STEL - Earnings call transcript Q4 2024

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Operator

Good morning, and welcome, everyone, to Stellar Bank Q4 earnings release. [Operator Instructions]. I would now like to turn the call over to Courtney Theriot. Please go ahead.

Courtney Theriot

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

CEO, Steve like quarter to earnings of Executive are of be Chairman Chief by the would for Officer Vice earnings of call President Executive welcome Vitulli, Bank; and bank. CFO, led the fourth CEO of company and the XXXX. our to team Also our and you call and Retzloff, of Ray will Joe Paul President Our Egge. Franklin; in Bob today attendance This company; the morning's West, Senior Credit

covered Before that in Reform at Also we only defined statements statement made forward-looking time that results, remind harbor note statements we as about begin, by beliefs in I forward-looking is need is that be and intend to of give as beliefs guidance Act some provisions management's today the the for the of to act. are guidance subject everyone We safe future statements Litigation such remarks of such amended. change. the the made, Securities reflection XXXX the Private contained a all constitute to if

for and time At of our over Franklin. conclusion allow the remarks, call our I about of law. We see except as information statements. website at by forward-looking turn disclaim the CEO, open associated risk publicly statements, release, obligation be this required last available Bob the any any may the morning's will forward-looking additional to in on our will to the update line the page earnings is text with Please which factors we now questions. ir.stellarbancorpinc.com for

Robert Franklin

my will start as want Bank. that Their future. the our us quarter Bancorp into you, Stellar earnings we have a the efforts call. at expressing support Courtney, team Stellar everyone. to Thank for laid you joining grow and gratitude outstanding for the Thank morning relentless foundation good fourth solid I by to to journey

on be our we focus As growth. will forward, move

Our vibrant promising balance paved sheet, coupled strong the for robust a for capital future Bank. with serve, we way markets Stellar base and the

us With now we stabilizing, look behind the rates election and ahead optimism. with interest

in but in we the remains inflation, domestic housing export. witness not rates, interest positive continue about favorable. production significant increased Although growth, environment gas will as serve to as remain inventories both XXXX. We see population increasing, and vigilant for push trends may we oil business an job and for enter use These factors limited and tailwinds relief

clear. remains strategy Our

generated will core our funding base our We relationship loan expand low-cost while offerings. broadening

well to potential to remains guidelines, dividends. spectrum increased past provide The of will over us the partnerships, growth, the organic or years for have provide capital and assist share full in built portfolio repurchases estate flexibility regulatory within real up allowing few commercial our a loans Our our support customers. we

For the Stellar of is and existing internal future. customer, Bank, the XXXX year

We relationships, ones. cultivate new will maintain straightforward approach, a and grow our existing

are on call to for the and journey eager the and to this CFO, now quarter the over ahead. I'll excited Paul more our We embark year this Egge, details turn year. on for

Paul Egge

and morning, good Bob, Thanks, everybody.

quarter an million fourth and represents full the also And million per XXXX, which or of diluted of share, diluted an of income annualized year net ROATCE report pleased XX.XX%. We X.X% net XX.XX%. for represents which $X.XX an ROAA income and to are was of ROATCE X.XX% $XXX.X share, an per $XX.X annualized ROAA $X.XX or of

a XXXX. to year. a seeing earlier growth forward and We fourth in highlight also with level key reasonable of we progress in fronts improvement while the of to margin return income performance net A continuation after XXXX quarter in look interest interest our incremental net seek on of to inflection these

of $XX the at crossing come the asset as from about expense which the protecting while capital build our that to that notwithstanding sheet de-risking foundation a growing strong Thinking a from industry upon much balance increases billion XXXX power, have built we our threshold. faster a and whole, earnings clip

from Before increases seasonal during noninterest-bearing deposits government year-end. I the moving due in tax last $XXX corresponding deposits and the million checking totaling on, should cash from to note of benefited balance year-end receipts size the interest-bearing certain over December banking that of clients and days in sheet at

the third translated slight We income million million the representing interest $X.X in expect the X.XX% increase margin to to into third booked third away the was in quarter first from to quarter accounting the balances normalize excess $XXX.X $XXX quarter of a net X.XX% quarter. fourth the these in interest $X.X This for in million, fourth during relative a million Purchase accretion relative was the quarter. Net quarter. quarter. in

deposit the accretion, accounting purchase margin to margin slightly performance prior income up an drivers in $XX.X cost by in which at quarter, in basis of point $XX.X quarter noninterest-bearing point liabilities. interest our XX quarter. Key to of included interest adjusted XX base, cost tax from million our interest-bearing the a in strength in the XX% increased funds, net portfolio, equivalent during of represented quarter improvement was driven fourth our prior in deposit X.XX% on basis basis, the Excluding million a the year-end net X.XX% improvement from our and

the for accounting income loan loans higher credit purchase We statement, provision quarter. from $XX.X for net strong securities with on quarter or yields our on allowance end of $XXX,XXX. we during also had booked X.XX% further a to yields the losses after accretion. Walking brings loans the In of million X.XX% the fourth loans combination loans in at million losses charge-offs or credit of this the $XX.X quarter, and down third of maintained

$X.X $X We the the million earned in quarter. million to noninterest fourth third income. on quarter for Moving versus

third assets. income benefited quarter small number $X.X million noting of that, that gain SBIC lumpy While a of on sale from and

expenses our and fees in up year. Higher was professional in in expenses, down than for our outside million expense XXXX. higher for the expense year severance quarter million, -- of for but the among the million operating noninterest were in XXXX, salaries $XXX.X in was quarter. for $XX.X $XXX.X expense initial from expense annual up guidance million million, $XXX expense the story full Next, Noninterest the drivers the third from $XX noninterest XXXX

we in about expense XXXX, to hold growth expect line we to For on seeking expenses. of inflation million, noninterest the continuously can $XXX we where line modest are although with

at Since XXXX XX.XX% Our Total XX.XX% strong the bottom merger. line XXXX, rate we value of the growing of have share continuation end our have fourth dividends, capital quarter results and years. regulatory of end driven the share since quarter first was per ratios record of a relative tangible XX.X% share book last track book and at end of that of capital over grown a value the at our at per XXXX. the post XX.X% XX.XX% $XX.XX the $XX.XX compound per per to growth of X end after the from annual representing risk-based share merger end tangible to

for which We generation we current is like our and feel capital operating to in continue environment. strong very that the it prospects internal creates, valuable the optionality

During did debt of the our we bank-level repurchase redeem stock, $XX quarter, December. did fourth not sub but the any in of we million shares

like repurchases find more M&A. in will to to XXXX deployment, uses preference our strategic capital of We evaluate notwithstanding continue share

continue Meanwhile, is We've advantage Bank asset call Entering space goal home strategically. be into expect to will Bob. the threshold. to over both of and financially banks. to we that during field adding through the deliver an XXXX, deliver for as the support It more improving positive we and our create Thank to to to ability we some which really from the we the manage our $XX where sit to back in I environment while drive operating to more the continue will best leverage operating Stellar what like meaningful Stellar our in billion turn country. scale now laid we to year, markets platform seek leverage operating Bank you, will exploit foundation

Robert Franklin

for your Thank you, and Operator. we're Paul, questions. ready

Operator

our [Operator Instructions] comes from first the And with line Will of Jones KBW. question

William Jones

whether Paul, start containment you a of was of was suit or little full be. guys to a that bit read strong maybe still to this But or that this So broadly to did pretty year. this higher I that ask just line of I happening anything in year that kind I kind into quarter? professional know quarter, came on there's year fees expenses this ahead speaking, you anything expenses. expecting were where unique for wanted want about to

Paul Egge

timing related engagement. outside outsourced it's auditing -- Now certain to auditing

William Jones

for to read your you of growth Okay. I feel size, needs on And challenges, then, release, to relative earnest you back kind leverage. broader of Bob, profitability, M&A know leverage and see take operating come to maybe just press one into you kind I really a But organic to play your role presents see for to the like in of kind in the that step own next of some comments really do guys? you, need picture. operating

Robert Franklin

I there a mistake. can we Well. Well, to I certainly we can we think make it really on speed. mean faster want get M&A., big don't do but if depends

level the there we're I calculating couple basis. the fight partners. build grow focus haven't we It's to we'll as a in year, payoffs we'll expense slower. couple go an bank. bit first here, as of So and through think get a the us about focused around on be move we'll very momentum try can going seeking we into think continue how of I on We organic some our today. last M&A years, in And early the just growth is we we for manage to But this to but And quarters. probably

good just is get little us basis. operating leverage would So things because there quicker expect help out from M&A But standpoint. organic an there from we it an certainly a

William Jones

Yes.

into talked are quick. maybe viewing neutral you that, let Last we kind year? as standpoint. we move you X cuts, relatively same it the to that's Okay. you us still rate X that the see would margin path Paul, real 'XX, That's just next today cuts, and one, Could cuts. reaffirm I confirm the positioning how whether kind still a I guys X glide the you margin guess to know past, look the just just of we in jump see balance of from to just you about as of helpful.

Paul Egge

adjust in a absolute an great with sit it and it as you purchase We really as when well accounting margin. pleased strength accretion. on We're relates where sits to basis position then for of our

a is strength. able which continued balance to our we're sheet, maintain as long really see core goal, As we funded

neutral. with the Now have sloping incrementally. that of curve. if rates yield we we should try we're being respect pleased positioning, stay continued high, up to said, to us upward we're even were that an That to with our benefit stay fact And big fans repricing

industry. win the and we better of we spot, in great what. a kind we lot of withstand matter feel the no think we can a environment, So like sitting We're current than

Operator

the Stephens. from comes question line of next with your Matt And Olney

Matt Olney

Just want outlook to clarify the XXXX. for growth loan

existing I that of for October, referenced mid-single-digit talked we as at the a think the in you consider you back on pipelines paydowns the around book. look growth 'XX. some and And

want mid-single-digit a Just see to if level XXXX. reasonable goal still for that is

Robert Franklin

I think that's a still number. good

interest I to that see stick going payoffs digits. a around think mid-single we neighborhood rates estate first, some in then around understanding some are is to people this at for probably as payoffs while. goal We'll get finally back real that around but fight our to

that's So plan. the

Ramon Vitulli

X we're you mentioned loan had the fourth in Matt, -- quarter highest quarters. I think also originations momentum, we were

expect we some 'XX and into going momentum So continue. to do have that

Matt Olney

bit love then you those grow XXXX. levels deposit were relatively And on side, to in deposit the side, think expectations a Would in other flat on balances thoughts hear on to deposit the XXXX? of Okay.

Ramon Vitulli

you the really of the leading what about we -- on like the look onboarded. Well, at right indicator you're we 'XX, if but number,

our before. the were mature. So we as they XX% number our -- not new, new, meaning And as new then watching -- of were those they accounts of grow had here accounts we're new were of our accounts customers

our net closed was So strong. new exceeding new really terms, -- -- and of in was dollar

our in deposit side, then So had when get we're our our growth with loan indicators we of as going all which I 'XX to And on those leading treasury percentage C&I onboard proposition good. where clients. obviously helps think good a some -- -- we're continuing originations, of those the those loans. helps the nice headed accounts We're we

Matt Olney

comment? for that looks XXXX. Okay. be higher? expenses we similar mid-single-digit positive a a you to growth me, implies goal you growth that low thinking to then to to All the for should so are mid year-over-year, thinking revenue in like leverage low leverage, for get kind Just right. back just comment about positive leverage lastly Appreciate to that. of a the how going gave operating guidance It operating or us operating about of the little about positive And manner bit

Paul Egge

about the deliver growth. expense as growth much that in your incremental dynamics noninterest It's higher can of and higher or execute revenue, we believe, answered as a X% support operating on base revenue on we and leverage will somewhat You question. that own long

Operator

[Operator Instructions] comes And Piper question the with from line Sandler. your of next Stephen Scouten

Stephen Scouten

trend guess, are thinking so, expectations you operating if down guys I But leverage. guess as that and basis? missing question thinking line? of GAAP that on more And are leverage on Appreciate wondering, basis I about are could up just I'm it. numbers, some follow provision look you kind at Or a If if of accretion? what that one you that earnings ex it about I on assuming think year-over-year core to related. do are maybe consensus a relates I analyst's operating

Paul Egge

guys what's those our out when delivered And how numbers. of on in and does combination better outlook your deliver to there will was bases. It you margin and seeking reset light, on and or we're to seeking throughout has year-end we've the been feel do than -- like expectations clearly growth consensus the think based relatively I We're XXXX. where margin

Stephen Scouten

about helpful. to of obviously, it think that to that or Got decline some $XX in similar such. you the was kind that I a Is then way 'XX, unexpected accretion, this And at in right $XX Would million it. and from, expect That's pace, take, for million, paydowns apart the think year. it? range give

Paul Egge

from amount decent what's windfall to benefited of about it. scheduled mean last the addition That's we the I X think years over earnings a in to way right accretion.

next currently diminishing $XX.X And discount of loan the year. see have and We we a remaining million left. out it flattening in

Stephen Scouten

deposit growth this And noninterest-bearing some was pretty you growth deposit down especially borrowings. paid and Great. the Okay. really quarter then fantastic, strong

how start a do that to the you of you ton at that guys strength move your sheet now as liquidity the point. to kind through? continues deposit the Like base What do you this you of think have tackled about on-balance you've So liquidity of do borrowings? assuming forward, investments of shine

Paul Egge

do and seasonality government need to transitory growth be the operating going part that note year-end business our sheet we Well, is relating space. that of to to the balance account of in

level sheet -- deposit that's -- pull month we're since But expect So quarter-over-quarter a that with we story. than cash flat basis balance more sheet particularly or the reason there's out, to the the on a for is that we on when so. you a that stay balance to have overall don't respect so why of high funding on our more

not on some excess So seeking a ability But balance to we good detriment like is and so been mirage. level as of cash a that of and hold And high we a have that of seek drive our long the securities sheet. do it's at liquidity to profile. earnings we our

Stephen Scouten

of guys thing last And release, and talked you even you to pursue Extremely the at, some do think around a noted potentially for you a let's guys is I it, just the currency me at $XXX value share -- levels? kind that in then to how your you desire and even current How book partner that the of M&A. about about hindrance helpful. Okay. allows is M&A? pursue call think potential Or

Robert Franklin

necessarily higher. not think like look but I you It's really see necessarily it's neutral it. to not at a it's a benefit, basically We'd Well, either. at this point, if it detriment

as used we we're will hopefully, think and people I year improve. continue that get what doing, to the through

there's for story they're we're attractive our us however, seek try that. facing. that us partners to to an I going But there find maybe and do out what alternative to think So to understand

Stephen Scouten

the on I Congrats out it. closing strongly. it. Got helpful. year appreciate very Very

Robert Franklin

Steve. you, Thank

Operator

Rodis line question Janney. your from John comes And next the of with

John Rodis

the about How question maybe just securities liquidity. and deposit for Paul, flows portfolio outflows given you securities see in trending on you portfolio your 'XX. then conversation do and

Paul Egge

opportunity we level to overall to drives of portfolio But is We think, securities the value trying return mindful that like that. XX% XX% really to currently. the drive to sheet. keep And balance what our that, And our I profile. of consider we're right increasing around

John Rodis

provisioning can one talk big just you and for we how about the then And level question know and other forth, I plays 'XX? Helpful. provision view just CECL should the guess, Okay. I a so on But and reserve part.

Paul Egge

But Credit as from loans of very XXXX. waterfall been evaluated. charge-offs. function a has that a the strong drivers planning then we've look reserve covering specific been it's in perspective, in growth XXXX, there asset And last loans bit particular, partially CECL great and naturally, has we individually in we relative a normalization to from And benefited that in assume has a ton of at credit. in been credit. measure more little a our year the are And of

very works ends that situation something a We're conservative up when And that bucket. the extent itself to out, into creating it falls situation. release

lot a of can. and seek to to credit strong we continue continue experience our normalized manage we in expectations drove have in were we'll as there XXXX, have So XXXX. idiosyncrasies but to that We there best

John Rodis

do Paul, sort charge-off what your you think -- normal, what a is talking normalized do net about you of rate company? think for

Paul Egge

Well, companies. think Stellar the net history expectations have fortunately, in having of we normalized It's we credit charge-off have tooth. pretty since either run this don't it's high prudent or long of in great the do predecessor to nation. But a rates,

right the continue driving to have, we to of So to guys track at tend are and and in expectation mid-teens. record dictate. seek you Is we'll think where consensus results the to better it around continue our expectations

John Rodis

net to Or mid-teens that expense? provision on on that is clarify, is Paul, mid-teens just charge-offs?

Paul Egge

Mid-teens or charge-offs, XX maybe net on so.

Operator

with Feaster Raymond the question And line comes James. David your of next from

David Feaster

is underappreciated doing is start Texas. well. I of was of you your extremely right? what from across economy, seemingly could you just Houston on the one you're your And the I clients, in and obviously market? right, what hearing wanted the Texas hoping hearing you pulse us I to wanted -- just mean I give footprint? what are markets in seeing -- are

Robert Franklin

thanks, Well, question with David, agree do I the you. because for

is economics in think The are good. here underappreciated. really I Houston Houston

I it that think that. in about pretty years, of you way. to economy good over if has terms to think the last people I people the of the what digest of But a were needed digest couple in effect rates allowed interest think

which damage. But buildings the pretty So allowed we us But has the than certain haven't the for play it, economy own we've interest -- seen has been it a crazy office rate been of in. come the most don't had of one, tremendous couple here its lot a environment good way. across this part, other damage something industry be we of in to years aspects has through resiliency the going last through to is

we where as like good a we forward, in we've about are. us we So we of feel wind And ways. the number look behind feel got

we a a rolling think us, environment, haven't regulatory to bit there's still for the we the that changed, most bit for about do is going But seen is on. sailing part, that's inflation. while. I think and clear in economy administration the I and the With a change worry

to of so think have And are a they going think of what borrowing with understanding interest when cost rates make is stabilized, for. they be to and I that cost decisions capital able people clear better

Ramon Vitulli

rate kind which as with we're XX,XXX. in of -- seeing committee as still in numbers, far definitely the more excess opportunity more growth, the around because just mentioned activity, year-end we're seeing job of rate think, waiting flow and we're I of Bob what deal growth mentioned, business, XXX,XXX stabilization, around on environment. there but in is winning And were we trending towards Bob excess David, population stabilization that And in still of great. as as the we're

David Feaster

been are you right? you on Texas. definitely a Markets pricing, you seeing increase on and with hoping And other folks But And both curious, a healthy competition, both just I kind of matter, from maybe the that's of then folks It's competitive their one. an great. attractive structure good deposits? and lot There's what want was side, where also, It's competitive, loans touch It's on right? focus I'm a extremely to could tough and again, on really deposits. right, That's on for got the always landscape economy, just go, loans market. and market. a

Robert Franklin

Well, we by Texas go said unnoticed -- world. the Houston, doesn't

institution back our So the have bank, is in we financial basically in door. world right every

So competition is to, something we're used David.

thing, at has we're still I it's localized -- to kind of to credit, around our But was they some Houston of I their found mean what look fact on. trying JPMorgan the sell market. for 'XXs. the that's very customers that the And market, think I is a crazy, our acquired that some what is if that haven't think of and in XX% the job good think we we're reception back something it's to back. I relinquished kind And you take that. focused of

have that the we in those over But at are we years. think that up And banks across the And business now size I certainly very JPMorgan. institutions incremental sort spectrum, at not in we can top soaked X basically inroad the our make into a if markets, make guys. large all look that can of you they're loans competition with

to people to our is to the brand understand in to they've to think continue we're build to what need the and and stood are had So hasn't what out continue our yet get past. alternatives we're that brand. And we that's build I here going

Ramon Vitulli

accounts, David, the been new number got mean, to we've customers we've I got over And that I of had here momentum, new of back -- not to accounts XX% momentum our mean were there. before.

love that trend. really we So

David Feaster

great. there's about great. right? hiring your you -- I That's from what And a coming a That's talked folks market. mean about lot into of perspective,

-- recruiting to a What curious Just are seeing you guys but you're seeing know been the opportunities program, of good training kind bank new the share. perspective? larger of a you gaining seeing always about you have add talent? that's is part lenders. and you talked hiring guys You I banks what on some that's because are something

seeing you're of that on what curious front. So just kind

Robert Franklin

good our here environment, experience, I with always has out competitive be Yes. able train ground around a I and ground But then have some ODP C&I people a program from seeing can with a competitive. it's in young some and we're with there. to hit is especially more into gaining to road going up and on our really mean really been fantastic focus from of And hiring lender be nice as provide that we salts here. they've been of people direction old and very us the business. the pieces that some some effective mean inroads

So as we build we'll out our XX/X full market and we're spectrum from looking middle business, small all grow bank. lower those business making we're build inroads help to think C&I I that to to on sort and can of this people of for middle -- And corporate some do levels, continue us that. even

always the we'll do future. that's to in top that of continue So mind, and

Operator

There's time. no the Bob Bob? Franklin this further back will turn over at question for now to call I remarks. closing

Robert Franklin

you. we'll you, call. this interest Thank appreciate Thank and operator, in Stellar and Bank, everyone's conclude we

Operator

you concludes meeting. joining. Thank for This all the

disconnect. now may You

Stellar Bancorp (STEL) 31 Jan 252024 Q4 Earnings call transcript