Stellar Bancorp's Q4 2024: Contradictions in Loan Growth Strategy, Deposit Costs, and Net Interest Margin

These are the key contradictions discussed in Stellar Bancorp's latest 2024Q4 earnings call, specifically including: Loan Growth Strategy, Strategic Focus and Loan Growth, Deposit Cost Trends, and Core Net Interest Margin:



Financial Performance and Growth Strategy:
- Stellar Bank reported fourth quarter net income of $27.8 million or $0.52 per diluted share, with an annualized ROAA of 1.04% and an ROATCE of 10.82%.
- The growth strategy for Stellar Bank focuses on expanding its relationship-generated low-cost core funding base and broadening loan offerings while maintaining a strong balance sheet and capital base.

Interest Margin and Income Improvement:
- Stellar Bank achieved a net interest margin of 4.25% in Q4, up from 4.19% in Q3, driven by strength in noninterest-bearing deposits and improved cost of funds.
- The improvement in net interest margin and income is attributed to strong securities yields, and the bank anticipates incremental improvement in 2025.

Capital Strength and Regulatory Compliance:
- Total risk-based capital was 16.06% at the end of Q4, with a strong foundation for future growth and capital deployment.
- Stellar Bank's robust capital position and regulatory compliance allow for flexible capital uses, including potential M&A activities and share repurchases.

Noninterest Income and Expenses:
- Stellar Bank reported noninterest income of $5 million in Q4, down from $6.3 million in Q3, primarily due to lower SBIC income.
- Noninterest expenses for the full year 2024 were $285.7 million, up from $290.5 million in 2023, driven by higher professional fees and severance expenses.