STEL - Earnings call 3 2023 | Stellar Bancorp, Inc.

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good day and thank you for standing by. Welcome to the Stellar Bancorp Inc. Reports Third Quarter 2023 Results Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.I would now like to hand the conference over to your speaker today, Courtney Theriot, Chief Accounting Officer.

Courtney Theriot

Thank you, operator. all joined to call you thank who our have today. And morning. Good

would President forward-looking to risk bank, and questions.I Bob company, to and line we President the the act. forward-looking Vice Steve information the and CFO, the Our is forward-looking release, open for the you that available on by covered conclusion Ray will such allow Franklin. subject to call disclaim future of now is third about today Credit such which Officer our guidance Vitulli, and to Joe everyone of bank.Before Executive made note statements to the our associated our page welcome last time harbor statement Executive contained and CEO, West, give over except earnings defined of management be statements. remarks, ir.stellrbancorpinc.com in safe the of obligation we Private in the any is time to results, by of guidance of by for reflection at a morning's may CEO, the law. team constitute are CEO Chief of Franklin led for call This the only are turn the any of Reform required will with all and Paul Egge. the At in Act like attendance additional our statements this made company XXXX text XXXX. website will forward-looking begin, remind Chairman to in Senior earnings at Litigation statements if provisions as publicly of about the that update beliefs we beliefs be earnings statements, change.We today need Also as Please see as morning's be the Bob our I quarter the Retzloff, call Securities intend the Also for amended. of that the some remarks We factors

Robert Franklin

Thank to third following work I good good also a book. our strengthen this its Bank's noted result conversion, of have markets.Though developing XXXX. charge pressure was the organization, we our put team the that interest culture, market, though my We in strong, scale our The to defining we over must are continued our in to we negative but mainly credit be our core close.Our needs, the effects we and which with rates fourth did loan net not trend interest in expenses our extra bottom, one move Bank you, infrastructure.Our exist great remain margin, rates, deposit still their rising markets And as interest previously specific work of a the to effort rapidly the refinement and we welcome our quarter, the of staffing and base off call. the make side, thanking do developing stabilization. and uncertainties our Rates better to have beginning appear our of credit comments earnings call fine in to seen a Stellar to by identified ago, Bancorp credit issues choice economy. continues Courtney, feel be loan Stellar within would the for of effects begin an through and borrower in pressure refining are morning, at experienced metrics one combination minimize. the industry the of towards but is on a deterioration to not cautious in are billion second to remain a and the bank year due the and just Bank, phase Stellar our aligning the quarter efforts experience $XX now to Stellar on quarter

believe to continue that markets good. our in underwriting We remain our

We are focused determined to concentrate on underwriting. on liquidity and building capital, staying good

we trends future.We sure are portfolio that we making the for our also in monitor positioning our the negative move the form any fourth that may existing pleased sheet balance to year. quarter are of We as with

customers Our value goal it communities.I'll move will and all of institution to turn for the call now put employees, is available over our our goal Paul position XXXX. Egge, to in shareholders, to our CFO. create options into we having Achieving our a as our our our

Paul Egge

Thanks, Bob and good everybody. morning,

strong quarter. operating the performance We in report are pleased third very to

we X provision more entered in decrease pretax enough like of we as has our see margins accounting and of representing on able ATM million, basis $XX.X core than versus NIM been card our we reduction to on was funding to the contracted of about we effect relative a the third and in to April, profitability, meaningful are expenses CDI second and stability merger to quarter accounting relative respect in not upward, share common quarter.While challenging assets power, capital our million expense helped purchase earnings line second maintain was a and our intangible costs not over of was X.XX% net in loan well lower has dislocation $XXX funding said, environment to but This basis.Since noninterest to increases feel the noninterest debit share the keep incrementally this trend NSF core in tangible income, us at from is core feel have after pleased point accelerated over environment.With the $XXX.X since and to And $XX.X net summary, items, pace, by the the and or monthly of the was after card on annualized basis the interest our expense income, reflected higher regulatory income we the of ability the noninterest quarter. ROAA to to to diluted of believe XX diluted excludes a the amortization third and about per repricing core costs monthly the million good discount XX.X%. third and an per in which and all item exited measured experiencing positioned a equity $X.XX among funding our Stellar internally quarter, more the pace in in earned have earnings due pretty net which March $X.XX, margin interest interest to offsetting experienced margin, a of end stable and really nice interest earnings relative EPS at our net remaining May, control continued in protect do million pace to quarters.In compare and margin through we That mostly Our industry. May quarter. we in and favorably had thrive. the good decreased noninterest core shown stabilization last the items Strong Durbin adjustments, in deposit increases a fees.During current points purchase trends XXX quarter of manage excluding our in generate noninterest our profile return well of in X.XX%, than of increases capital profitability income.Notable having ratios revenue for expense our continues also withstanding lower Amendment at operating

great in and puts favorable maintain and earnings Our funding position composition us power. to liquidity a spot margins

-- and on from And one you. from Finally, strongest the lending feel in we take unknowns our lending given turn credit Bob. over in and country.Thank reserved current will discipline the the comfort of call credit, appropriately economic one we in the in now the of back I otherwise to underwriting markets

Robert Franklin

And Paul. you, for questions, Thank we're ready operator.

Operator

comes Raymond James. question Spector first Our Eric Instructions] [Operator with from

Eric Spector

Dave dialing for in Feaster. is Eric This

underlying how Just think curious about balance trends seen deposit trending core trends CDs migration, kind on wanted how the maybe Obviously, core some you and deposit as on as touch core of side. funding some you're seeing, maybe of products prices is well the just just to forward? new some for but of going you've the

Ramon Vitulli

still quarter that actually felt nicely X those then at look you which call there for quarters. our, outflows, is when amount new row. held look we good at a what outflows we the carried, this about existing exceeded but It's trends, third quarters almost really they There's what's dollar total, decreased the is from decelerated really Yes. the on those held And were the the Ray. of Eric, prior over X net to that if -- -- we some a new got Yes, core. in and outflow closed it's we nicely. still the that to to deposit pace at closed, where previous a core significantly to but nice

Robert Franklin

Yes.

some was relatively the there kept shrinkage, we similar. composition While

mirrored ratio. our wholesale having we about in succeeded we stability including everything And think quarter. our the else, funding noninterest-bearing our you So when at dependency, we were where -- deposits still really in base, second funding

Eric Spector

Just that. kind up of following on

Just assuming curious and you think environment. margin higher the how trajectory, sheet a just the balance about prolonged

prior loan-free Just kind bank's issues end on performance how color environment, you how any economic that loan color or that dynamics of think roll-off on kind new broader are in and longer arise rates, yields are of color trending, great? for any be would the new could like a just yields versus loan on

Robert Franklin

stability X of the months net our in feel have the that interest a really out of mean, coming September I takeaway best we Certainly. about measure we last relative is margin. good and

the so in And the upwards, to change very locked cost of continues asset, rate much in with it's the of our equilibrium been that side. on and fact notwithstanding asset the funding trend up

more to longer, benefit we're longer this give see how stability manage we there.We we really So And for the very the term, over of the think uncertainties more time time we unprecedented rate the environment. book for asset our about but interest feel there, we're very, good net higher around reprice. cautious it'll

just feel outlook We're about we So now, pretty pleased. sit. and where good right feel we about cautious

Paul Egge

loans. give Eric, numbers, some new can Hey, color you some on the I

up points So was we for quarter. quarter was picked at quarter loans new that. from the from $XXX basis basis million. XX then quarter the X.XX. on loans And That XX and at that points pick prior million in over up a the We previous originated X.XX the of renewed $XXX

Eric Spector

And to the securities then just on wanted book. touch

truly advantage portfolio. the You of having a liquid have

other types continue cash if ratio loan-to-deposit That sales how shaking guess these versus deposit remind Maybe just of you Where comfortable noncore us CDs are your borrowings you do we what and I are? about that see helpful. if with think flows funding? in be security out? Just portfolio could you securities versus outflows, to would

Robert Franklin

Certainly.

$XXX So in in we of securities the flows well coming have portfolio. off security quarter, the million over fourth cash

takes the that to manage and about do cash.We months, relates day, If million comfortable probably portfolio. off the take do the coming flows loan forward as cash But part we deposits, with $XXX take feel of then we it XX you to the talk our with we you're opportunities about securities that puts and every securities and how talking of of we what balance repricing in out want there. and level sheet current --

us leaning afford So going of cash flows, towards currently, a those reinvestment does high but level we're it of forward. flexibility

can audibles that So we base we broader a able to funding call on around are gets. -- depending how

Operator

Our next comes question from Will with KBW. Jones

William Jones

of to at on wanted we you saw know bit little the softness that And we've more just for growth. the I a look fourth the mid theme single-digit to this start I low been we a kind continue about softness I half, into see full to little talking loan but of year. maybe quarter. range stronger, as was first this So we if the little guess it quarter. a

may the how I the of year. growth a, you're range to So quarter single-digit is outlook? guess, kind about up kind near still low mid that we wind term fourth and round-trip, for thinking in that of

Robert Franklin

the let Ray fairly for growth most market we see be bit. kind give And of of increased a is loan more our as what's underwritings Yes. color. through the going little quite year. and we've the end the I'll available part, to watch to But a muted us,

deck the to bit on the the can what book. a cleared it's get clear actually on So hurdles

first slower add can you than year. be you part might in to it So But Ray, was it's going of the the on.

Ramon Vitulli

this negative -- growth the that how that the that Well, Yes. When posture a the where waterfall, couple we got the quarter. little you of you look so the just for things to and were saw at it's new second year quarter, Those originations. around million managing a in of liquidity. we credit our quarter, function $XXX And $XXX million. loan in about in the started around loans last

third actually component continues one of in quarter. is where our $XXX definitely that's other around we've we're thing that quarter, where probably So experienced normally million a something million payoffs, headed.The the $XXX like is

a low increase levels, we least of contributing That's Bob's the payoff payoffs, combination a healthy. return think is probably probably muted, to lower what So of originations in single-digits. plus little at probably which to not about the a that talking but

Robert Franklin

think would about And I our views to just approach feel strongly it, I on Will, know add, others and this, have about core really as but funding. deposit you different our we

now, there, those don't right some [ of what and that fights on going is. out deposits the so, really And to through rates ] with funding rates high core pretty even high lot we're pertain a knife

we like loan even loan feel increase comfortable a a margins. been deposit. volume we've going haven't to and focus keep balance our like really money loan funding out chased at a it the good rather borrowing that We the we time and to So percentage pull by to would to noncore to able We increase probably position on -- not that a try more with bit.This tighter from of down feel volume. strength is we but sheet,

sort our profile within core that we funding to boundaries is value that. our don't the we we're of So true and what around We organization in like disturb bank. way staying want grow really is feel think the the to of a

William Jones

I I company growth a core put guys. is be to funding it to combined huge when But higher oriented. was together, know a built more and feels to it advantage point, that And really you was like guess

does just the pressure for really you on the costs of on growth Do and kind loan more positive overall about be step how see a do we to you rates offensive or need over stabilize what really to kind and stabilize to see clarity there you So the credit or fund? would growth? think more do of on drive need what get to little more need just -- guys offensive positive a

Robert Franklin

the it that do ever do. change to fastest in trajectory. of Well, the things in we November agree built drive at we you. were wanted interest we and really raising when 'XX, We that with deal your rates That was to the of process our to had. Unfortunately, growth has closed pace Fed

with push and something wished happen going you. You that can't were for didn't to continue just to happen what to you on

next as in guess, I So people a you're deposits.So you pull right field us, safety. are your things, out strategy you people ways, back, playing gains right coming unless there's don't at call. we're that's is, battling a and for continue running pretty but here figure But type high for really out level deposits a to approach. deposit the what are what cost rest many on of the not the now think aggressive JPMorgan, basis for are but the for they're relationship rates And as around paying move long we

well That's we're sure us.On their side, we're these to for deposit interest trying account. approach the to the relationship-type So through high done years the take and funnel the economy. taken approach going are to loan it's years, way make have developing on to making we've side we're move deposits, sure right rates and for still for the looking the

seen effects have yet. the We of them not

we're We're the in horizon.So think there's nice I a We that your mean coming. sheet from doesn't know standpoint. a still we put increase balance Texas want good sure comfortable on earnings admit some just it, you it's nice when preserve We make cautiously. we happen sure do loans. really in to it's economic through really and still a dust nice the think we're on. make that drive hole doing profile. we're we Houston, in to pretty we'll right our core you And be that to just balance approaching underwriting feel increased sheet to that I strong something to that. standards have still things That is an place make and cautious, But always we that continuing

good. our think earnings them exactly still pretty not but we are where to I like they're would be,

we where are. feel we good so And about

William Jones

for little southeast higher some of this broader off quarter? the C&I kind a and saw we credit the I just you bit there's noise a Is how wanted theme maybe saw on kick space. that across We of charge up this this a these within to idiosyncratic been kind characterize And of of quarter. touch credit bit. obviously really really

Robert Franklin

wouldn't. I

up relative a it and loan ended that this better really it It's up ended and one well worked with we the think indicative really in not figure We one frankly was time that I position our company managed a out position. to to that for it portfolio. wasn't in we trying way of long did.

in the we well advantage we harder, it that talk people if us, the that's time.So of have happen, ability like things market as using take with things to the good good, landing is it soft rates 'XX. here doesn't I and remains I so those increase great. If get cautious of we think this direction. think tools. it's went off.So to And make direction. and and in a and actually of about we're trend Because that to significantly helps loan available a handling that that's what's to at renewal that dealing into if still think it a and because positioned lot having us is we nonperformers off It's I we higher fairly are the we out But want really go sure the how could think people You are. been see charged where how a are see we are about think didn't to as head indicative after we backfill through there. that down I as we interesting happen about We don't renewals trend going not little hopefully, interest we're all And rates, people I move there's we

William Jones

is pulse optimism. maybe as the that Stellar, like at it cautious pertains way? you characterize Would bit feels of credit, a on it it to least So

Robert Franklin

would. to get Yes. a ago. if to I 'XX, in better year But back well mean, be the have to positioned been Fed to where move through. you we we're I is over signals we have think like would sure positioned that I

every sort was the where running of make and sure we And to make into as that want we're of option of all not really position.We to feel that slowing economy have that's I available Fed good we so sure get us. the leaving are an open. we kind think You we things where hurt are it's about And 'XX. of economy ourselves been our believe we're at into that successful

So creating are pretty so us make earnings a place an earnings see we're sure as our and going we're we to can good into capital, 'XX. good, in we're expenses repositioning what that provides that from we move we're it standpoint

Operator

Our Dick next from question Graham Sandler. comes Piper with

Graham Dick

the stabilization year back to assuming in start can part in I on abate quarter So pressures could to continues expansion back the be some then side as end, Is to seen have 'XX in guys and to from the I wanted bit handoff to And quickly. the rate. maybe obviously in reason volatile, and of side of core the later the margin you asset even some year? there's off the first to pressure maybe think there's of the like a start the which quarter that lead trends half any funding to from heard is that stability there's a there funds to Paul, higher. reprice Fed just more the but hear. level in to increases great continue circle Funding NIM can no

Paul Egge

the stand good markets.I there's than a We side. As that the funding really more composition obviously up go I But big to is as been approach lot constant, this optimistic there, believe room We're herculean. in on asset long feel side competitive able asset relative to in contingency. going stays cautiously in a to we've go. has meaningful going about to performance what continuing is reason which in record to that. post what NIM are feel defend up last It hard a has taking, the year. we're has to over work months that point does still to the because still the X But side room a stable earlier the we I work funds, to we're guess, more our particularly and on cost outperformance translating of been really, some tumult our like do track to continue been on really outperformance of the into

Graham Dick

what around things the assuming Yes. there, to I approach accretion saw on guess, at then stable on what helpful? direction, there still And couple higher we trending at don't bit I quickly, of next the bit accretion is guys of payoffs was very the at cautious guys know to I a you driven guess, quarter. in I there are you seem what income, quarter-by-quarter. absolutely a there than the I but first be little quarters, guess, it early or industry. year are any the be some understand I would over would that of little thought have what color if essentially this least right be looking just part the good from hear might Is the

Paul Egge

market granted been the really we've is we'll ways and accretion reprice feel brought look the accretion ultimately, mindful because at income on expected we and to some of which the level absolutely being rates Certainly. forward both accretion. paydowns income, because driven it entire this of portfolio expected, of take.Recall, It higher powerful we really And the that's the of loans of are in powerful. all business has that's the those of higher that's interest accretion repricing more like extra We a income. repricing windfall what's loans. it required than at they try welcomed nature portfolio and pretty than just do And when

where we to as we're XX% getting at X.X%, outlined nice the especially we've Ray a experiencing reprices see when rates obviously of fact recurring So loans market-based accretion when core that X.X% represented there's into loan, reprice but accretion repricing ultimately here been of it with over aside on respect ultimately, loans. much the those to what we that, take going call, today.We'll the I'll and what has windfall XX% about from that

types it pricing. we good forward of pull about repricing feel if levels we it's those to a it think definitely of of So we as but most feel of market

Graham Dick

repricing And rate this is the guess we $XXX terms renewals typical? could of quarter, that in then that like current of just loan just forward? that or that you front, million of book repricing that that kind Ray, Is expect mentioned, run happened on is happened going churn the I

Ramon Vitulli

It's of Normally were probably a you our this higher $XXX was than kind kind originations renewals probably of the $XXX like little And little track think this bit a and outsized generally where about was normal. together. and renewals quarters of more first million million. X

between $XXX probably probably $XXX think So outsized. a about was the and it. is something million million way to little It

Graham Dick

said turning I in it you then relates does forward And that and revenue to some kind growth approach maybe got just XXXX in as know of quickly. with base that But increased align expense the expense your environment the economy. for current focus expenses to expenses going mean to that. to all's the you've on optimizing guess I what

dollar $XXX for a XXXX? I think about we talked million number

Robert Franklin

we're going Well, trying to as manage and dynamics competing thoughtful as strategic we with on. how there's expenses be

onto First opportunity completing the We presents be and Stellar Bank well the to we're grow what our positioned of and to means. merger moving want second to that create and foremost, stage itself. when

the same a current underinvesting. of and don't want into we we But of to mindful be investors. delivering So trap really at time, revenue for have fall to trends

and in to our and control so and achieve level is we about going allocate from XXXX to to ends.So stayed in balance the how into And where that expenses core as a XXXX extent means it to that seeking seeking really as So relates what thoughtful and being expenses. XXXX. way to we are both

we're day. season just something to our this haven't relates we it hyper-focused. any that thinking that, as sudden balance And management is every it's moves and made we're like sheet about So but budgeting

Operator

Janney. Our with next John from comes question Rodis

John Rodis

Bob, things. I that. about view wouldn't apologetic be your I cautious like on

just sort in. I you or you made and environment $XXX said of comment sort I think expenses, ago the million talked of about on think full we're you year X just level. Paul, before that's the quarter 'XX

So for just lines, sense? next low Does growth of implies make the to reading that that flat between year? sort single-digit

Paul Egge

basis, around right low yes. we effectively this manage all formulating that, we're flat a single-digit, think I in but we're to on still core seek And XXXX. to

John Rodis

Back have the accretion, the of certainly been some yield the higher forward. pulling payoffs accretion to

I think at put $X quarter. the for you a million million year, per $XX to would what, quarter talked $X ago about million to or X which XX million you

it higher, For does does few quarters that quarter in purposes, the seem million -- next come million for accretion to over modeling while $X could $X reasonable? yield a still

Paul Egge

it's get thinking that hard and much lot predict any on if more. conservative you're we were going I think things. straight these we That's we've a And really wouldn't happens, to or gotten it paydowns. as

I view positive. So surprised think that's the we've conservative our been been and to

pardon me, repayment with recent once think a to path, deposit, So that taking loan but this say warranted, less again, it's behavior, rates. been outpaced it's point. especially safe our hard has it's I to predict It's these at that interesting our conservatism higher been a expectations little

John Rodis

company industry Back say sort what that to can the charge-off, was of guys you in?

Robert Franklin

these leave call ongoing guys. is should any We're to have And probably want still a way. now. more for them don't And with John, I it we it think in stuff not some in negotiations, being I good still idea specific out us is. as right

John Rodis

I understand.

one Just correct? Houston though. was in follow-up market, the It that on

Robert Franklin

Yes.

Operator

[Operator from comes Matt Olney with Instructions] Our next Stephens. question

Matt Olney

I typically the addressed, with to my but base. deposit questions in has bank seasonality respect and into the fourth have quarter been that first of quarter late the know Most some

that expectations to seasonality if we'd seasonal expect you today, to of and maintain those stands hear it about As kind patterns? normal of love

Paul Egge

of expecting using substitution Sure. level of We to. would We do than expect a or we're a broker on, wholesale funding usage certain funding going our measure deposits, of kind way seasonality, of dynamic substitute by much that but you. especially not I to higher what we'll let will of seek growth. measure seasonality borrowings the probably given we're we'd like see asset on More, FHLB of have a currently away a say, side so

Matt Olney

short paid those to are eligible all sounds those wholesale it assume down I be duration, pretty FHLB, like?

Paul Egge

expectations certain amount play a that to is that that it It's we food able if wholesale kind groups little of To Fed. side composition the extent drives the we're bit funding, both we growth of at we around meaningful seasonality. that we're will we definitely about a the short -- a have at the of excess mixed, but put Fed the cash if relative how and that that manage to be and level of put enjoying thoughtful on asset the spread,

Matt Olney

the quarter. a were XQ, started then some looks side, have expected. were been we -- Durbin see it in this color can't my other I in that. or still like me to the perhaps but third -- on the in seat. impact quarter Appreciate more Any fees here? quarter little in maybe in than bit I third slower from And the fees on impacts its tough fees know outlook there may Durbin give there

Robert Franklin

All a I been has more our expected impact. than Durbin little can tell is bit that

We we any of the charging also longer. are of sort not trend followed NSF fees

Matt Olney

And start? Bob, that? you that point, quarter third Is did on that last implement when

Robert Franklin

That's last quarter, yes.

Paul Egge

Mid-August.

Matt Olney

nice the build. the put we on when know over year deal Bob I was mentioned rapid was the there together, has the expectation last And earlier, then some was environment are together. put seeing guess capital I build. capital, capital a changed And bank of since

of continued are So to expectations capital, any around hear of thoughts updated we'd such capital? what thoughts then and with excess deployment capital, updated on love your the build,

Robert Franklin

some that this increased capital. whether see very those to There's us.So dividends. to times to all to as with all into to we that the that buybacks, be if want on but sure where what with But think, give ways also whether options safety get to to trying we approach table in and go keep for move it's us problem that. M&A, do can like through a these we're -- we're bill want good that it There's that, to decide optionality. various optionality comfortable looking build have, be that that I give things They we're fact to we continue be what think we're in to and you we organization. 'XX look We I at. trying looks to with capital whether think difficult us the that, deploy at allows us Matt, Yes, building make

us grow. the use build to that of help best So continue and to is

Operator

I'd Bob closing any now to remarks. back turn the like for over to call Franklin

Robert Franklin

Thank Corp. your Stellar in Bancorp are for that, with we you And interest adjourned.

Operator

for This Thank you. call. conference participating. today's Thank you concludes

may You disconnect. now

Stellar Bancorp (STEL) 27 Oct 232023 Q3 Earnings call transcript