Stellar Bancorp, Inc. Q4 FY2024 earnings call

CEO Bob Franklin thanked the team and emphasized focus on growth, strong capital base, and favorable market conditions post-election with interest rates stabilizing. CFO Paul Egge reported Q4 net income of $27.8 million ($0.52 per diluted share) and full-year 2024 net income of $117.6 million ($2.20 per diluted share). Noted net interest margin improvement, net interest income, provision for credit losses of $942,000, non-interest income of $5 million in Q4 vs $6.3 million in Q3, non-interest expense of $72 million in Q4 vs $71.1 million in Q3. Highlighted regulatory capital ratios growth, tangible book value per share increase, and plans for 2025 including modest non-interest expense growth and goal of positive operating leverage.

Expect modest growth in non-interest expense to about $295 million in 2025. Goal to deliver positive operating leverage in 2025. Mid-single-digit loan growth target for 2025 with momentum from Q4 loan originations.

Transitory nature of certain deposit balances due to seasonal factors; competition in the market affecting loans and deposits; potential impact of inflation and regulatory changes.

Q: Will Jones asked about higher professional fees and M&A role.

A: Paul Egge said higher professional fees were timing related to outsourced auditing; Bob Franklin said M&A could help get to operating leverage faster but organic growth is possible too Q: Matt Olney asked about loan growth outlook, deposit growth, and operating leverage.

A: Robert Franklin said mid-single-digit loan growth target remains, Ramon Vitulli noted Q4 loan originations were highest in six quarters; Paul Egge said non-interest expense growth around 3% with revenue dynamics supporting higher growth for operating leverage Q: Stephen Scouten asked about operating leverage basis, accretion, deposit liquidity, and M&A currency.

A: Paul Egge said seeking operating leverage on core ex-accretion and GAAP; Paul Egge noted accretion diminishing; Paul Egge said part of deposit growth is transitory; Robert Franklin said currency around $150 a book is neutral for M&A Q: John Rodis asked about securities portfolio, provisioning, and net charge-off rates.

A: Paul Egge said securities portfolio around 15%-16% of balance sheet; Paul Egge discussed provisioning and normalized net charge-off rate around mid-teens for net charge-offs Q: David Feaster asked about market pulse, competition, and hiring.

A: Robert Franklin and Ramon Vitulli discussed positive market indicators in Houston, competition in the market, and hiring with ODP program training young talent