Stellar Bancorp(US:STEL)2025-04-25 14:02Financial Data and Key Metrics Changes - The company reported a net income of $24.7 million or $0.46 per diluted share for Q1 2025, 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 decreased to $99.3 million from $103 million in the previous quarter, resulting in a net interest margin of 4.2%, down from 4.25% [11][12] - Non-interest expenses decreased to $70.2 million from $75.3 million in the previous quarter, reflecting a reduction of $5.1 million [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, increasing 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 [31][32] - 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, focusing on customer acquisition and managing capital to benefit shareholders through share repurchases [7][8] - The management expressed a cautious approach to growth due to economic uncertainty, anticipating growth to be pushed to the latter half of the year [9] Management's Comments on Operating Environment and Future Outlook - Management acknowledged economic uncertainty introduced by the administration but remains optimistic about opportunities for new customer acquisition and growth in the second half of the year [7][9] - The management emphasized a disciplined approach to credit monitoring in light of new tariff policies affecting customers [7] Other Important Information - The company repurchased 1.4 million shares at a weighted average price of $27.99 per share during the first quarter, with a new share repurchase program authorized for up to $65 million through May 2026 [15] - Year-over-year tangible book value per share increased by 14.3% from $17.23 to $19.69, after accounting for dividends and share repurchases [14] Q&A Session Summary Question: Client sentiment and loan pipeline trends - Management noted a cautious optimism regarding loan growth, with a focus on reconfiguring the loan book to reduce reliance on smaller real estate loans [22][23] - The loan originations in Q1 were solid, supporting a positive outlook for the pipeline and deal flow [26] Question: Competitive deposit market - Management highlighted the intense competition in the deposit market, with successful onboarding of new accounts and a low level of closed accounts [30][31] Question: Credit migration and concerns - Management reported migration in non-accruals primarily in owner-occupied commercial real estate, but did not attribute it to tariffs, indicating a cautious approach to new credits [35][36] Question: Capital management and buyback strategy - Management discussed the ongoing evaluation of capital use, including potential debt redemption and the flexibility to pursue M&A opportunities [44][46] Question: Expense trends and outlook - Management cautioned against annualizing the first quarter's expenses, indicating a focus on managing costs while investing in growth [68]