Stellar Bancorp, Inc. Q1 FY2025 earnings call

• Focus remains on customer, internal, existing, and prospective.
• Utilized strong capital position for share repurchases.
• Balance sheet shrunk due to seasonal outflow of government deposits.
• Reduced noninterest expenses.
• Continued core net interest margin progress.
• Strong capital position with risk-based capital at 15.94% and tangible book value per share up 14.3% from $17.23 to $19.69 per share.
• Board authorized a new share repurchase program allowing up to $65 million in share repurchases through February.

In the first quarter of 2025, Stellar Bancorp, Inc. reported a net income of $24.7 million or $0.46 per diluted share. Net interest income was $99.3 million, a decrease from $103 million in the fourth quarter of 2024, largely due to lower purchasing accounting accretion and fewer interest-earning days. The net interest margin was 4.2% in Q1 2025 compared to 4.25% in Q4 2024. Excluding purchase accounting accretion, net interest income was $94 million (down from $95.5 million prior quarter) and the net interest margin excluding purchase accounting accretion was 3.97% (up from 3.94% prior quarter). Noninterest income was $5.5 million in Q1 2025 vs $5 million in Q4 2024. Noninterest expense decreased to $70.2 million from $75.3 million in Q4 2024. The allowance for credit losses on loans was $83.7 million or 1.15% of loans, up from $81.1 million or 1.09% of loans at the end of the prior year.

• Growth expected to be pushed to the third and fourth quarters of 2025.
• Goal to deliver positive operating leverage during the year.
• Continuation of share repurchases with the new authorization of up to $65 million through February.

• Economic uncertainty from tariff policies and other administration actions posing potential impact on customers and communities.
• Credit risks, including migration in non-accruals, particularly notable in commercial real estate (CRE).

Q: David Feaster from Raymond James asked about loan pipeline, deposits, and credit.

A: Robert Franklin, Jr. and Ramon Vitulli discussed loan originations, pipeline trends, and customer sentiment; Paul Egge talked about deposit growth and new account openings.

Q: Matt Olney from Stephens inquired about capital, margins, and expenses.

A: Robert Franklin, Jr. and Paul Egge commented on capital use, margin outlook, and expense trends.

Q: Will Jones from KBW asked about paydowns, loan pricing, and expenses.

A: Ramon Vitulli and Paul Egge responded on paydowns, loan pricing, and expense trends.