Stellar Bancorp(US:STEL)2025-04-25 14:00Financial Data and Key Metrics Changes - The company reported a net income of $24.7 million or $0.46 per diluted share, with an annualized return on average assets of 94 basis points and an annualized return on average tangible common equity of 11.48% [10] - Net interest income for the quarter was $99.3 million, a decrease from $103 million in the previous quarter, resulting in a net interest margin of 4.2% compared to 4.25% in the fourth quarter of 2024 [11][12] - Non-interest expense decreased to $70.2 million from $75.3 million in the previous quarter, reflecting a focus on managing expenses [13] Business Line Data and Key Metrics Changes - The company experienced a provision for loan losses of $3.6 million, with minimal net charge-offs of $163,000, bringing the allowance for credit losses on loans to $83.7 million or 1.15% of loans [13] - Non-interest income increased to $5.5 million from $5 million in the previous quarter, benefiting from small gains on asset sales [13] Market Data and Key Metrics Changes - The company noted a competitive market for deposits, with a focus on new account origination, onboarding more accounts in both number and dollar amount compared to the previous quarter [30][31] - The company maintained a strong proportion of non-interest bearing deposits, representing over 37% of the deposit base, and achieved a 14 basis point improvement in the cost of funds [12] Company Strategy and Development Direction - The company aims to build a strong foundation for growth while managing capital to benefit shareholders, including share repurchases totaling 1.4 million shares at an average price of $27.99 [15][17] - The management expressed a cautious but optimistic outlook for growth, expecting it to be pushed to the latter half of the year due to current economic uncertainties [9][11] Management's Comments on Operating Environment and Future Outlook - Management acknowledged economic uncertainty introduced by the administration but noted no immediate signs of impact on their communities [7] - The company remains focused on customer acquisition and is optimistic about the growth potential in the second half of the year, despite challenges [9][28] Other Important Information - The total risk-based capital ratio was 15.94% at the end of the first quarter, slightly down from 16% at the end of 2024, but the regulatory capital ratios at the bank increased year-over-year [14] - The Board of Directors authorized a new share repurchase program allowing up to $65 million in shares to be repurchased through May 2026 [15] Q&A Session Summary Question: What is the current sentiment from clients regarding loan growth? - Management indicated a cautious optimism about potential loan growth, noting that the pipeline is building positively and that payoffs have been significant, around $275 million to $300 million per quarter [22][27] Question: Can you elaborate on the competitive deposit market? - Management confirmed that the market is intensely competitive, but they have successfully onboarded new accounts, with a significant portion being new customers [30][31] Question: What are the current trends in credit quality? - Management noted some migration in non-accruals, particularly in owner-occupied commercial real estate, but emphasized a cautious approach to credit evaluation [34][37] Question: What are the company's plans regarding capital management? - Management stated they are considering various options for capital utilization, including potential debt redemption and continued share buybacks, while remaining open to M&A opportunities [44][46] Question: How do you see the interest margin evolving? - Management expressed a goal to achieve a core net interest margin of over 4%, while acknowledging that improvements may be incremental due to current economic conditions [56][58]