Earnings call transcript: Stellar Bancorp Q1 2025 beats EPS, misses revenue

Stellar Bancorp Inc (STEL) reported its first-quarter 2025 earnings, revealing a mixed bag of financial results. The company posted an earnings per share (EPS) of $0.46, surpassing the forecast of $0.44. However, revenue fell short of expectations, coming in at $104.76 million against a projected $105.72 million. Following the announcement, Stellar Bancorp’s stock price dipped by 2.85% in pre-market trading, reflecting investor concerns over the revenue miss and broader economic uncertainties. According to InvestingPro, the company maintains a "GOOD" overall financial health score, though two analysts have recently revised their earnings expectations downward for the upcoming period.

Key Takeaways

• Stellar Bancorp’s EPS exceeded expectations by $0.02.
• Revenue fell short, raising concerns about growth.
• Stock price decreased by 2.85% following the earnings release.
• Economic uncertainty, including tariff impacts, poses challenges.
• The company anticipates loan growth in the latter half of 2025.

Company Performance

Stellar Bancorp’s performance in Q1 2025 demonstrated resilience in earnings but highlighted challenges in revenue growth. While the EPS beat suggests effective cost management and operational efficiency, the revenue shortfall may indicate slowing demand or competitive pressures. The company’s focus on diversifying its loan portfolio and reducing regulatory-sensitive exposures aligns with industry trends towards more robust risk management.

Financial Highlights

• Revenue: $104.76 million, slightly below the forecast of $105.72 million.
• Earnings per share: $0.46, surpassing the forecast of $0.44.
• Net income: $24.7 million.
• Net interest income: $99.3 million, down from $103 million in Q4 2024.
• Net interest margin: 4.2%, a slight decrease from 4.25% in Q4 2024.

Earnings vs. Forecast

Stellar Bancorp reported a $0.02 EPS beat, translating to a 4.5% surprise. Despite the positive EPS, the revenue miss of nearly $960,000 represents a 0.91% shortfall, which may have tempered investor enthusiasm.

Market Reaction

The stock’s 2.85% decline post-earnings reflects investor caution, likely driven by the revenue miss and broader economic uncertainties. While the stock has delivered a 15.4% return over the past year, it’s down 4.3% year-to-date. Based on InvestingPro’s Fair Value analysis, the stock appears slightly overvalued at current levels. The stock trades between its 52-week range of $21.27 to $32.36, suggesting moderate volatility relative to market trends.

Outlook & Guidance

Looking forward, Stellar Bancorp remains optimistic about loan growth in the second half of 2025, targeting low to mid-single-digit increases. The company aims to maintain a 4% core net interest margin and continues to explore mergers and acquisitions as part of its strategic initiatives. Notably, InvestingPro analysis shows the company has maintained dividend payments for 9 consecutive years, with analyst consensus indicating continued profitability for the current fiscal year. For deeper insights into STEL’s financial health and growth prospects, investors can access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers.

Executive Commentary

CEO Bob Franklin highlighted, "We continue to see opportunities for new customer acquisition and our pipelines are growing," emphasizing the company’s focus on relationship-based banking. CFO Paul Ege reinforced this sentiment, stating, "Our goal is to continue to be a core bank."

Risks and Challenges

• Economic uncertainty from new tariff policies could impact growth.
• Revenue shortfall may signal competitive pressures.
• Decreased net interest income and margin could affect profitability.
• Regulatory changes may influence loan portfolio strategies.
• Potential sub-debt retirement could affect capital structure.

Q&A

During the earnings call, analysts inquired about loan payoffs and new loan originations, with the company reporting $275-300 million in quarterly payoffs and a 7.29% weighted average rate for new loans. The management’s cautious approach to economic impacts and deposit mix optimization was also a focal point of discussion.

Full transcript - Stellar Bancorp Inc (STEL) Q1 2025:

Karen, Conference Operator: Thank you for standing by. My name is Karen, and I will be your conference operator today. At this time, I would like to welcome everyone to the Stellar Quarter One twenty twenty five Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After today’s presentation, there will be an opportunity to ask questions.

I will now turn the call over to Courtney Theriault, Chief Accounting Officer. Please go ahead.

Courtney Theriault, Chief Accounting Officer, Stellar Bancorp: Thank you, operator, and thank you to all who have joined our call today. Good morning. Our team would like to welcome you to our earnings call for the first quarter of twenty twenty five. This morning’s earnings call will be led by our CEO, Bob Franklin and CFO, Paul Ege. Also in attendance today are Steve Ruzloff, Executive Chairman of the company Ray Bettulli, President of the company and CEO of the bank and Joe West, Senior Executive Vice President and Chief Credit Officer of the bank.

Before we begin, I need to remind everyone that some of our remarks made today constitute forward looking statements as defined in the Private Securities Litigation Reform Act of 1995 as amended. We intend all such statements to be covered by the safe harbor provisions for forward looking statements contained in the act. Also note that if we give guidance about future results, that guidance is only a reflection of management’s beliefs at the time the statement is made, and such beliefs are subject to change. We disclaim any obligation to publicly update any forward looking statement, except as may be required by law. Please see the last page of the text in this morning’s earnings release, which is available on our website at ir.sellerbankworkinc.com for additional information about the risk factors associated with forward looking statements.

At the conclusion of our remarks, we will open the line and allow time for questions. I will now turn the call over to our CEO, Bob Franklin.

Bob Franklin, CEO, Stellar Bancorp: Thank you, Courtney. Good morning, everyone, and welcome to the Stellar Bancorp first quarter earnings call. I’ll begin by thanking our outstanding team at Stellar whose solid work continues to build a strong financial institution for our communities. As we enter 2025, we spoke of our focus on the customer, internal, existing and perspective. Our focus is unchanged.

We must acknowledge, however, that the administration has introduced a fair amount of uncertainty into the economy, though it is too early to see size of impact on our communities. Our team will remain disciplined around credit as we monitor the impact of the new tariff policies on our customers and our communities. We continue to see opportunities for new customer acquisition and our pipelines are growing, while we are also seeing significant commercial real estate pay downs as interest rates begin to stabilize. Given these conditions and the economic climate, we will proceed cautiously. Challenges also provide opportunity and we took advantage of our strong capital position to return capital to our shareholders through meaningful share repurchases during the first quarter.

The repurchases are in line with our goal to manage our capital to the benefit of our shareholders. We remain focused on building great we remain focused on building the great foundation our team has put in place. Given the economic uncertainty of the first quarter, we believe that growth will be pushed to the third and fourth quarters of the year. Although conditions make us cautious, our dynamic markets and our team keep us optimistic. I will now turn the call over to Paul Legge, our CFO, for more details on the quarter.

Paul Ege, CFO, Stellar Bancorp: Thanks, Bob, and good morning, everybody. We are very pleased to report first quarter twenty twenty five net income of $24,700,000 or $0.46 per diluted share, which represents an annualized return on average assets of 94 basis points and an annualized return on average tangible common equity of 11.48%. Key highlights of our first quarter performance included a reduction of noninterest expenses and a meaningful repurchase of common stock along with the continuation of core net interest margin progress after seeing inflection during 2024. Our balance sheet shrunk during the quarter on a point to point basis, largely due to the seasonal outflow of government banking deposits and cash balances that had significantly inflated our balance sheet at year end, which we acknowledged during our last earnings call. Looking at it on an average basis, the linked quarter decrease in assets was much less significant and more reflective of the decrease in loans experienced during the quarter.

The net result is a smaller but stronger and more core balance sheet with a very strong capital position, and that’s notwithstanding our share repurchase activity during the quarter. And if not for two less days to earn interest in the first quarter, earnings would have been up relative to the prior quarter. Notwithstanding broader economic uncertainty, we believe we are well positioned to return to a reasonable level of growth during the year, albeit later than initially planned. And incremental growth will position us well to deliver operating leverage and earnings improvement in 2025. Net interest income for the quarter was $99,300,000 representing a decrease from the $103,000,000 booked in the fourth quarter.

This was largely due to lower purchasing accounting accretion and two less days to earn interest due to the ninety day quarter. This translated into a net interest margin of 4.2% in the first quarter relative to 4.25 in the fourth quarter of twenty twenty four. Purchase accounting accretion in the first quarter was $5,400,000 relative to $7,600,000 in the fourth quarter. Excluding purchase accounting accretion, tax equivalent net interest income decreased slightly in the quarter to $94,000,000 from $95,500,000 in the prior quarter and net interest margin excluding purchase accounting accretion was 3.97%, up from 3.94% in the prior quarter. Key drivers to the strong margin performance during the first quarter included the relative stability in maintaining a strong proportion of noninterest bearing deposits, which represented over 37% of our deposit base a 14 basis point improvement in our cost of funds, driven by a 21 basis point improvement in our cost of interest bearing liabilities.

Also, we had incrementally higher securities yields and pretty strong loan yields after excluding purchase accounting accretion. Walking further down the income statement, we booked a provision for loan losses from the first quarter of $3,600,000 In combination with minimal net charge offs of $163,000 during the quarter, this brings our allowance for credit losses on loans to $83,700,000 or 1.15% of loans from $81,100,000 or 1.09% of loans at the end of the prior year. Moving on to non interest income. We earned $5,500,000 for the first quarter versus $5,000,000 in the fourth quarter, noting that the first quarter benefited from small gains on sales of assets. Next, non interest expense for the quarter was down $5,100,000 to $70,200,000 from $75,300,000 in non interest expense during the fourth quarter.

This is better than planned and reflective of both some timing driven dynamics and our focus on holding the line on expenses where we can. Our strong bottom line results have driven a continuation of our track record of growing our regulatory capital ratios and tangible book value per share since the merger. Total risk based capital was 15.94% at the end of the first quarter relative to 16% at the end of twenty twenty four and fourteen point zero two percent at the end of twenty twenty three. Our regulatory capital ratios at the bank actually ticked up. Year over year, tangible book value per share increased 14.3% from $17.23 to $19.69 per share, and that is after the effect of both dividends and the share repurchases.

We continue to like our prospects for strong internal capital generation and the optionality that it creates, which we feel is very valuable in the current operating environment. During the first quarter, we acted on this optionality through share repurchases, buying back 1,400,000.0 shares of our stock at a weighted average price of $27.99 per share. Additionally, we repurchased 679,000 shares at a weighted average price of $25.83 per share since the end of the first quarter, representing in total nearly 4% of our shares outstanding at year end. The Board of Directors also authorized a new share repurchase program, which allows us to repurchase up to $65,000,000 in shares through May of twenty twenty six. While our preference would be to deploy capital through growth and M and A, we appreciate having the flexibility to pursue capital optimization through buybacks when appropriate.

In closing, we really like where we sit, both financially and strategically. We’ve laid the foundation to support adding more scale to the Stellar Bank platform, and it remains our goal to deliver positive operating leverage during the year while maintaining a really strong balance sheet and the financial flexibility to be opportunistic. Thank you. And I will now turn the call back over to Bob.

Bob Franklin, CEO, Stellar Bancorp: Thank you, Paul. I think, operator, we’re ready for questions.

Karen, Conference Operator: The first question comes from David Pfister from Raymond James. Your line is open.

David Pfister, Analyst, Raymond James: Good morning, everybody.

Bob Franklin, CEO, Stellar Bancorp: Morning, David.

David Pfister, Analyst, Raymond James: Want to start off on the loan side. Know, it sounds like we’re cautiously optimistic for about potential for accelerating growth that this might, you know, hopefully, kind of the the the trough here. Did you just I guess, first off, touch on on the pulse of your clients. Obviously, there’s a a ton of uncertainty out there. So I’d be curious, what are you hearing from your clients?

And just how the pipeline is trending? And how much of this decline is a function of payoffs and paydowns being elevated and higher than expected versus slower originations just given the uncertainty?

Bob Franklin, CEO, Stellar Bancorp: Let let me set this up a little bit, and I want I want Ray to come in and and and fill in. One of the things we did we’ve been focused on, David, is is I mean, I I think when you see an MOE come together, especially the way ours did, is two real community, small community banks, and then combine into a bank that’s over $10,000,000 in assets, there’s some redistribution of how the loan book should look. And we’ve been attempting to kind of reconfigure what that what the loan side of our balance sheet looks like. In other words, be able to do across the board any type of loan that we want to do without being totally reliant on these sort of smaller real estate loans that we have all done in the past as a smaller community bank. So across the board, able to do the things that we want to do.

So there’s a real bit of real focus on it and letting some of this stuff roll out. So we were at when we started this journey, we were over the regulatory guidance in both categories, both C and D and CRE. So what we’ve done is focused on getting those balances back down to what looks more like a larger bank balance sheet. So we’ve done that. We continue to see some of that roll off that we’ve really kind of focused on letting roll off.

And then as we add to it, it’s a little bit different focus on what we’re adding to it. But I’m going let Ray fill in the gaps here.

Ray Bettulli, President of the Company and Bank CEO, Stellar Bancorp: Thanks, Bob. David, on the to your question around pipeline and kind of the waterfall. So in the first quarter, our loan originations and this kind of goes to this the build of the pipeline and what we’re seeing. If you compare it to the past four quarters, we’ve had two good quarters of solid originations that were in excess of the second quarter ’twenty four and third quarter ’twenty four. So fourth quarter of ’twenty four and first quarter were trending in the right direction and it supports what we’re seeing in the pipeline as far as deal flow as well as just the absolute value of the pipeline both in expansion of our existing customer base and new market share gain opportunities.

So if you look at where that’s building, it’s so long as we can convert, it will continue to generate higher loan originations and then we’ve got to see where those fund. But if they fund the way we think they’re going to fund, that obviously gives us a lift to offset the payoffs, which have been about, call it, $275,000,000 to $300,000,000 a quarter. The other component of the waterfall that really kind of goes to what Bob just talked about is that what we call our carried loans, which is our advances less our payments on the whole book. And because of the posture that Bob mentioned, that has not given us a lift over the past four quarters. So as we continue to originate and get availability that will then fund, we should see a to the positive lift in the carried, which will help the overall loan growth story, which we as we said, we should be in the second half of the year.

We’re seeing a little bit of growth in our unfunded commitments, which is good, is kind of a leading indicator for that. So we feel good about it. Our team is laser focused. We know what’s needed on the origination side in order to generate the growth. And to your question about customer sentiment, it’s kind of the way we’re talking about it.

It’s still early to tell. We have seen maybe some pull through of things like maybe some inventory purchases early, but we still think it’s too early in that aspect. And as far as deal flow, what we’re seeing on a in committee and what we’re seeing in the pipelines, it’s positive.

David Pfister, Analyst, Raymond James: Okay. Okay. That’s great color. And maybe just touching on the deposit side. I mean you used some pretty strong language in press release saying the market’s intensely competitive.

Could you just elaborate on that and and touch on some of the the trends you’re seeing? Obviously, exclusive of the government deposits, you know, just where are you having success winning new relationships? How do you think about core deposit growth and and opportunities to further, optimize funding and maybe drive some further improvements in deposit costs even exclusive of Fed cuts?

Ray Bettulli, President of the Company and Bank CEO, Stellar Bancorp: Well, we still we really like our new account origination story. First quarter onboarded in both number and dollar amount more than the fourth quarter. The net mix is consistent with our overall bank net mix. And you got to also you can’t talk about new accounts without closed accounts and closed accounts were at the lowest level in four quarters. So and of that of those new accounts, close to 40% were to customers that weren’t here before, which we we really love that trend.

I think it talks about the stellar brand, where we sit in the market, our success in having doors open for us. And we continue as we’re sixth in the MSA and deposit market share, kind of the opportunity to continue to take market share gains.

Paul Ege, CFO, Stellar Bancorp: And that’s notwithstanding our track record of not really being a market leader in price. We don’t buy our deposit base. We work we work the hard way, and it’s reflective of the new account openings, being skewed towards, the way we want it, a lot of non interest bearing deposits and things along those lines.

David Pfister, Analyst, Raymond James: Okay. That’s great. And then just maybe shifting gears to credit quickly. You know, not not surprising to see some migration in non accruals. It seems like it’s across several segments, but maybe notably in in CRE.

You know, obviously, you got a track record of being really conservative on on credit, very disappointed. I was just hoping you could touch on what you’re seeing on the credit side and and maybe what you’re watching more closely and and especially anything that you’re maybe more concerned with just given the trade wars, tariff issues, those impacts, all of those all of those issues.

Bob Franklin, CEO, Stellar Bancorp: Yes. This is Joe. The migration was in the owner occupied CRE. Not I wouldn’t classify it as anything related to tariffs or just some owner occupied CRE with management issues, and then we noticed that and granted it appropriately and put appropriate reserves against it. What we’re seeing, as Ray said, it’s a little early in this tariff issue to know how it’s going to affect it.

There’s a lot of talking, but we haven’t really seen too much in the way of any deteriorating financial reports from the customers. So I think we’re it’s a wait and see attitude, but we’re just taking a cautious approach to it as we examine new credits and we and just wait and see what happens.

David Pfister, Analyst, Raymond James: Has there been any adjustments to to underwriting or risk ratings or or management as a result of this?

Bob Franklin, CEO, Stellar Bancorp: No. I mean, we’ve always had a strong focus on primary sources of cash flow. We’ll continue to do that as we grade our credits and look at our credits. We want to know how we’re going to get paid back and then what secondary source of repayment to be that will follow on behind that. It’s coming from credit enhancement like guarantees or additional collateral.

But no, it’s just a strong focus on operating cash flow. Okay. Perfect. Thanks everybody. Thanks, David.

The

Karen, Conference Operator: next question comes from Matt Olney from Stephens. Your line is open.

Matt Olney, Analyst, Stephens: Hi, thanks. Good morning, guys. Want to dig more into I think Paul mentioned the active buyback in the first quarter and even more activity in recent weeks. I think that makes a lot of sense considering the valuation and the capital. Just would love to hear just updated thoughts from capital from here including consideration for additional debt redemption just with the context of course of just economic uncertainty.

Bob Franklin, CEO, Stellar Bancorp: Yeah, Matt. I think we continue with the same posture that we’ve had on trying to decide what the right use of the capital is. We continue to build capital at a pretty significant rate. There’s some sub debt that we are thinking about possibly retiring. I think we weigh that versus the benefits of what buybacks might be or what refinancing that debt might look like and what the benefits of that are.

But we’re losing capital treatment on some of that sub debt. So it’s we’re gonna make a decision around that a little later in the year, but we continue to to to build capital, which allows us some flexibility. It’s certainly enough capital for for what we think our growth is gonna be over the next couple of years. And so we have the ability to use it for for some other things at this point. We haven’t given up on m and a.

I think m and a is still out there for us. Although, I think it’s been put on hold like a lot of folks. But I think people are still talking. We’re still talking. We’re still talking to folks about transactions.

I think it’s a little bit different if you think about public to public versus public to private. Those conversations are a bit different, and most of ours tend to be with the private at this point. But so all of these things are still on the table, and I think we’re gonna have to balance that out over the rest of the year as to to what the best place and utilization of that capital is. But that’s kind of how we’re approaching it.

Paul Ege, CFO, Stellar Bancorp: Okay. Appreciate

Matt Olney, Analyst, Stephens: that. And I guess other capital options that your peers are considering at this point. I’m curious if this is on your radar as far as a focus just whether it’s I think security purchases, whether it’s kind of a smaller wholesale trade with some wholesale funding or even a few years ago, think you guys purchased some loans as well. Are those other options are being considered or is the focus still on, like you said, the buyback with a kind of a longer term eye on M and A?

Bob Franklin, CEO, Stellar Bancorp: Yeah. I mean, we’re a core bank and this is where we keep our focus. We don’t manage this thing on a quarter by quarter basis. We’ve got a very good game plan around what we want this to look like in the markets that we’re in, and we’re on track to build this bank the way that we think that it ought to be built in our market. So to do something on an ad hoc basis is probably not in our DNA.

So we’re going to continue on an organic basis to focus on our the great markets that we’re in, look for opportunities to add the partnership with someone else in the future, and then we can look at dividends or buybacks as those opportunities arise. I think we tend to like buybacks just because from a tax standpoint, it seems to be a little bit better way to return capital to shareholders, although dividends are nice also. So we’ll continue to manage that as we go along. Yeah.

Paul Ege, CFO, Stellar Bancorp: And and for what it’s worth, you’ve seen both. We’ve seen the increased dividends in the fourth quarter, and we’ve chosen to be selectively active on the share repurchase. So we we appreciate that flexibility, we think we sit it, in the catbird seat relating to having a lot of plenty of options and ability to do a lot of things. But I’ll end where Bob started. Our goal is to continue to be a core bank.

Ray Bettulli, President of the Company and Bank CEO, Stellar Bancorp: Yeah.

Matt Olney, Analyst, Stephens: Okay. Appreciate the commentary there. And then I guess switching gears, the other positive theme in the quarter that I saw was just a nice improvement on your interest bearing deposit cost. We’d love to appreciate just how much more room you think you have to bring that down, whether the Fed kind of stays put or continues to cut rates and then for margin, ticks a little bit higher. Love to appreciate your view of kind of the outlook there.

Thanks.

Paul Ege, CFO, Stellar Bancorp: Certainly. Well, the first quarter we saw the, what I’ll call, full quarter impact of a lot of the rate activity you saw in the back half of the year, including in the fourth quarter. And it’s we work every day to try and optimize that mix, but we we kinda see, that we’ve gotten most of what we could out of that. Note our cost of deposits, did not skew as high as a lot of our peers. So, you know, we’re we’re gonna continue to to work on, working that down.

But ultimately, it’s it’s gonna continue to be a slog. I don’t think we’re gonna have, or you’ll the world will see the same kind of improvement, in from the in the second quarter from the first quarter. But day by day, you know, that’s our job, continue to drive an optimal mix of deposits and try to grow that base. So we’ll we’ll be working just as hard, but the incremental return in terms of improvement is gonna be hard to compete with this prior quarter’s improvement.

Matt Olney, Analyst, Stephens: Okay. And and Paul, I guess the last part of that question was just around the core margin, think the 3.97% ex the accretion. Would love to hear thoughts on kind of directionally where that could go?

Paul Ege, CFO, Stellar Bancorp: Well, we’re pleased with showing incremental improvement, three basis points quarter over quarter. Our goal, would be to to get a four handle back on our core net interest margin, excluding purchase accounting adjustments. And, you know, we think we’re on that path. It’s just given a lot of the uncertainty, we’d we’d rather, under promise and outperform on that front. I think every basis point from here is is gonna be a win, and we’re we’re just keeping our nose down to drive a core balance sheet.

And with that, we’ll we believe will come incremental improvement. But we’re already in rare air, so every basis point we get from here is gonna be considered a pretty good win and we’re gonna continue to work on it.

Matt Olney, Analyst, Stephens: Okay. Thanks for taking my questions. I’ll step back.

Bob Franklin, CEO, Stellar Bancorp: Thanks, man.

Karen, Conference Operator: The next question comes from Will Jones from KBW. Your line is open.

Will Jones, Analyst, KBW: Yes. Hey, guys. Good morning. Thanks for the questions. You’re welcome.

So I wanted to circle back to the growth conversation. Ray, maybe if you could just help us frame what you kind of see and know is upcoming on the pay down front. I know it’s been obviously a headwind for you guys, but more so a headwind for the broader industry. So just so we understand what the bar to chin is on the pay down front. And then just to the comments about growth being more backend loaded, know that you guys are used to kind of growing in that five to 8% range.

Would you expect we kind of immediately get back to that level? Or is it really more of a slow grind higher as we move into the latter half of twenty twenty five?

Ray Bettulli, President of the Company and Bank CEO, Stellar Bancorp: Yeah. Well, on on payoffs, I mean, I think what we what we feel the kind of the behavior of the portfolio is something like two seventy five million to $300,000,000 a quarter is kind of what we’re what experienced in absolute dollar terms. On the growth side, think we talked about going into the years more like low to mid single digits. And obviously, we had down in the first quarter. But again, as I said earlier, it’s going to really come in two areas.

One is the just what’s funded of new production and then also where we start to see advances exceed payments. I think as we see that pipeline build and those originations start to increase that should result in getting us over the payoffs and turn into growth. But again as Bob mentioned in the beginning, we think that will be in the last two second half of the year.

Will Jones, Analyst, KBW: Yeah. Great. Okay. That’s helpful color there. I wanted to also circle back, just on the margin.

I appreciate the new slide, Slide nine, the repricing slide. That’s really great. It really helps kind of frame and visualize what the fixed repricing opportunity is. And it really seems like moving beyond 2025, that there’s still a pretty meaningful repricing story out there. But just curious today on new loans, you’re seeing pricing come in and what you’re kind of seeing from a competitive standpoint on loan pricing?

Ray Bettulli, President of the Company and Bank CEO, Stellar Bancorp: Well, I mean, is competitive for the good loan. But first quarter, our loan originations came on at a weighted average rate of $7.29 and our renewed loans came on at 7.48

Will Jones, Analyst, KBW: Okay. And are you still sticking kind of within the same fixed versus variable SKU in terms of the broader portfolio? Is it really kind of more of a fifty-fifty mix?

Ray Bettulli, President of the Company and Bank CEO, Stellar Bancorp: Correct. On the new. Yes, on what’s coming on new.

Will Jones, Analyst, KBW: Okay, great. Then just lastly for me, mean, Paul, the expense story this quarter was really quite positive. I know we kind of talked about being more in that $295,000,000 range for this year. I know it’s not as simple as just annualizing what you guys did this quarter and it sounds like there may be a little bit of timing differences with some costs that are coming through. But could you just help us appreciate where you see expenses trending maybe into the next quarter and the balance of the year?

Paul Ege, CFO, Stellar Bancorp: Certainly. We work every day expenses and we would caution against annualizing the first quarter. Although we have our notes to grindstone as it relates to managing expenses, but also we want to be as thoughtful as possible about continuing to invest in the business and what’s gonna drive growth in a go forward basis. So we we look at this quarter as something that we can hold our heads high with respect to, and, you know, we like our chances of of beating that prior guidance, but we we will continue to see incremental investment, while while always holding the line where we can. Some of probably about 50% of, the the relative beat there was on timing related things that are likely gonna come later in the month, particularly as it relates to professional services fees, and and certain external audits and things along those lines that that have to get done on a time in a timely manner.

So not all of it will get pushed into the next year, but, we are as diligent as we’ve ever been, and we’re, very pleased with, our performance on expenses year to date.

Will Jones, Analyst, KBW: Yes. Okay. Great. Well, nice work there. Thanks for the questions, That

Karen, Conference Operator: concludes our Q and A session. I will now turn the call over to Bob Franklin for closing remarks.

Bob Franklin, CEO, Stellar Bancorp: Very good. Thank you very much for joining our first quarter call. And with that, have a great weekend.

Karen, Conference Operator: Ladies and gentlemen, that concludes today’s call. Thank you all for joining and you may now disconnect.

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