Stellar Bancorp(US:STEL)2022-01-28 20:35Financial Data and Key Metrics Changes - The company reported a net income of $21.6 million or $1.06 per diluted share for Q4 2021, compared to $19.1 million or $0.93 per diluted share in Q3 2021 and $15.9 million or $0.77 per diluted share in Q4 2020 [34] - Full-year net income for 2021 was $81.6 million or $4.01 per diluted share, up from $45.5 million or $2.22 per diluted share in 2020 [35] - The pre-tax pre-provision income for Q4 was $23.8 million, down from $25.9 million in Q3 2021 [36] - The net interest income for Q4 was $58.1 million, slightly down from $58.2 million in Q3 2021 but up from $54.9 million in Q4 2020 [37][38] Business Line Data and Key Metrics Changes - Core loans increased by $75 million during Q4 at an annualized growth rate of 7.5%, with total core loans reaching over $4 billion [10][25] - The company originated $450 million in core loans during Q4, with total loan originations for the year reaching $2 billion, a record for the bank [21] - Non-performing assets decreased to 34 basis points of total assets, down from 44 basis points in Q3 2021 [26] Market Data and Key Metrics Changes - Total deposits increased by $381 million in Q4 and were up $1.1 billion compared to the year-ago quarter [30] - Noninterest-bearing deposits to total deposit ratio improved to 37.1% as of December 31, compared to 36.8% in Q3 2021 [31] - The Houston region created 152,000 jobs in 2021, indicating strong economic growth that supports demand for banking services [32] Company Strategy and Development Direction - The company announced a merger of equals with CBTX, Inc., which is expected to enhance its market position and operational efficiency [14] - The management emphasized a commitment to community outreach and support, including partnerships with local organizations [16][17] - The focus remains on loan growth as the primary use of liquidity, with a strategic approach to managing the securities portfolio [61] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about loan growth entering 2022, supported by a healthy pipeline and reduced pay-downs [58][60] - The company is positioned to benefit from a favorable interest rate environment, which is expected to enhance net interest income [80] - Management acknowledged the challenges of integrating the two organizations post-merger but expressed confidence in the collaborative efforts of both teams [75] Other Important Information - The company declared an increase in the quarterly dividend rate to $0.14 per share, up 16.7% from the previous rate [50] - The year-end tangible book value per share was $28.43, reflecting an 11% increase from the prior year-end [50] Q&A Session Summary Question: How does the company view loan growth in 2022 with the merger? - Management indicated a healthy pipeline and expected to carry momentum from Q4 into 2022, aiming for high-single digit growth [58][60] Question: What is the appetite for additional bond purchases versus loan growth? - The company emphasized that loan growth is the priority, with securities purchases being a secondary consideration to manage liquidity [61][62] Question: What are the expectations for expense growth in 2022? - Management noted that while inflationary pressures exist, they aim to maintain a core expense rate around $34 million, excluding one-time merger-related costs [70][72] Question: How is the integration process for the merger progressing? - The integration teams are actively working together, with leadership and project managers in place to ensure a smooth transition [74][75] Question: What drove the record loan origination in Q4? - The increase was attributed to customer acquisition, improved economic conditions, and efforts to pursue larger loan relationships [78] Question: How does the company view asset sensitivity post-merger? - Management expressed confidence in the combined entity's asset sensitivity profile, anticipating benefits from the first rate hikes [80][82]