. Professional fees decreased $674,000, or 28%, and were primarily driven by reduced technology implementation consulting fees and swap collateral interest expense. Other expense decreased $353,000, or 13%, as other expense was elevated in the linked first quarter of 2025 from the timing of semiannual director share awards. Corporate and business development expense decreased by $246,000, or 18%, due to reduced advertising expense, primarily driven by the timing of when advertisement television spots were purchased and utilized. Net occupancy expense decreased $233,000, or 12%, due to reductions in seasonal expenses. Data processing fees and supplies expense decreased $113,000, or 3%. Noninterest expense decreased by $843,000, or 1%, for the six months ended June 30, 2025 to $63.2 million compared to $64.0 million for the six months ended June 30, 2024. Adjusted core noninterest expense, which excludes the impact of the $4.5 million legal accrual, increased $3.7 million, or 6%, from $59.5 million for the six months ended June 30, 2024. Salaries and benefits expense increased by $2.0 million, or 6%. Data processing fees and supplies and expense increased $766,000, or 10%. Net occupancy expense increased $289,000, or 8%, as a result of increased occupancy expense from the continued expansion of the company's branch network and improvements to existing facilities. Offsetting these increases were decreases to other expense of $3.4 million, or 41%, and professional fees of $500,000, or 11%. The company's efficiency ratio was 45.9% for the second quarter of 2025, compared to 48.5% for the second quarter of 2024 and 51.4% for the linked first quarter of 2025. The company's adjusted core efficiency ratio, a non-GAAP financial measure, was 48.2% for the second quarter of 2024. The company's efficiency ratio was 48.6% for the six months ended June 30, 2025, compared to 49.7% for the comparable period in 2024. The company's adjusted core efficiency ratio was 50.1% for the six months ended June 30, 2024. Findlay added, 'We are pleased with the improvement in our efficiency ratio, which has benefited from strong core revenue growth of 10% on a year-over-year basis. Our growth in noninterest expense is focused on continued investments in human capital, technology solutions and organic expansion of our banking footprint, particularly in Indianapolis.' Information regarding Lakeland Financial Corporation may be accessed on the home page of its subsidiary, Lake City Bank, at The company's common stock is traded on the Nasdaq Global Select Market under "LKFN." Lake City Bank, a $7.0 billion bank headquartered in Warsaw, Indiana, was founded in 1872 and serves Central and Northern Indiana communities with 54 branch offices and a robust digital banking platform. Lake City Bank's community banking model prioritizes building in-market long-term customer relationships while delivering technology-forward solutions for retail and commercial clients. This document contains, and future oral and written statements of the company and its management may contain, forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 with respect to the financial condition, results of operations, plans, objectives, future performance and business of the company. Forward-looking statements, which may be based upon beliefs, expectations and assumptions of the company's management and on information currently available to management, are generally identifiable by the use of words such as "believe," "expect," "anticipate," "continue," "plan," "intend," "estimate," "may," "will," "would," "could," "should" or other similar expressions. The company's ability to predict results or the actual effect of future plans or strategies is inherently uncertain and, accordingly, the reader is cautioned not to place undue reliance on any forward-looking statements made by the company. Additionally, all statements in this document, including forward-looking statements, speak only as of the date they are made, and the company undertakes no obligation to update any statement in light of new information or future events. Numerous factors could cause the company's actual results to differ from those reflected in forward-looking statements, including the effects of economic, business and market conditions and changes, particularly in our Indiana market area, including prevailing interest rates and the rate of inflation; governmental trade, monetary and fiscal policies; the risks of changes in interest rates on the levels, composition and costs of deposits, loan demand and the values and liquidity of loan collateral, securities and other interest sensitive assets and liabilities; and changes in borrowers' credit risks and payment behaviors, as well as those identified in the company's filings with the Securities and Exchange Commission, including the company's Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. LAKELAND FINANCIAL CORPORATIONSECOND QUARTER 2025 FINANCIAL HIGHLIGHTS Three Months Ended Six Months Ended (Unaudited – Dollars in thousands, except per share data) June 30, March 31, June 30, June 30, June 30, END OF PERIOD BALANCES 2025 2025 2024 2025 2024 Assets $ 6,964,301 $ 6,851,178 $ 6,568,807 $ 6,964,301 $ 6,568,807 Investments 1,129,346 1,132,854 1,123,803 1,129,346 1,123,803 Loans 5,226,827 5,223,221 5,052,341 5,226,827 5,052,341 Allowance for Credit Losses 66,552 92,433 80,711 66,552 80,711 Deposits 6,176,833 5,960,194 5,763,537 6,176,833 5,763,537 Brokered Deposits 150,416 125,409 161,040 150,416 161,040 Core Deposits (1) 6,026,417 5,834,785 5,602,497 6,026,417 5,602,497 Total Equity 709,987 694,509 654,590 709,987 654,590 Goodwill Net of Deferred Tax Assets 3,803 3,803 3,803 3,803 3,803 Tangible Common Equity (2) 706,184 690,706 650,787 706,184 650,787 Adjusted Tangible CommonEquity (2) 866,758 854,585 820,534 866,758 820,534 AVERAGE BALANCES Total Assets $ 6,904,681 $ 6,762,970 $ 6,642,954 $ 6,834,217 $ 6,598,711 Earning Assets 6,570,607 6,430,804 6,295,281 6,501,092 6,256,105 Investments 1,125,597 1,136,404 1,118,776 1,130,970 1,138,639 Loans 5,229,646 5,185,918 5,034,851 5,207,903 5,002,935 Total Deposits 6,096,504 5,874,725 5,819,962 5,986,227 5,725,196 Interest Bearing Deposits 4,852,446 4,616,381 4,589,059 4,735,066 4,472,693 Interest Bearing Liabilities 4,886,943 4,716,465 4,666,136 4,802,175 4,599,136 Total Equity 696,976 696,053 638,999 696,517 642,003 INCOME STATEMENT DATA Net Interest Income $ 54,876 $ 52,875 $ 48,296 $ 107,751 $ 95,712 Net Interest Income-Fully Tax Equivalent 55,986 53,983 49,493 109,970 98,176 Provision for Credit Losses 3,000 6,800 8,480 9,800 10,000 Noninterest Income 11,486 10,928 20,439 22,414 33,051 Noninterest Expense 30,432 32,763 33,333 63,195 64,038 Net Income 26,966 20,085 22,549 47,051 45,950 Pretax Pre-Provision Earnings (2) 35,930 31,040 35,402 66,970 64,725 PER SHARE DATA Basic Net Income Per Common Share $ 1.05 $ 0.78 $ 0.88 $ 1.83 $ 1.79 Diluted Net Income PerCommon Share 1.04 0.78 0.87 1.82 1.78 Cash Dividends Declared Per Common Share 0.50 0.50 0.48 1.00 0.96 Dividend Payout 48.08 % 64.10 % 55.17 % 54.95 % 53.93 % Book Value Per Common Share (equity per share issued) $ 27.63 $ 26.99 $ 25.49 $ 27.63 $ 25.49 Tangible Book Value Per Common Share (2) 27.48 26.85 25.34 27.48 25.34 Market Value – High $ 62.39 $ 71.77 $ 66.62 $ 71.77 $ 73.22 Market Value – Low 50.00 58.24 57.59 50.00 57.59 Three Months Ended Six Months Ended (Unaudited – Dollars in thousands, except per share data) June 30, March 31, June 30, June 30, June 30, KEY RATIOS 2025 2025 2024 2025 2024 Basic Weighted Average Common Shares Outstanding 25,707,233 25,714,818 25,678,231 25,711,004 25,667,647 Diluted Weighted Average Common Shares Outstanding 25,776,205 25,802,865 25,742,871 25,782,817 25,746,773 Return on Average Assets 1.57 % 1.20 % 1.37 % 1.39 % 1.40 % Return on Average Total Equity 15.52 11.70 14.19 13.62 14.39 Average Equity to Average Assets 10.09 10.29 9.62 10.19 9.73 Net Interest Margin 3.42 3.40 3.17 3.41 3.16 Efficiency (Noninterest Expense/Net Interest Incomeplus Noninterest Income) 45.86 51.35 48.49 48.55 49.73 Loans to Deposits 84.62 87.64 87.66 84.62 87.66 Investment Securities to Total Assets 16.22 16.54 17.11 16.22 17.11 Tier 1 Leverage (3) 12.21 12.30 11.98 12.21 11.98 Tier 1 Risk-Based Capital (3) 14.73 14.51 14.28 14.73 14.28 Common Equity Tier 1 (CET1) (3) 14.73 14.51 14.28 14.73 14.28 Total Capital (3) 15.86 15.77 15.53 15.86 15.53 Tangible Capital (2) 10.15 10.09 9.91 10.15 9.91 Adjusted Tangible Capital (2) 12.17 12.19 12.18 12.17 12.18 ASSET QUALITY Loans Past Due 30 - 89 Days $ 1,648 $ 4,288 $ 1,615 $ 1,648 $ 1,615 Loans Past Due 90 Days or More 7 7 26 7 26 Nonaccrual Loans 30,627 57,392 57,124 30,627 57,124 Nonperforming Loans 30,634 57,399 57,150 30,634 57,150 Other Real Estate Owned 284 284 384 284 384 Other Nonperforming Assets 183 193 90 183 90 Total Nonperforming Assets 31,101 57,876 57,624 31,101 57,624 Individually Analyzed Loans 52,069 81,346 78,533 52,069 78,533 Non-Individually Analyzed Watch List Loans 139,548 134,218 189,726 139,548 189,726 Total Individually Analyzed and Watch List Loans 191,617 215,564 268,259 191,617 268,259 Gross Charge Offs 29,111 508 1,076 29,619 1,580 Recoveries 230 181 127 411 319 Net Charge Offs/(Recoveries) 28,881 327 949 29,208 1,261 Net Charge Offs/(Recoveries) to Average Loans 2.22 % 0.03 % 0.08 % 1.13 % 0.05 % Credit Loss Reserve to Loans 1.27 1.77 1.60 1.27 1.60 Credit Loss Reserve to Nonperforming Loans 217.25 161.04 141.23 217.25 141.23 Nonperforming Loans to Loans 0.59 1.10 1.13 0.59 1.13 Nonperforming Assets to Assets 0.45 0.84 0.88 0.45 0.88 Total Individually Analyzed and Watch List Loans to Total Loans 3.67 % 4.13 % 5.31 % 3.67 % 5.31 % Three Months Ended Six Months Ended (Unaudited – Dollars in thousands, except per share data) June 30, March 31, June 30, June 30, June 30 KEY RATIOS 2025 2025 2024 2025 2024, OTHER DATA Full Time Equivalent Employees 675 647 653 675 653 Offices 54 54 53 54 53 (1 ) Core deposits equals deposits less brokered deposits. (2 ) Non-GAAP financial measure - see "Reconciliation of Non-GAAP Financial Measures". (3 ) Capital ratios for June 30, 2025 are preliminary until the Call Report is filed. CONSOLIDATED BALANCE SHEETS (in thousands, except share data) June 30,2025 December 31,2024 (Unaudited) ASSETS Cash and due from banks $ 97,413 $ 71,733 Short-term investments 212,767 96,472 Total cash and cash equivalents 310,180 168,205 Securities available-for-sale, at fair value 996,957 991,426 Securities held-to-maturity, at amortized cost (fair value of $107,979 and $113,107, respectively) 132,389 131,568 Real estate mortgage loans held-for-sale 1,637 1,700 Loans, net of allowance for credit losses of $66,552 and $85,960 5,160,275 5,031,988 Land, premises and equipment, net 61,449 60,489 Bank owned life insurance 127,399 113,320 Federal Reserve and Federal Home Loan Bank stock 21,420 21,420 Accrued interest receivable 29,109 28,446 Goodwill 4,970 4,970 Other assets 118,516 124,842 Total assets $ 6,964,301 $ 6,678,374 LIABILITIES Noninterest bearing deposits $ 1,261,740 $ 1,297,456 Interest bearing deposits 4,915,093 4,603,510 Total deposits 6,176,833 5,900,966 Borrowings Federal Home Loan Bank advance 1,200 0 Other borrowings 5,000 0 Total borrowings 6,200 0 Accrued interest payable 9,996 15,117 Other liabilities 61,285 78,380 Total liabilities 6,254,314 5,994,463 STOCKHOLDERS' EQUITY Common stock: 90,000,000 shares authorized, no par value 26,016,494 shares issued and 25,525,105 outstanding as of June 30, 2025 25,978,831 shares issued and 25,509,592 outstanding as of December 31, 2024 130,664 129,664 Retained earnings 757,739 736,412 Accumulated other comprehensive income (loss) (161,121 ) (166,500 ) Treasury stock, at cost (491,389 shares and 469,239 shares as of June 30, 2025 and December 31, 2024, respectively) (17,384 ) (15,754 ) Total stockholders' equity 709,898 683,822 Noncontrolling interest 89 89 Total equity 709,987 683,911 Total liabilities and equity $ 6,964,301 $ 6,678,374 CONSOLIDATED STATEMENTS OF INCOME (unaudited - in thousands, except share and per share data) Three Months Ended June 30, Six Months Ended June 30, 2025 2024 2025 2024 NET INTEREST INCOME Interest and fees on loans Taxable $ 84,418 $ 84,226 $ 166,158 $ 166,268 Tax exempt 291 632 583 1,532 Interest and dividends on securities Taxable 3,457 3,104 6,846 6,143 Tax exempt 3,917 3,932 7,827 7,879 Other interest income 2,302 1,842 3,426 2,948 Total interest income 94,385 93,736 184,840 184,770 Interest on deposits 39,111 44,363 75,569 85,527 Interest on short-term borrowings 398 1,077 1,520 3,531 Total interest expense 39,509 45,440 77,089 89,058 NET INTEREST INCOME 54,876 48,296 107,751 95,712 Provision for credit losses 3,000 8,480 9,800 10,000 NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES 51,876 39,816 97,951 85,712 NONINTEREST INCOME Wealth advisory fees 2,667 2,597 5,534 5,052 Investment brokerage fees 550 478 1,002 1,000 Service charges on deposit accounts 2,827 2,806 5,601 5,497 Loan and service fees 3,006 3,048 5,890 5,900 Merchant and interchange fee income 854 892 1,676 1,755 Bank owned life insurance income 1,040 890 1,362 1,926 Interest rate swap fee income 20 0 20 0 Mortgage banking income (loss) 124 23 73 75 Net securities gains (losses) 0 0 0 (46 ) Net gain on Visa shares 0 9,011 0 9,011 Other income 398 694 1,256 2,881 Total noninterest income 11,486 20,439 22,414 33,051 NONINTEREST EXPENSE Salaries and employee benefits 17,096 16,158 34,998 32,991 Net occupancy expense 1,747 1,698 3,727 3,438 Equipment costs 1,437 1,343 2,819 2,755 Data processing fees and supplies 4,152 3,812 8,417 7,651 Corporate and business development 1,160 1,265 2,566 2,646 FDIC insurance and other regulatory fees 839 816 1,639 1,605 Professional fees 1,706 2,123 4,086 4,586 Other expense 2,295 6,118 4,943 8,366 Total noninterest expense 30,432 33,333 63,195 64,038 INCOME BEFORE INCOME TAX EXPENSE 32,930 26,922 57,170 54,725 Income tax expense 5,964 4,373 10,119 8,775 NET INCOME $ 26,966 $ 22,549 $ 47,051 $ 45,950 BASIC WEIGHTED AVERAGE COMMON SHARES 25,707,233 25,678,231 25,711,004 25,667,647 BASIC EARNINGS PER COMMON SHARE $ 1.05 $ 0.88 $ 1.83 $ 1.79 DILUTED WEIGHTED AVERAGE COMMON SHARES 25,776,205 25,742,871 25,782,817 25,746,773 DILUTED EARNINGS PER COMMON SHARE $ 1.04 $ 0.87 $ 1.82 $ 1.78 LAKELAND FINANCIAL CORPORATIONLOAN DETAIL(unaudited, in thousands) June 30,2025 March 31,2025 June 30,2024 Commercial and industrial loans: Working capital lines of credit loans $ 717,484 13.7 % $ 716,522 13.7 % $ 697,754 13.8 % Non-working capital loans 776,278 14.9 807,048 15.5 828,523 16.4 Total commercial and industrial loans 1,493,762 28.6 1,523,570 29.2 1,526,277 30.2 Commercial real estate and multi-family residential loans: Construction and land development loans 552,998 10.6 623,905 12.0 658,345 13.0 Owner occupied loans 780,285 14.9 804,933 15.4 830,018 16.4 Nonowner occupied loans 869,196 16.6 852,033 16.3 762,365 15.1 Multifamily loans 477,910 9.1 339,946 6.5 252,652 5.0 Total commercial real estate and multi-family residential loans 2,680,389 51.2 2,620,817 50.2 2,503,380 49.5 Agri-business and agricultural loans: Loans secured by farmland 150,934 2.9 156,112 3.0 161,410 3.2 Loans for agricultural production 188,501 3.6 227,659 4.3 199,654 4.0 Total agri-business and agricultural loans 339,435 6.5 383,771 7.3 361,064 7.2 Other commercial loans 95,442 1.8 94,927 1.8 96,703 1.9 Total commercial loans 4,609,028 88.1 4,623,085 88.5 4,487,424 88.8 Consumer 1-4 family mortgage loans: Closed end first mortgage loans 273,287 5.2 265,855 5.1 259,094 5.1 Open end and junior lien loans 226,114 4.4 217,981 4.2 197,861 3.9 Residential construction and land development loans 16,667 0.3 16,359 0.3 12,952 0.3 Total consumer 1-4 family mortgage loans 516,068 9.9 500,195 9.6 469,907 9.3 Other consumer loans 103,880 2.0 102,254 1.9 97,895 1.9 Total consumer loans 619,948 11.9 602,449 11.5 567,802 11.2 Subtotal 5,228,976 100.0 % 5,225,534 100.0 % 5,055,226 100.0 % Less: Allowance for credit losses (66,552 ) (92,433 ) (80,711 ) Net deferred loan fees (2,149 ) (2,313 ) (2,885 ) Loans, net $ 5,160,275 $ 5,130,788 $ 4,971,630 LAKELAND FINANCIAL CORPORATIONDEPOSITS AND BORROWINGS(unaudited, in thousands) June 30,2025 March 31,2025 June 30,2024 Noninterest bearing demand deposits $ 1,261,740 $ 1,296,907 $ 1,212,989 Savings and transaction accounts: Savings deposits 283,976 293,768 283,809 Interest bearing demand deposits 3,841,703 3,554,310 3,274,179 Time deposits: Deposits of $100,000 or more 584,165 602,577 776,314 Other time deposits 205,249 212,632 216,246 Total deposits $ 6,176,833 $ 5,960,194 $ 5,763,537 FHLB advances and other borrowings 6,200 108,200 55,000 Total funding sources $ 6,183,033 $ 6,068,394 $ 5,818,537 LAKELAND FINANCIAL CORPORATIONAVERAGE BALANCE SHEET AND NET INTEREST ANALYSIS(UNAUDITED) Three Months Ended June 30, 2025 Three Months Ended March 31, 2025 Three Months Ended June 30, 2024 (fully tax equivalent basis, dollars in thousands) Average Balance Interest Income Yield (1)/Rate Average Balance Interest Income Yield (1)/Rate Average Balance Interest Income Yield (1)/Rate Earning Assets Loans: Taxable (2)(3) $ 5,204,006 $ 84,418 6.51 % $ 5,160,031 $ 81,740 6.42 % $ 4,993,270 $ 84,226 6.78 % Tax exempt (1) 25,640 359 5.62 25,887 361 5.66 41,581 783 7.57 Investments: (1) Securities 1,125,597 8,416 3.00 1,136,404 8,338 2.98 1,118,776 8,082 2.91 Short-term investments 2,832 28 3.97 2,964 28 3.83 2,836 35 4.96 Interest bearing deposits 212,532 2,274 4.29 105,518 1,096 4.21 138,818 1,807 5.24 Total earning assets $ 6,570,607 $ 95,495 5.83 % $ 6,430,804 $ 91,563 5.77 % $ 6,295,281 $ 94,933 6.07 % Less: Allowance for credit losses (93,644 ) (87,477 ) (74,166 ) Nonearning Assets Cash and due from banks 66,713 71,004 64,518 Premises and equipment 61,280 60,523 58,702 Other nonearning assets 299,725 288,116 298,619 Total assets $ 6,904,681 $ 6,762,970 $ 6,642,954 Interest Bearing Liabilities Savings deposits $ 285,944 $ 43 0.06 % $ 283,888 $ 42 0.06 % $ 289,107 $ 48 0.07 % Interest bearing checking accounts 3,767,903 31,499 3.35 3,486,447 28,075 3.27 3,275,502 33,323 4.09 Time deposits: In denominations under $100,000 208,770 1,745 3.35 212,934 1,832 3.49 217,146 1,871 3.47 In denominations over $100,000 589,829 5,824 3.96 633,112 6,509 4.17 807,304 9,121 4.54 Other short-term borrowings 33,297 398 4.79 99,830 1,122 4.56 77,077 1,077 5.62 Long-term borrowings 1,200 0 0.00 254 0 0.00 0 0 0.00 Total interest bearing liabilities $ 4,886,943 $ 39,509 3.24 % $ 4,716,465 $ 37,580 3.23 % $ 4,666,136 $ 45,440 3.92 % Noninterest Bearing Liabilities Demand deposits 1,244,058 1,258,344 1,230,903 Other liabilities 76,704 92,108 106,916 Stockholders' Equity 696,976 696,053 638,999 Total liabilities and stockholders' equity $ 6,904,681 $ 6,762,970 $ 6,642,954 Interest Margin Recap Interest income/average earning assets 95,495 5.83 % 91,563 5.77 % 94,933 6.07 % Interest expense/average earning assets 39,509 2.41 37,580 2.37 45,440 2.90 Net interest income and margin $ 55,986 3.42 % $ 53,983 3.40 % $ 49,493 3.17 % (1 ) Tax exempt income was converted to a fully taxable equivalent basis at a 21 percent tax rate. The tax equivalent rate for tax exempt loans and tax-exempt securities acquired after January 1, 1983, included the Tax Equity and Fiscal Responsibility Act of 1982 ("TEFRA") adjustment applicable to nondeductible interest expenses. Taxable equivalent basis adjustments were $1.11 million, $1.11 million and $1.20 million in the three-month periods ended June 30, 2025, March 31, 2025, and June 30, 2024, respectively. (2 ) Loan fees, which are immaterial in relation to total taxable loan interest income for the three-month periods ended June 30, 2025, March 31, 2025, and June 30, 2024, are included as taxable loan interest income. (3 ) Nonaccrual loans are included in the average balance of taxable loans. Reconciliation of Non-GAAP Financial Measures Tangible common equity, adjusted tangible common equity, tangible assets, adjusted tangible assets, tangible book value per common share, tangible common equity to tangible assets, adjusted tangible common equity to adjusted tangible assets, and pretax pre-provision earnings are non-GAAP financial measures calculated based on GAAP amounts. Tangible common equity is calculated by excluding the balance of goodwill and other intangible assets from the calculation of equity, net of deferred tax. Tangible assets are calculated by excluding the balance of goodwill and other intangible assets from the calculation of total assets, net of deferred tax. Adjusted tangible assets and adjusted tangible common equity remove the fair market value adjustment impact of the available-for-sale investment securities portfolio in accumulated other comprehensive income (loss) ("AOCI"). Tangible book value per common share is calculated by dividing tangible common equity by the number of shares outstanding less true treasury stock. Pretax pre-provision earnings is calculated by adding net interest income to noninterest income and subtracting noninterest expense. Because not all companies use the same calculation of tangible common equity and tangible assets, this presentation may not be comparable to other similarly titled measures calculated by other companies. However, management considers these measures of the company's value meaningful to understanding of the company's financial information and performance. A reconciliation of these non-GAAP financial measures is provided below (dollars in thousands, except per share data). Three Months Ended Six Months Ended Jun. 30, 2025 Mar. 31, 2025 Jun. 30, 2024 Jun. 30, 2025 Jun. 30, 2024 Total Equity $ 709,987 $ 694,509 $ 654,590 $ 709,987 $ 654,590 Less: Goodwill (4,970 ) (4,970 ) (4,970 ) (4,970 ) (4,970 ) Plus: DTA Related to Goodwill 1,167 1,167 1,167 1,167 1,167 Tangible Common Equity 706,184 690,706 650,787 706,184 650,787 Market Value Adjustment in AOCI 160,574 163,879 169,747 160,574 169,747 Adjusted Tangible Common Equity 866,758 854,585 820,534 866,758 820,534 Assets $ 6,964,301 $ 6,851,178 $ 6,568,807 $ 6,964,301 $ 6,568,807 Less: Goodwill (4,970 ) (4,970 ) (4,970 ) (4,970 ) (4,970 ) Plus: DTA Related to Goodwill 1,167 1,167 1,167 1,167 1,167 Tangible Assets 6,960,498 6,847,375 6,565,004 6,960,498 6,565,004 Market Value Adjustment in AOCI 160,574 163,879 169,747 160,574 169,747 Adjusted Tangible Assets 7,121,072 7,011,254 6,734,751 7,121,072 6,734,751 Ending Common Shares Issued 25,697,093 25,727,393 25,679,066 25,697,093 25,679,066 Tangible Book Value Per Common Share $ 27.48 $ 26.85 $ 25.34 $ 27.48 $ 25.34 Tangible Common Equity/Tangible Assets 10.15 % 10.09 % 9.91 % 10.15 % 9.91 % Adjusted Tangible Common Equity/Adjusted Tangible Assets 12.17 % 12.19 % 12.18 % 12.17 % 12.18 % Net Interest Income $ 54,876 $ 52,875 $ 48,296 $ 107,751 $ 95,712 Plus: Noninterest Income 11,486 10,928 20,439 22,414 33,051 Minus: Noninterest Expense (30,432 ) (32,763 ) (33,333 ) (63,195 ) (64,038 ) Pretax Pre-Provision Earnings $ 35,930 $ 31,040 $ 35,402 $ 66,970 $ 64,725 Adjusted core noninterest income, adjusted core noninterest expense, adjusted earnings before income taxes, core operational profitability, core operational diluted earnings per common share and adjusted core efficiency ratio are non-GAAP financial measures calculated based on GAAP amounts. These adjusted amounts are calculated by excluding the impact of the net gain on Visa shares, legal accrual and 2023 wire fraud loss insurance recoveries for the periods presented below. Management considers these measures of financial performance to be meaningful to understanding the company's core business performance for these periods. A reconciliation of these non-GAAP financial measures is provided below (dollars in thousands, except per share data). Three Months Ended Six Months Ended Jun. 30, 2025 Mar. 31, 2025 Jun. 30, 2024 Jun. 30, 2025 Jun. 30, 2024 Noninterest Income $ 11,486 $ 10,928 $ 20,439 $ 22,414 $ 33,051 Less: Net Gain on Visa Shares 0 0 (9,011 ) 0 (9,011 ) Less: Insurance Recovery 0 0 0 0 (1,000 ) Adjusted Core Noninterest Income $ 11,486 $ 10,928 $ 11,428 $ 22,414 $ 23,040 Noninterest Expense $ 30,432 $ 32,763 $ 33,333 $ 63,195 $ 64,038 Less: Legal Accrual 0 0 (4,537 ) 0 (4,537 ) Adjusted Core Noninterest Expense $ 30,432 $ 32,763 $ 28,796 $ 63,195 $ 59,501 Earnings Before Income Taxes $ 32,930 $ 24,240 $ 26,922 $ 57,170 $ 54,725 Adjusted Core Impact: Noninterest Income 0 0 (9,011 ) 0 (10,011 ) Noninterest Expense 0 0 4,537 0 4,537 Total Adjusted Core Impact 0 0 (4,474 ) 0 (5,474 ) Adjusted Earnings Before Income Taxes 32,930 24,240 22,448 57,170 49,251 Tax Effect (5,964 ) (4,155 ) (3,261 ) (10,119 ) (7,414 ) Core Operational Profitability (1) $ 26,966 $ 20,085 $ 19,187 $ 47,051 $ 41,837 Diluted Earnings Per Common Share $ 1.04 $ 0.78 $ 0.87 $ 1.82 $ 1.78 Impact of Adjusted Core Items 0.00 0.00 (0.13 ) 0.00 (0.16 ) Core Operational Diluted Earnings Per Common Share $ 1.04 $ 0.78 $ 0.74 $ 1.82 $ 1.62 Adjusted Core Efficiency Ratio 45.86 % 51.35 % 48.22 % 48.55 % 50.11 % (1 ) Core operational profitability was $3.4 million lower than reported net income for the three months ended June 30, 2024 and $4.1 million lower for the six months ended June 30, 2024. 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Stellar Bancorp, Inc. Reports Second Quarter 2025 Results
HOUSTON, July 25, 2025--(BUSINESS WIRE)--Stellar Bancorp, Inc. (the "Company" or "Stellar") (NYSE: STEL) today reported net income of $26.4 million, or diluted earnings per share of $0.51, for the second quarter of 2025, compared to net income of $24.7 million, or diluted earnings per share of $0.46, for the first quarter of 2025. "We are pleased to report our second quarter results that reflect the efforts of our team beginning to add growth to the foundation we've built at Stellar Bank," said Robert R. Franklin, Jr., Stellar's Chief Executive Officer. "Our bankers made meaningful progress on originations during the second quarter after experiencing elevated payoff activity. We believe that the momentum we saw at the end of the second quarter will continue, which sets us up for loan and deposit growth over the remainder of the year," Mr. Franklin continued. "We also anticipate that the President's spending bill will provide some tail wind for the Houston economy. The Stellar message is resonating with our customer base, and we are seeing great progress with our prospects. Our pipelines are building and Stellar Bank is well-positioned to gain market share in the vibrant Texas markets we serve," Mr. Franklin concluded. Financial Highlights Solid Profitability: Net income for the second quarter of 2025 was $26.4 million, or diluted earnings per share of $0.51, which translated into an annualized return on average assets of 1.01%, an annualized return on average equity of 6.62% and an annualized return on average tangible equity of 12.16%(1). Strong Net Interest Margin: Tax equivalent net interest margin for the second quarter of 2025 was 4.18% compared to 4.20% for the first quarter of 2025. The tax equivalent net interest margin, excluding purchase accounting accretion ("PAA"), was 3.95%(1) for the second quarter of 2025 compared to 3.97%(1) for the first quarter of 2025. Strong Capital Position and Book Value Build: Total risk-based capital ratio increased to 15.98% at June 30, 2025, while book value per share increased to $31.20 at June 30, 2025 from $30.89 at March 31, 2025 and tangible book value per share increased to $19.94(1) at June 30, 2025 from $19.69(1) at March 31, 2025. Low Net Charge-offs: Net charge-offs of $370 thousand, or 0.01% of average loans, for the six months ended June 30, 2025 along with manageable asset quality, compared to $713 thousand, or 0.02% of average loans, for the six months ended June 30, 2024. Repurchase of Shares: Repurchased 791 thousand shares at a weighted average price per share of $26.08 during the second quarter of 2025. Second Quarter 2025 Results Net interest income in the second quarter of 2025 decreased $923 thousand, or 0.9%, to $98.3 million from $99.3 million for the first quarter of 2025. The net interest margin on a tax equivalent basis decreased to 4.18% for the second quarter of 2025 from 4.20% for the first quarter of 2025. The decrease in the net interest margin from the prior quarter was primarily due to the impact of increased rates on interest-bearing liabilities along with the decrease in average interest-earning assets partially offset by higher rates on loans. Net interest income for the second quarter of 2025 benefited from $5.3 million of income from PAA compared to $5.4 million in the first quarter of 2025. Excluding PAA, net interest income (tax equivalent) for the second quarter of 2025 would have been $93.1 million(1) and the tax equivalent net interest margin would have been 3.95%(1). Noninterest income for the second quarter of 2025 was $5.8 million, an increase of $286 thousand, or 5.2%, compared to $5.5 million for the first quarter of 2025. Noninterest income increased in the second quarter of 2025 compared to the first quarter of 2025 primarily due to the increase in other noninterest income partially offset by the loss on sale of assets during the second quarter. A significant driver of the increase in other noninterest income was $490 thousand in Federal Reserve Bank dividends as a result of Stellar Bank becoming a member of the Federal Reserve System effective in April 2025. Noninterest expense for the second quarter of 2025 decreased $162 thousand, or 0.2%, to $70.0 million compared to $70.2 million for the first quarter of 2025. The decrease in noninterest expense in the second quarter of 2025 compared to the first quarter of 2025 was primarily due to a decrease in salaries and employee benefits of $865 thousand along with a decrease in professional fees of $499 thousand partially offset by a $473 thousand increase in net occupancy and equipment, a $385 thousand increase in advertising expense and a $567 thousand increase in other noninterest expense. The efficiency ratio was 61.87% for the second quarter of 2025 compared to 61.93%(1) for the first quarter of 2025. Annualized returns on average assets, average equity and average tangible equity were 1.01%, 6.62% and 12.16%(1) for the second quarter of 2025, respectively, compared to 0.94%, 6.21% and 11.48%(1) for the first quarter of 2025, respectively. Financial Condition Total assets at June 30, 2025 were $10.49 billion, an increase of $58.1 million compared to $10.43 billion at March 31, 2025. The increase in total assets was largely due to an increase in Federal Reserve Bank stock along with increases in cash and securities, all of which were funded largely by core deposit growth. Total loans at June 30, 2025 increased $4.2 million to $7.29 billion compared to $7.28 billion at March 31, 2025. At June 30, 2025, the remaining balance of the purchase accounting accretion ("PAA") on loans was $62.9 million. Total deposits at June 30, 2025 increased $110.9 million to $8.67 billion compared to $8.56 billion at March 31, 2025 primarily due to increases in demand and money market and savings deposits partially offset by decreases in certificates and other time and noninterest-bearing deposits. Certificates and other time deposits decreased primarily due to the reduction in brokered deposits. Asset Quality Nonperforming assets totaled $58.2 million, or 0.55% of total assets, at June 30, 2025, compared to $59.7 million, or 0.57% of total assets, at March 31, 2025. The allowance for credit losses on loans as a percentage of total loans was 1.14% at June 30, 2025 compared to 1.15% at March 31, 2025. The provision for credit losses was $1.1 million for the second quarter of 2025 compared to $3.6 million for the first quarter of 2025. Net charge-offs for the second quarter of 2025 were $206 thousand, or 0.01% (annualized) of average loans, compared to net charge-offs of $163 thousand, or 0.01% (annualized) of average loans, for the first 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 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 25, 2025 at 8:00 a.m. Central Time (9:00 a.m. Eastern Time) to discuss its results for the second quarter of 2025. Participants may register for the conference call at conference ID 63586 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@ A simultaneous webcast is available at and requires pre-registration. If you are unable to participate during the live webcast, the webcast will be accessible via the Investor Relations section of the Company's website at _____________________ (1) Refer to the calculation of this non-GAAP financial measure on page 10 of this earnings release. The calculation of returns on average tangible equity and the efficiency ratio have been adjusted from prior period disclosures. 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 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, 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: 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; risks associated with uninsured deposits and responsive measures by federal or state governments or banking regulators; legislative changes, executive orders, regulatory actions and reforms of the Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation and Texas Department of Banking. 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 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) 2025 2024 June 30 March 31 December 31 September 30 June 30 (Dollars in thousands) ASSETS: Cash and due from banks $ 136,060 $ 130,932 $ 419,967 $ 103,735 $ 110,341 Interest-bearing deposits at other financial institutions 442,044 429,643 491,249 412,482 379,909 Total cash and cash equivalents 578,104 560,575 911,216 516,217 490,250 Available for sale securities, at fair value 1,729,684 1,719,371 1,673,016 1,691,752 1,630,971 Loans held for investment 7,287,347 7,283,133 7,439,854 7,551,124 7,713,897 Less: allowance for credit losses on loans (83,165 ) (83,746 ) (81,058 ) (84,501 ) (94,772 ) Loans, net 7,204,182 7,199,387 7,358,796 7,466,623 7,619,125 Accrued interest receivable 35,537 37,669 37,884 39,473 43,348 Premises and equipment, net 108,615 109,750 111,856 113,742 113,984 Federal Reserve Bank and Federal Home Loan Bank stock 47,099 20,902 8,209 20,123 15,089 Bank-owned life insurance 108,726 108,108 107,498 106,876 106,262 Goodwill 497,318 497,318 497,318 497,318 497,318 Core deposit intangibles, net 81,468 87,007 92,546 98,116 104,315 Other assets 102,277 94,800 107,451 79,537 103,001 Total assets $ 10,493,010 $ 10,434,887 $ 10,905,790 $ 10,629,777 $ 10,723,663 LIABILITIES AND SHAREHOLDERS' EQUITY LIABILITIES: Deposits: Noninterest-bearing $ 3,183,693 $ 3,205,619 $ 3,576,206 $ 3,303,048 $ 3,308,441 Interest-bearing Demand 1,941,156 1,863,752 1,845,749 1,571,504 1,564,405 Money market and savings 2,393,767 2,248,616 2,253,193 2,280,651 2,213,031 Certificates and other time 1,154,998 1,244,726 1,453,236 1,587,398 1,639,426 Total interest-bearing deposits 5,489,921 5,357,094 5,552,178 5,439,553 5,416,862 Total deposits 8,673,614 8,562,713 9,128,384 8,742,601 8,725,303 Accrued interest payable 7,607 9,856 17,052 16,915 12,327 Borrowed funds 69,925 119,923 — 60,000 240,000 Subordinated debt 70,165 70,135 70,105 110,064 109,964 Other liabilities 67,865 61,428 82,389 74,074 70,274 Total liabilities 8,889,176 8,824,055 9,297,930 9,003,654 9,157,868 SHAREHOLDERS' EQUITY: Common stock 514 521 534 535 536 Capital surplus 1,185,048 1,202,628 1,240,050 1,238,619 1,238,477 Retained earnings 529,216 510,072 492,640 474,905 447,948 Accumulated other comprehensive loss (110,944 ) (102,389 ) (125,364 ) (87,936 ) (121,166 ) Total shareholders' equity 1,603,834 1,610,832 1,607,860 1,626,123 1,565,795 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 10,493,010 $ 10,434,887 $ 10,905,790 $ 10,629,777 $ 10,723,663 Stellar Bancorp, Inc. Financial Highlights (Unaudited) Three Months Ended Six Months Ended 2025 2024 2025 2024 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 $ 121,814 $ 120,640 $ 128,738 $ 132,372 $ 135,885 $ 242,454 $ 270,570 Securities: Taxable 15,293 16,148 14,789 13,898 11,923 31,441 21,216 Tax-exempt 810 812 814 814 816 1,622 1,634 Deposits in other financial institutions 4,782 4,720 5,681 4,692 3,555 9,502 7,182 Total interest income 142,699 142,320 150,022 151,776 152,179 285,019 300,602 INTEREST EXPENSE: Demand, money market and savings deposits 31,097 27,574 27,877 29,440 28,399 58,671 55,929 Certificates and other time deposits 11,459 13,527 16,830 18,073 18,758 24,986 33,842 Borrowed funds 407 517 235 840 1,700 924 3,474 Subordinated debt 1,401 1,444 2,123 1,916 1,912 2,845 3,829 Total interest expense 44,364 43,062 47,065 50,269 50,769 87,426 97,074 NET INTEREST INCOME 98,335 99,258 102,957 101,507 101,410 197,593 203,528 Provision for (reversal of) credit losses 1,090 3,632 942 (5,985 ) (1,935 ) 4,722 2,163 Net interest income after provision for credit losses 97,245 95,626 102,015 107,492 103,345 192,871 201,365 NONINTEREST INCOME: Service charges on deposit accounts 1,561 1,584 1,590 1,594 1,648 3,145 3,246 (Loss) gain on sale of assets (57 ) 417 (112 ) 432 (64 ) 360 449 Bank-owned life insurance 618 610 622 614 591 1,228 1,178 Debit card and interchange income 566 520 570 551 543 1,086 1,070 Other 3,103 2,374 2,362 3,111 2,698 5,477 5,769 Total noninterest income 5,791 5,505 5,032 6,302 5,416 11,296 11,712 NONINTEREST EXPENSE: Salaries and employee benefits 40,927 41,792 43,797 41,123 39,061 82,719 80,437 Net occupancy and equipment 4,399 3,926 4,401 4,570 4,503 8,325 8,893 Depreciation 1,992 1,995 1,984 1,911 1,948 3,987 3,912 Data processing and software amortization 5,620 5,682 5,551 5,706 5,501 11,302 10,395 Professional fees 1,287 1,786 3,428 1,714 1,620 3,073 4,282 Regulatory assessments and FDIC insurance 1,561 1,733 1,636 1,779 2,299 3,294 4,153 Amortization of intangibles 5,548 5,548 5,581 6,212 6,215 11,096 12,427 Communications 861 847 807 827 847 1,708 1,784 Advertising 1,167 782 1,593 878 891 1,949 1,656 Other 6,642 6,075 6,488 6,346 8,331 12,717 14,687 Total noninterest expense 70,004 70,166 75,266 71,066 71,216 140,170 142,626 INCOME BEFORE INCOME TAXES 33,032 30,965 31,781 42,728 37,545 63,997 70,451 Provision for income taxes 6,680 6,263 6,569 8,837 7,792 12,943 14,551 NET INCOME $ 26,352 $ 24,702 $ 25,212 $ 33,891 $ 29,753 $ 51,054 $ 55,900 EARNINGS PER SHARE Basic $ 0.51 $ 0.46 $ 0.47 $ 0.63 $ 0.56 $ 0.98 $ 1.05 Diluted $ 0.51 $ 0.46 $ 0.47 $ 0.63 $ 0.56 $ 0.97 $ 1.04 Stellar Bancorp, Inc. Financial Highlights (Unaudited) Three Months Ended Six Months Ended 2025 2024 2025 2024 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 $ 26,352 $ 24,702 $ 25,212 $ 33,891 $ 29,753 $ 51,054 $ 55,900 Earnings per share, basic $ 0.51 $ 0.46 $ 0.47 $ 0.63 $ 0.56 $ 0.98 $ 1.05 Earnings per share, diluted $ 0.51 $ 0.46 $ 0.47 $ 0.63 $ 0.56 $ 0.97 $ 1.04 Dividends per share $ 0.14 $ 0.14 $ 0.14 $ 0.13 $ 0.13 $ 0.28 $ 0.26 Return on average assets(A) 1.01 % 0.94 % 0.94 % 1.27 % 1.13 % 0.98 % 1.06 % Return on average equity(A) 6.62 % 6.21 % 6.21 % 8.49 % 7.78 % 6.42 % 7.33 % Return on average tangible equity(A)(B)(D) 12.16 % 11.48 % 11.53 % 15.61 % 14.94 % 11.82 % 14.28 % Net interest margin (tax equivalent)(A)(C) 4.18 % 4.20 % 4.25 % 4.19 % 4.24 % 4.19 % 4.25 % Net interest margin (tax equivalent) excluding PAA(A)(B)(C) 3.95 % 3.97 % 3.94 % 3.91 % 3.82 % 3.96 % 3.86 % Efficiency ratio(B)(E) 61.87 % 61.93 % 64.46 % 60.40 % 60.81 % 61.90 % 60.62 % Capital Ratios Stellar Bancorp, Inc. (Consolidated) Equity to assets 15.28 % 15.44 % 14.74 % 15.30 % 14.60 % 15.28 % 14.60 % Tangible equity to tangible assets(B)(E) 10.34 % 10.42 % 9.87 % 10.27 % 9.53 % 10.34 % 9.53 % Estimated Total capital ratio (to risk-weighted assets) 15.98 % 15.97 % 16.00 % 15.85 % 15.30 % 15.98 % 15.30 % Estimated Common equity Tier 1 capital (to risk weighted assets) 14.06 % 14.05 % 14.14 % 13.57 % 12.95 % 14.06 % 12.95 % Estimated Tier 1 capital (to risk-weighted assets) 14.18 % 14.17 % 14.26 % 13.69 % 13.06 % 14.18 % 13.06 % Estimated Tier 1 leverage (to average tangible assets) 11.44 % 11.20 % 11.31 % 11.10 % 10.77 % 11.44 % 10.77 % Stellar Bank Estimated Total capital ratio (to risk-weighted assets) 15.39 % 15.40 % 15.28 % 15.02 % 14.61 % 15.39 % 14.61 % Estimated Common equity Tier 1 capital (to risk-weighted assets) 14.18 % 14.20 % 14.13 % 13.58 % 13.08 % 14.18 % 13.08 % Estimated Tier 1 capital (to risk-weighted assets) 14.18 % 14.20 % 14.13 % 13.58 % 13.08 % 14.18 % 13.08 % Estimated Tier 1 leverage (to average tangible assets) 11.44 % 11.22 % 11.21 % 11.01 % 10.78 % 11.44 % 10.78 % Other Data Weighted average shares: Basic 51,529 53,146 53,422 53,541 53,572 52,333 53,457 Diluted 51,569 53,197 53,471 53,580 53,608 52,376 53,506 Period end shares outstanding 51,398 52,141 53,429 53,446 53,564 51,398 53,564 Book value per share $ 31.20 $ 30.89 $ 30.09 $ 30.43 $ 29.23 $ 31.20 $ 29.23 Tangible book value per share(B) $ 19.94 $ 19.69 $ 19.05 $ 19.28 $ 18.00 $ 19.94 $ 18.00 Employees - full-time equivalents 1,062 1,054 1,037 1,040 1,045 1,062 1,045 (A) Interim periods annualized. (B) Refer to the calculation of these non-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) The calculation of return on average tangible equity has been adjusted from prior period disclosures. All periods presented above have been recalculated and disclosed under the same calculation. (E) The calculation of the efficiency ratio has been adjusted from prior period disclosures. All periods presented above have been recalculated and disclosed under the same calculation. Stellar Bancorp, Inc. Financial Highlights (Unaudited) Three Months Ended June 30, 2025 March 31, 2025 June 30, 2024 AverageBalance InterestEarned/InterestPaid AverageYield/Rate AverageBalance InterestEarned/InterestPaid AverageYield/Rate AverageBalance InterestEarned/InterestPaid AverageYield/Rate (Dollars in thousands) Assets Interest-Earning Assets: Loans $ 7,282,609 $ 121,814 6.71 % $ 7,344,298 $ 120,640 6.66 % $ 7,808,320 $ 135,885 7.00 % Securities 1,729,384 16,103 3.73 % 1,817,286 16,960 3.78 % 1,549,638 12,739 3.31 % Deposits in other financial institutions 436,596 4,782 4.39 % 430,621 4,720 4.45 % 258,916 3,555 5.52 % Total interest-earning assets 9,448,589 $ 142,699 6.06 % 9,592,205 $ 142,320 6.02 % 9,616,874 $ 152,179 6.36 % Allowance for credit losses on loans (83,700 ) (81,166 ) (96,306 ) Noninterest-earning assets 1,099,268 1,100,652 1,103,297 Total assets $ 10,464,157 $ 10,611,691 $ 10,623,865 Liabilities and Shareholders' Equity Interest-Bearing Liabilities: Interest-bearing demand deposits $ 1,952,004 $ 14,399 2.96 % $ 1,911,625 $ 12,392 2.63 % $ 1,545,096 $ 12,213 3.18 % Money market and savings deposits 2,371,221 16,698 2.82 % 2,234,571 15,182 2.76 % 2,227,393 16,186 2.92 % Certificates and other time deposits 1,201,903 11,459 3.82 % 1,296,972 13,527 4.23 % 1,694,536 18,758 4.45 % Borrowed funds 34,427 407 4.74 % 45,795 517 4.58 % 112,187 1,700 6.09 % Subordinated debt 70,151 1,401 8.01 % 70,121 1,444 8.35 % 109,910 1,912 7.00 % Total interest-bearing liabilities 5,629,706 $ 44,364 3.16 % 5,559,084 $ 43,062 3.14 % 5,689,122 $ 50,769 3.59 % Noninterest-Bearing Liabilities: Noninterest-bearing demand deposits 3,160,791 3,346,066 3,308,633 Other liabilities 78,120 92,299 87,986 Total liabilities 8,868,617 8,997,449 9,085,741 Shareholders' equity 1,595,540 1,614,242 1,538,124 Total liabilities and shareholders' equity $ 10,464,157 $ 10,611,691 $ 10,623,865 Net interest rate spread 2.90 % 2.88 % 2.77 % Net interest income and margin $ 98,335 4.17 % $ 99,258 4.20 % $ 101,410 4.24 % Net interest income and margin (tax equivalent) $ 98,427 4.18 % $ 99,353 4.20 % $ 101,482 4.24 % Cost of funds 2.02 % 1.96 % 2.27 % Cost of deposits 1.97 % 1.90 % 2.16 % Stellar Bancorp, Inc. Financial Highlights (Unaudited) Six Months Ended June 30, 2025 2024 AverageBalance InterestEarned/Interest Paid AverageYield/Rate AverageBalance InterestEarned/ Interest Paid AverageYield/Rate (Dollars in thousands) Assets Interest-Earning Assets: Loans $ 7,313,283 $ 242,454 6.69 % $ 7,873,572 $ 270,570 6.91 % Securities 1,773,092 33,063 3.76 % 1,495,726 22,850 3.07 % Deposits in other financial institutions 433,625 9,502 4.42 % 261,911 7,182 5.51 % Total interest-earning assets 9,520,000 $ 285,019 6.04 % 9,631,209 $ 300,602 6.28 % Allowance for credit losses on loans (82,440 ) (93,959 ) Noninterest-earning assets 1,099,956 1,118,077 Total assets $ 10,537,516 $ 10,655,327 Liabilities and Shareholders' Equity Interest-Bearing Liabilities: Interest-bearing demand deposits $ 1,931,926 $ 26,791 2.80 % $ 1,621,154 $ 24,491 3.04 % Money market and savings deposits 2,303,273 31,880 2.79 % 2,189,099 31,438 2.89 % Certificates and other time deposits 1,249,175 24,986 4.03 % 1,569,292 33,842 4.34 % Borrowed funds 40,079 924 4.65 % 123,293 3,474 5.67 % Subordinated debt 70,136 2,845 8.18 % 109,859 3,829 7.01 % Total interest-bearing liabilities 5,594,589 $ 87,426 3.15 % 5,612,697 $ 97,074 3.48 % Noninterest-Bearing Liabilities: Noninterest-bearing demand deposits 3,252,917 3,417,196 Other liabilities 85,171 92,223 Total liabilities 8,932,677 9,122,116 Shareholders' equity 1,604,839 1,533,211 Total liabilities and shareholders' equity $ 10,537,516 $ 10,655,327 Net interest rate spread 2.89 % 2.80 % Net interest income and margin $ 197,593 4.19 % $ 203,528 4.25 % Net interest income and margin (tax equivalent) $ 197,780 4.19 % $ 203,688 4.25 % Cost of funds 1.99 % 2.16 % Cost of deposits 1.93 % 2.05 % Stellar Bancorp, Inc. Financial Highlights (Unaudited) Three Months Ended 2025 2024 June 30 March 31 December 31 September 30 June 30 (Dollars in thousands) Period-end Loan Portfolio: Commercial and industrial $ 1,346,744 $ 1,362,266 $ 1,362,260 $ 1,350,753 $ 1,396,064 Real estate: Commercial real estate (including multi-family residential) 3,840,981 3,854,607 3,868,218 3,976,296 4,029,671 Commercial real estate construction and land development 762,911 721,488 845,494 890,316 922,805 1-4 family residential (including home equity) 1,126,523 1,125,837 1,115,484 1,112,235 1,098,681 Residential construction 137,855 141,283 157,977 161,494 200,134 Consumer and other 72,333 77,652 90,421 60,030 66,542 Total loans held for investment $ 7,287,347 $ 7,283,133 $ 7,439,854 $ 7,551,124 $ 7,713,897 Deposits: Noninterest-bearing $ 3,183,693 $ 3,205,619 $ 3,576,206 $ 3,303,048 $ 3,308,441 Interest-bearing Demand 1,941,156 1,863,752 1,845,749 1,571,504 1,564,405 Money market and savings 2,393,767 2,248,616 2,253,193 2,280,651 2,213,031 Certificates and other time 1,154,998 1,244,726 1,453,236 1,587,398 1,639,426 Total interest-bearing deposits 5,489,921 5,357,094 5,552,178 5,439,553 5,416,862 Total deposits $ 8,673,614 $ 8,562,713 $ 9,128,384 $ 8,742,601 $ 8,725,303 Asset Quality: Nonaccrual loans $ 50,505 $ 54,518 $ 37,212 $ 32,140 $ 50,906 Accruing loans 90 or more days past due — — — — — Total nonperforming loans 50,505 54,518 37,212 32,140 50,906 Foreclosed assets 7,652 5,154 1,734 2,984 2,548 Total nonperforming assets $ 58,157 $ 59,672 $ 38,946 $ 35,124 $ 53,454 Net charge-offs (recoveries) $ 206 $ 163 $ 2,016 $ 3,933 $ (1 ) Nonaccrual loans: Commercial and industrial $ 13,395 $ 11,471 $ 8,500 $ 9,718 $ 18,451 Real estate: Commercial real estate (including multi-family residential) 23,359 26,383 16,459 10,695 18,094 Commercial real estate construction and land development 3,412 2,027 3,061 4,183 1,641 1-4 family residential (including home equity) 9,965 14,550 9,056 7,259 12,454 Residential construction 176 — — 121 155 Consumer and other 198 87 136 164 111 Total nonaccrual loans $ 50,505 $ 54,518 $ 37,212 $ 32,140 $ 50,906 Asset Quality Ratios: Nonperforming assets to total assets 0.55 % 0.57 % 0.36 % 0.33 % 0.50 % Nonperforming loans to total loans 0.69 % 0.75 % 0.50 % 0.43 % 0.66 % Allowance for credit losses on loans to nonperforming loans 164.67 % 153.61 % 217.83 % 262.92 % 186.17 % Allowance for credit losses on loans to total loans 1.14 % 1.15 % 1.09 % 1.12 % 1.23 % Net charge-offs to average loans (annualized) 0.01 % 0.01 % 0.11 % 0.21 % 0.00 % 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 Six Months Ended 2025 2024 2025 2024 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 $ 26,352 $ 24,702 $ 25,212 $ 33,891 $ 29,753 $ 51,054 $ 55,900 Add: Provision for (reversal of) credit losses 1,090 3,632 942 (5,985 ) (1,935 ) 4,722 2,163 Add: Provision for income taxes 6,680 6,263 6,569 8,837 7,792 12,943 14,551 Pre-tax, pre-provision income $ 34,122 $ 34,597 $ 32,723 $ 36,743 $ 35,610 $ 68,719 $ 72,614 Total average assets $ 10,464,157 $ 10,611,691 $ 10,649,175 $ 10,626,266 $ 10,623,865 $ 10,537,516 $ 10,655,327 Pre-tax, pre-provision return on average assets(A) 1.31 % 1.32 % 1.22 % 1.38 % 1.35 % 1.32 % 1.37 % Total shareholders' equity $ 1,603,834 $ 1,610,832 $ 1,607,860 $ 1,626,123 $ 1,565,795 $ 1,603,834 $ 1,565,795 Less: Goodwill and core deposit intangibles, net 578,786 584,325 589,864 595,434 601,633 578,786 601,633 Tangible shareholders' equity $ 1,025,048 $ 1,026,507 $ 1,017,996 $ 1,030,689 $ 964,162 $ 1,025,048 $ 964,162 Shares outstanding at end of period 51,398 52,141 53,429 53,446 53,564 51,398 53,564 Tangible book value per share $ 19.94 $ 19.69 $ 19.05 $ 19.28 $ 18.00 $ 19.94 $ 18.00 Average shareholders' equity $ 1,595,540 $ 1,614,242 $ 1,614,762 $ 1,587,918 $ 1,538,124 $ 1,604,839 $ 1,533,211 Less: Average goodwill and core deposit intangibles, net 581,438 586,895 592,471 598,866 604,722 584,152 607,935 Average tangible shareholders' equity $ 1,014,102 $ 1,027,347 $ 1,022,291 $ 989,052 $ 933,402 $ 1,020,687 $ 925,276 Net income $ 26,352 $ 24,702 $ 25,212 $ 33,891 $ 29,753 $ 51,054 $ 55,900 Add: Core deposit intangibles amortization, net of tax 4,383 4,383 4,409 4,907 4,910 8,766 9,817 Adjusted net income $ 30,735 $ 29,085 $ 29,621 $ 38,798 $ 34,663 $ 59,820 $ 65,717 Return on average tangible equity(A)(B) 12.16 % 11.48 % 11.53 % 15.61 % 14.94 % 11.82 % 14.28 % Total assets $ 10,493,010 $ 10,434,887 $ 10,905,790 $ 10,629,777 $ 10,723,663 $ 10,493,010 $ 10,723,663 Less: Goodwill and core deposit intangibles, net 578,786 584,325 589,864 595,434 601,633 578,786 601,633 Tangible assets $ 9,914,224 $ 9,850,562 $ 10,315,926 $ 10,034,343 $ 10,122,030 $ 9,914,224 $ 10,122,030 Tangible equity to tangible assets 10.34 % 10.42 % 9.87 % 10.27 % 9.53 % 10.34 % 9.53 % Net interest income (tax equivalent) $ 98,427 $ 99,353 $ 103,039 $ 101,578 $ 101,482 $ 197,780 $ 203,688 Less: Purchase accounting accretion 5,344 5,397 7,555 6,795 10,098 10,741 18,649 Adjusted net interest income (tax equivalent) $ 93,083 $ 93,956 $ 95,484 $ 94,783 $ 91,384 $ 187,039 $ 185,039 Average earning assets $ 9,448,589 $ 9,592,205 $ 9,653,162 $ 9,643,629 $ 9,616,874 $ 9,520,000 $ 9,631,209 Net interest margin (tax equivalent) excluding PAA(A) 3.95 % 3.97 % 3.94 % 3.91 % 3.82 % 3.96 % 3.86 % Noninterest expense $ 70,004 $ 70,166 $ 75,266 $ 71,066 $ 71,216 $ 140,170 $ 142,626 Less: Core deposit intangibles amortization 5,548 5,548 5,581 6,212 6,215 11,096 12,427 Adjusted noninterest expense $ 64,456 $ 64,618 $ 69,685 $ 64,854 $ 65,001 $ 129,074 $ 130,199 Net interest income $ 98,335 $ 99,258 $ 102,957 $ 101,507 $ 101,410 $ 197,593 $ 203,528 Noninterest income 5,791 5,505 5,032 6,302 5,416 11,296 11,712 Less: (Loss) gain on sale of assets (57 ) 417 (112 ) 432 (64 ) 360 449 Adjusted noninterest income 5,848 5,088 5,144 5,870 5,480 10,936 11,263 Net interest income plus adjusted noninterest income $ 104,183 $ 104,346 $ 108,101 $ 107,377 $ 106,890 $ 208,529 $ 214,791 Efficiency ratio(C) 61.87 % 61.93 % 64.46 % 60.40 % 60.81 % 61.90 % 60.62 % (A) Interim periods annualized. (B) The calculation of return on average tangible equity has been adjusted from prior period disclosures. All periods presented above have been recalculated and disclosed under the same calculation. (C) The calculation of the efficiency ratio has been adjusted from prior period disclosures. All periods presented above have been recalculated and disclosed under the same calculation. View source version on Contacts Investor Relations ir@
