Stellar Bancorp(US:STEL)2021-10-30 17:27Financial Data and Key Metrics Changes - Net income for Q3 2021 was $19.1 million or $0.93 per diluted share, compared to $22.9 million or $1.12 per diluted share in Q2 2021 and $16.2 million or $0.79 per diluted share in Q3 2020 [19] - Pretax pre-provision income reached a record of $25.9 million, up from $25.3 million in Q2 2021 and $21.2 million in Q3 2020 [20] - Net interest income increased by $1.6 million or 2.8% to $58.2 million in Q3 2021 from $56.6 million in Q2 2021 [20] - Total non-interest expense rose to $34.3 million in Q3 2021 from $33.6 million in Q2 2021, primarily due to professional fees [24] Business Line Data and Key Metrics Changes - Total core loans, excluding PPP loans, increased by $37.9 million during the quarter, ending at $4 billion [13] - New core loans originated in Q3 2021 amounted to $454 million, surpassing the previous record set in Q2 2021 [12] - Paid-off core loans were $290 million in Q3 2021, compared to $238 million in Q2 2021 [13] Market Data and Key Metrics Changes - Total deposits increased by $234 million in Q3 2021 from Q2 2021 and by $750 million year-over-year [16] - Non-interest bearing deposits to total deposit ratio was 36.7% for September 30, 2021, compared to 36.3% for June 30, 2021 [16] - The Houston Purchasing Managers Index was 59.5 in September, indicating economic expansion [17] Company Strategy and Development Direction - The company aims to grow core loans and improve productivity to handle more growth [9] - There is a focus on expanding relationships and attracting new business, with a healthy mix of internal and external lender additions [12] - The company is exploring larger loan relationships to enhance growth potential [45] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the economic conditions in Houston, noting strong customer sentiment and a robust pipeline [31] - The company is positioned well for growth, with a strong capital position and liquidity [9] - Management acknowledged the competitive landscape but highlighted the stability of new loan yields [35] Other Important Information - The allowance for credit losses on loans ended the quarter at $50.5 million, representing 118 basis points of total loans [25] - The company has approximately $10.8 million of net deferred fees remaining related to PPP loans [21] - The tangible book value per share increased to $27.67, a 10.8% rise from the previous year [26] Q&A Session Summary Question: Insights on loan origination drivers - Management expects the trend of improving production to continue, driven by strong economic conditions and effective pipeline management [31] Question: Competitive landscape and pricing pressure - There is significant competition, but the company has managed to maintain stable new loan yields [35] Question: Future margin outlook with PPP forgiveness and deposit growth - The largest dynamic driving margin will be funded core loan growth, which is currently a focus for the company [38] Question: Loan growth potential and origination levels - Management believes they have the pieces in place to accelerate loan growth, targeting mid- to high-digit growth [44] Question: Impact of Fed rate increases on loan portfolio - The company is positioned to benefit from potential increases in Fed funds, expecting improvements in net interest income [82]