Stellar Bancorp (STEL) Q3 2024 earnings summary

Executive summary

• Net income for Q3 2024 was $33.9 million, or $0.63 per diluted share, up from both Q2 2024 and Q3 2023, with annualized ROAA of 1.27% and ROATCE of 13.63%.

• Book value per share increased to $30.43 and tangible book value per share to $19.28 at September 30, 2024.

• Focused on de-risking the balance sheet, increasing liquidity, reducing CRE concentrations, and building capital.

• Maintains strong core earnings and capital position, with a focus on the Houston region and scalable infrastructure.

• Nonperforming loans decreased significantly, and allowance for credit losses coverage improved.

Financial highlights

• Net interest income was $101.5 million in Q3 2024, slightly up sequentially but down 4.9% year-over-year due to higher funding costs.

• Net interest margin (tax equivalent) was 4.19%; excluding purchase accounting accretion, it was 3.91%.

• Noninterest income rose to $6.3 million, up 34.2% year-over-year and 16.4% sequentially, driven by asset sale gains and Small Business Investment Company income.

• Noninterest expense was $71.1 million, up 0.4% year-over-year, with efficiency ratio at 66.18%.

• Allowance for credit losses on loans was $84.5 million (1.12% of loans), as NPLs fell 37% to $32.1 million.

Outlook and guidance

• Targeting mid-single digit loan growth in 2025, contingent on market conditions and borrower demand.

• Confident in defending and potentially improving NIM, even with anticipated Fed rate cuts.

• Expense run rate targeted at $70 million per quarter, with ongoing cost control.

• Positioned for continued rapid capital build and strong financial flexibility.

• Management expects to benefit from a scalable platform and diversified loan and deposit base.