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Stellar Bancorp(STEL) - 2024 Q4 - Earnings Call Transcript
STELStellar Bancorp(STEL)2025-02-01 00:44
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Financial Data and Key Metrics Changes - The company reported a fourth quarter net income of 27.8millionor27.8 million or 0.52 per diluted share, with an annualized ROAA of 1.04% and an annualized ROATCE of 10.82% [12] - For the full year 2024, net income was 117.6millionor117.6 million or 2.20 per diluted share, representing an ROAA of 1.1% and an ROATCE of 12.18% [12] - Net interest income for the fourth quarter was 103million,slightlyupfrom103 million, slightly up from 101.5 million in the third quarter, translating to a net interest margin of 4.25% compared to 4.19% in the previous quarter [14] Business Line Data and Key Metrics Changes - The commercial real estate portfolio remains well within regulatory guidelines, allowing for a full spectrum of loan offerings [10] - Non-interest income for the fourth quarter was 5million,downfrom5 million, down from 6.3 million in the third quarter, which had benefited from one-time income [17] - Non-interest expense for the fourth quarter was 72million,upfrom72 million, up from 71.1 million in the third quarter, with full year expenses at 285.7million,slightlylowerthanthepreviousyear[18]MarketDataandKeyMetricsChanges−Thecompanynotedpositivetrendsinjobgrowth,populationincrease,andlimitedhousinginventories,whichareexpectedtoserveastailwindsentering2025[9]−Thecompanyreportedastrongdepositbase,withnon−interestbearingdepositsrepresenting39285.7 million, slightly lower than the previous year [18] Market Data and Key Metrics Changes - The company noted positive trends in job growth, population increase, and limited housing inventories, which are expected to serve as tailwinds entering 2025 [9] - The company reported a strong deposit base, with non-interest bearing deposits representing 39% of the deposit base at year-end [15] Company Strategy and Development Direction - The company aims to expand its low-cost core funding base while broadening loan offerings, focusing on customer relationships in 2025 [10][11] - The strategy includes evaluating share repurchases and potential partnerships, with a clear focus on organic growth [21][22] - The company plans to maintain a straightforward approach to grow existing relationships and cultivate new ones [11] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the business environment, citing stabilized interest rates and a favorable economic backdrop [8] - The company remains vigilant about inflation but is encouraged by job growth and increased oil and gas production [9] - Management expects modest growth in non-interest expenses in line with inflation for 2025 [19] Other Important Information - The total risk-based capital ratio was reported at 16.06% at the end of the fourth quarter, up from 14.02% at the end of 2023 [20] - The company did not repurchase any shares in the fourth quarter but redeemed 40 million of bank-level subordinated debt [21] Q&A Session Summary Question: Inquiry about higher professional fees - The increase in professional fees was attributed to timing related to certain outsourced auditing engagements [29] Question: Operating leverage and M&A role - Management indicated that while organic growth is possible, M&A could accelerate the process, but they are cautious about potential mistakes [32] Question: Loan growth outlook for 2025 - Management reaffirmed a mid-single-digit growth target for loans in 2025, supported by strong fourth quarter loan originations [44][45] Question: Deposit growth expectations - Management noted that leading indicators for deposit growth are positive, with a significant portion of new accounts coming from new customers [47] Question: Positive operating leverage guidance - Management expects revenue growth to match or exceed the low to mid-single-digit growth in non-interest expenses to achieve positive operating leverage [50] Question: Securities portfolio trends - The company aims to maintain its securities portfolio at around 15% to 16% of the balance sheet while seeking to drive the right return profile [72] Question: Provisioning and normalized charge-off rates - Management anticipates a normalization in credit conditions and expects mid-teens net charge-off rates moving forward [76][79] Question: Economic outlook and competition - Management expressed confidence in the Houston market's resilience and noted competitive pressures from larger banks, emphasizing the need to build their brand [91][95]