• Net Income (Q4 2024): $27.8 million or $0.52 per diluted share.
• Net Income (Full Year 2024): $117.6 million or $2.20 per diluted share.
• Return on Average Assets (ROAA) (Q4 2024): 1.04%.
• Return on Average Tangible Common Equity (ROATCE) (Q4 2024): 10.82%.
• Net Interest Income (Q4 2024): $103 million.
• Net Interest Margin (Q4 2024): 4.25%.
• Provision for Credit Losses (Q4 2024): $942,000.
• Allowance for Credit Losses on Loans (Q4 2024): $81.1 million or 1.09% of loans.
• Non-Interest Income (Q4 2024): $5 million.
• Non-Interest Expense (Q4 2024): $72 million.
• Non-Interest Expense (Full Year 2024): $285.7 million.
• Total Risk-Based Capital (End of Q4 2024): 16.06%.
• Tangible Book Value Per Share (End of Q4 2024): $19.10 per share.

• Warning! GuruFocus has detected 6 Warning Sign with STEL.

Release Date: January 31, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Stellar Bancorp Inc (NYSE:STEL) reported a strong fourth quarter net income of $27.8 million, translating to $0.52 per diluted share.
• The company achieved an annualized ROAA of 1.04% and an annualized ROATCE of 10.82% for the fourth quarter.
• Net interest margin improved to 4.25% in the fourth quarter from 4.19% in the third quarter, indicating better profitability.
• Stellar Bancorp Inc (NYSE:STEL) has a robust capital base and a strong balance sheet, supporting future growth and potential share repurchases or increased dividends.
• The company has seen strong loan originations, with the fourth quarter being the highest in six quarters, indicating positive momentum going into 2025.

Negative Points

• Non-interest income decreased to $5 million in the fourth quarter from $6.3 million in the third quarter, partly due to the absence of lumpy SBIC income and asset sale gains.
• Non-interest expense for the full year 2024 was higher than initial guidance, reaching $285.7 million compared to the expected $280 million.
• The company expects modest growth in non-interest expenses in 2025, aligning with inflation, which could pressure operating leverage.
• Stellar Bancorp Inc (NYSE:STEL) did not repurchase any shares in the fourth quarter, despite having the capital flexibility to do so.
• The securities portfolio is expected to remain around 15% to 16% of the balance sheet, limiting potential yield improvements from this asset class.

Q & A Highlights

Q: Can you explain the higher professional fees this quarter? A: Paul Egge, CFO, explained that the increase was due to timing related to certain outsourced auditing engagements.

Q: Do you think M&A is necessary for improving profitability? A: Robert Franklin, CEO, stated that while M&A could accelerate growth, they are cautious and can achieve growth organically, albeit more slowly.

Q: What is your outlook on net interest margin for 2025? A: Paul Egge, CFO, expressed confidence in maintaining a strong margin due to their core funded balance sheet and neutral rate positioning, benefiting from both high rates and an upward sloping yield curve.

Q: Is mid-single-digit loan growth still a reasonable goal for 2025? A: Robert Franklin, CEO, confirmed that mid-single-digit growth remains the target, with momentum from recent high loan originations.

Q: How do you view the competitive landscape in Texas for loans and deposits? A: Robert Franklin, CEO, acknowledged intense competition but emphasized their focus on localized service and capturing market share from larger institutions.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.