Q4 2022 Stellar Bancorp Inc Earnings Call
Speaker 2: The conference will begin shortly. To raise and lower your hand during Q&A, you can dial star 1 1.
Speaker 3: To ask a question during this session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised today's conference is being recorded. I would now like to hand the conference over to your speaker today, Courtney Cherio, Chief Chief of Staff.
Speaker 4: accounting officer. Please go ahead. Good morning and thank you to all who have joined our call today. We would like to welcome you to our earnings call for the fourth quarter of 2022. This morning's earnings call will be led by Stellar's CEO Bob Franklin and CFO Paul Eggie.
Speaker 5: Also in attendance today are Steve Retslaff, Executive Chairman of the company, Ray Vitulli, President of the company and CEO of the bank, and Joe West, Senior Executive Vice President and Chief Credit Officer of the bank.
Speaker 6: Before we begin, I need to remind everyone that some of the 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.
Speaker 7: 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.
Speaker 8: Please see the last page of the text in this morning's earnings release, which is available on our website at IR.SellerBankorp.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.
Speaker 9: I will now turn the call over to our CEO , Bob Franklin. Thank you, Courtney, and good morning. Welcome to Stellar Bancorp's fourth quarter earnings call and our first of a combined organization.
Speaker 10: I will begin by thanking our dedicated staff that is working tirelessly to make Stellar Bank an outstanding organization.
Speaker 11: This is an all-bank team effort, and our team is responding to the challenge.
Speaker 12: We are divided by two operating systems, but we are fully engaged in supporting the successful system integration in February of 2023.
Speaker 13: Completion of this conversion is an important step in solidifying the combination of our two banks.
Speaker 14: The fourth quarter provides us with a first look at both our balance sheet adjusted for purchase accounting with market valuations and our income statement, which will provide insight into the expenses associated with our merger along with Day 2 provisions.
Speaker 15: The fourth quarter is one dominated by purchase accounting adjustments and merger related expenses.
Speaker 16: Our goal today is to help guide the reader of our financials to a core franchise and reveal the core earnings power created by our combination.
Speaker 17: We have also been proactive in our decision making given the current interest rate environment and economic environment.
Speaker 18: Throughout the fourth quarter, we look to make business decisions that best fit our current focus on liquidity, capital, and credit.
Speaker 19: First of all, we took care to make proper reserves as we turn into a more challenged economic environment.
Speaker 20: Secondly, we sold some of our challenge credits, or more challenge credits, which would have been longer term workouts with uncertain outcomes, opting for certainty, which decreased our classified credits and allowed us to realize values greater than our indicated marks.
Speaker 21: and having to market the CBTX securities portfolio for the transaction.
Speaker 22: meant we own the securities today at market value. We felt it an opportune time to sell some of those securities and bolster our liquidity.
Speaker 23: Later, Paul and the team will provide more detail to aid in understanding the changes to our financials.
Speaker 24: Regulatory approval was a key factor in the timing of our closing.
Speaker 25: Between announcement and final approval, the interest rate environment changed significantly by the Federal Reserve increasing interest rates at a very rapid pace.
Speaker 26: Therefore, the purchase marks that were affected by interest rates have been a moving target.
Speaker 27: Today, a majority of that work is done and we have had a chance to review the results.
Speaker 28: We have never been more bullish on the long-term success of this financial combination.
Speaker 29: our ability to deliver for our constituencies.
Speaker 30: our shareholders, our customers, our employees, and our communities in which we operate has never been better.
Speaker 31: However, in the near term, we cannot ignore the actions of the Federal Reserve is taking to slow our economy and contain inflation.
Speaker 32: We know from lessons learned in previous cycles to be cautious.
The end of this interest rate cycle remains unclear, but we will be vigilant as to the effects on our customers and our operating economic environment.
We will stay disciplined in managing our capital, our liquidity, and the credit in our bank as we continue to build Stellar Bank.
Our franchise resides in one of the most robust economies of the country. Our long-term future is bright and we will stay determined to increase shareholder value.
Our belief is that Stellar Bank is well positioned to deliver on that promise.
I will now turn the call over to Paul Eggie.
Thanks, Bob, and good morning, everybody. We are very pleased to be reporting our first quarter as a combined company as our merger went effective on the first day of October .
for accounting and financial reporting purposes.
All of our filings contain comparative information relative to legacy ABTX financial results with historical shares in per share numbers adjusted for the reverse merger.
Given the transformative nature of the merger to create Stellar, I will focus my commentary on the here and now of Stellar.
Sticking to what we believe are the most salient takeaways from our combined financial condition at the end of 2022, our Q4 operating performance, and what it all means for our outlook.
Then I'll turn the call back to Bob and he'll open it up for questions.
Before diving in, I'll note that while I won't be directly referencing the accompanying investor presentation, there's a good amount of detail included in the presentation regarding merger accounting adjustments, non-GAAP items, and other information.
So I will start with our financial condition.
which reflects the impact from purchase counting and the strategies we executed in the fourth quarter.
We ended the year with $10.9 billion in assets after accounting for the merger and results of operations for the quarter.
As we previewed on our third quarter call, the fair value purchase counting adjustments were meaningful given where the yield curve was at the effective time of the merger.
The impact of losses in the securities portfolio to equity were already accounted for in AOTI, amounting to $69.8 million after tax.
But the impact of bringing the CBTX loan portfolio over at fair value was even more significant as the fair value mark on the loan portfolio totaled $166.4 million and was mostly interest rate related. The combination of these items led to more good will resulting from the merger.
incrementally impacting capital and tangible book value per share. Going forward, we'll effectively earn that loan mark back through pretty significant purchase accounting accretion of loan yields over the life of the acquired loan.
The next most significant merger accounting adjustment was the $138.1 million core deposit in tangible created in the merger.
This totaled approximately 3.97% of core deposits, which is relatively high and reflective of the nature of the yield curve at 930 and the high quality composition of the CDTX deposit franchise.
The resulting CDI will be amortized on an accelerated basis over 10 years using the sum of years digits method. And this expense represents a partial offset to the beneficial dynamic of purchased accounting accretion revenue from the loan marks. The last significant merger related item I'll note.
$2.5 million in allowance for credit losses on PCD loans, which did not run through the income debate.
After our progress during the quarter, we ended the quarter with $7.75 billion in loans.
which, after adjusting for the previously mentioned merger-related fair value mark on loans, reflects an increase in loans over the quarter of around $200 million.
This represents what we feel like is an appropriate deceleration of loan growth from prior quarters given current market dynamics.
During the quarter, we saw deposits decrease $116.9 million in the quarter from a combined $9.38 billion at 9.30 to $9.27 billion at the end of 2022.
$100.7 million of this decrease came by way of interest bearing deposit.
Even though we saw an incremental decrease in non-insh bearing deposits totaling $16 million, we feel great about our deposit composition.
with 45.6% of our deposits being transactional, non-insurbearing deposits.
The cost of our interest-bearing deposits has continued to increase.
reflective of current industry markets and a fiercely competitive deposit market.
But we feel very good about how we've been able to manage these dynamics, relatively speaking.
Strategically, we're really pleased with our balance sheet positioning going into 2023, particularly considering our loan deposit ratio of 83.7%, solid capital levels, and a strong core earnings power to support a healthy go-forward capital bill.
Good evening, our fourth quarter results were noisy.
Our bottom line is $2.1 million in net income, translating to 4 cents in EPS.
These headline numbers were impacted significantly by merger-related and non-recurring items, which obscure the continuation of many positive operating trends both ABTX and CBTX brought into the stellar combination.
First, net interest income and net interest margin were extremely strong, thanks in part to purchase accounting accretion and loan yields, but even after adjusting for this, we're very proud of our revenue profile, notwithstanding market dynamics driving cost of funds upward.
headline NIM was 4.71% and after excluding first accounting accretion adjusted net interest margin with 4.38%.
Purchased accounting accretion with $8.2 million in the quarter.
The future recognition of purchased county accretion will be driven by scheduled and non-scheduled pay down behavior in the acquired portfolio.
Our current expectations are for 2023 would be to recognize between $26 and $30 million of purchase accounting accretion income into yield. This will be partially driven by our expectation that fewer lower yielding loans will pay down early in the current industry environment.
Walking down the income statement, it's hard not to notice that outside provision for loan losses in the quarter totaling $44.8 million.
We hit on this in the merger accounting discussion, but it's important to note that after excluding that day two CECL provision of $28.2 million on non-PCD loans and $5 million provision for unfunded commitments, our quarterly provisioning amounted to $11.6 million. Reflective of our more conservative view on credit given a—
have a higher than usual net charge loss number during the quarter totaling 5.7 million dollars.
of which 4.6 million dollars related to the proactive sale of
$35.4 million in loans. Most of these zones came over with meaningful marks such that the actual sale netted a game despite the charge off.
This is a good segue into our non-interest income, which was also bolstered by these gains and other gains totaling $4 million.
1.9 million related to the loan sale we just mentioned. About 1 million came from the sales branch assets and the remainder came from that strategic sale in October of more than $350 million in acquired securities to support our liquidity profile.
And we just Bob mentioned this and we discussed this on our prior earnings call Moving on an honest expense This was elevated in the quarter due to the recognition of eleven point five million dollars in merger related expenses And the introduction of merger CDI amortization into our expense base which totaled six point three million dollars for the core
During 2023, scheduled CDI amortization expense from the merger will total $24.5 million in addition to the $2.3 million in scheduled CDI amortization from prior deals.
We feel very good about our core operating expenses in the fourth quarter a result of both Legacy ABTX and CBTX doing an exceptional job holding the line on non-inflation expenses in an otherwise very inflationary environment and We're proud of being able to do this without hindering growth since the merger announcement From an overall performance standpoint when you after excluding merger related expenses and non-recurring the non-recurring gains purchase accounting accretion and that CDI amortization Amortization we feel very good about
We believe this strong core operating earnings power will drive rapid capital bills.
and once the non-recurring merger noise subsides.
The remaining merger related accounting items will be additive to our core operating earnings power since we expect merger related purchase accounting accretion.
In summary, we feel pretty good about our combined positioning on earnings, liquidity, capital and credit, which we know will prepare us for a wide range of economic scenarios. As we look into 2023 and beyond, we are hyper focused on maintaining the absolute and relative financial and strategic gains from our merger. We feel well positioned to withstand and advance our business, notwithstanding the potential challenges 2023 can bring.
Thank you and I will now turn the call back over to Bob. Thanks Paul and we'll be happy to answer some questions around trying to help the folks get through this kind of noisy quarter. So operator we're ready for questions. Thank you. As a reminder to ask a question please press star 1 1 on your telephone and wait for your name.
with Raymond James. Your line is open. Please go ahead.
Hey, good morning everybody.
I just wanted to start maybe with if you could just give us some color on the economic backdrop in Houston. Obviously the economy is strong, but I was hoping you could kind of give us a pulse from your perspective on your clients, how demand for loans is trending and then also your appetite for credit.
on the um...
The economic background in Houston is still strong. We had, you know, don't have full 22 job numbers in yet, but it's expected to be somewhere around 150,000 in job growth for the year, which is a strong year. And, you know, maybe taper down a little bit in December , but we still, that looks good. Our pipeline going into the fourth quarter.
we knew was a little, was less than the prior quarter, and that really manifested itself through less originations in the fourth quarter, but still really strong. Think about it, we originated about a billion in the third quarter on a combined basis, and then about 850 or so in the...
fourth quarter. So kind of that knowing that the demand had tapered just a little bit in our pipeline it did manifest it that way in originations.
I think I'll let Bob talk about kind of how we've.
kind of the message around our approach to lending given the uncertainties in the economic environment.
But overall, we still have a healthy pipeline even as we think about 23 and think about our long growth in 23, even all of that probably still in the low to mid single digits. So, I'm going to turn it over to Bob.
Yeah, David, I think what we're trying to adjust to is what may happen in the future, which is
for us is...
uncertainty, nobody likes uncertainty.
I think we need to be in front of this this stuff So we're we're enhancing our credit underwriting making sure that we get to do the right things and it slows things down a bit, but
Also, in these rising interest rate environments, we see these cycles where at first, the rising interest rates are sort of ignored. Customers continue to buy at low cap rates, and then they start to find it's very difficult to get things financed at the rates that they are trying to buy the assets.
So you start to see cycles of...
really repricing of those assets. So then we get to the point where people are hesitant because now there's a lot of talk about when the rates going to come back down again. So you get people go I'm going to hold off on my project until maybe rates come down. I don't want to borrow at 8%.
So there's a lot of, we're in that phase where there's a lot of uncertainty.
And so we want to be cautious around that as we move through this cycle. But we still have a decent pipeline. It's not as robust as what we had in 2022. But we had some pretty substantial loan growth in 2022. So we think, we do believe the Fed. We think the Fed...
is going to continue on to possibly have rates around that five and a quarter number. And so we have to be prepared for the effects of that. So we're watching our portfolio and watching what we put on.
Okay, that makes sense. And kind of along the same line, this is where I think the timing of the deal is really opportune, just given economic backdrop. So I wanted to get an update. We got the conversion and integration upcoming.
I was hoping you could just maybe update us on the timing of the synergies. Is that timeline still on track? And then, you know, just whether you've identified any other levers to pull, just given the increased scale to help maybe decelerate expense growth and whether there's any change to that overall synergy target. Quite during the latter stages of remodeling of AMR smoke in the remote area, you could start to reduce your overuse assumed fishr from nearchel
No change in synergy target. It has been invaluable in really offsetting what's been a very inflationary environment. As you know from prior calls, we've been able to hold the line and really pull through a lot of merger cost savings up to this point. We've been able to hold the line and really pull through a lot of merger costs savings up to this point.
We're going to be getting.
Perhaps almost all the way there by mid-year. There's a couple of expense items that will drop off to absolutely finish things at the end of 2023, but that's relatively low.
relatively small compared to the overall kind of success on cost saves. And also we do continue to have more levers. I appreciate your hitting on the fortuitous timing of the merger because we feel like this merger gives us a lot more financial flexibility.
going into uncertain times and more levers to potentially pursue additional call savings. And we're just better off with combined scale to confront these uncertain times. And we'll be better off when it's time to go back on offense.
And we are on schedule for conversion.
Terrific. And so that this this kind of $68 million you touched on the the CDI and some of those impacts but that's it's kind of $68 million run rates a pretty good starting base.
on a core basis? Actually, it's a hair high, you know...
I look at kind of core expenses now that you have the introduction of that very large CEI expense coming from the merger and core non-merger related and non-redundant expenses in 2022 is probably going to run around $265 over the year.
You can chop that into quarters if you see fit. But there's a broad target for us. Naturally
Our execution will be a function of what's coming By way of opportunities when we're not going to shy away from opportunities If it's the right people and or investments come along in 2023, but currently that's our target give or take
Was that 255 or 265? 65 with the CDI.
Got it. And then just last one for me, I wanted to touch on the $35 million in loan sales. Sounds like we're just kind of cleaning things up, just giving the deal and the uncertain backdrop just kind of getting ahead of some issues or some potential issues. But just curious if you'd give us some color on that.
Yeah, David, we had what's unique to them is it was basically the hangover that we had from.
So we had about four or five credits.
that were really struggling at post-COVID.
And we were having to put pretty heavy marks on those.
credits anyway.
They were rocking along, they were still alive and still trying to be worked out, but it was going to be long-term workouts for us with real uncertainty as to what the end might be. So we opted for certainty around what those losses might be in those portfolios as we were able to come inside our marks. So that's really why we did. It sort of cleared the
the COVID piece of that.
Got it. That makes sense. Thanks everybody.
Thanks everybody.
Thank you and one moment for our next question.
next question comes from the line of Brad Millsaps with Piper Sandler. Your line is open please go ahead.
Hey, good morning guys.
Bye
Thanks for all the color. Maybe I wanted to start with the core net interest margin, Paul. Could you give us an updated sense of what you feel like your loan or earning asset beta will be going forward as well as how you can think about the...
you know, the interest bearing or the total deposit beta at the combined company and how that would impact your core name.
Certainly, well, we're actually really proud of where our kind of cumulative beta is up to this point. And we've obviously had a measure of acceleration in the cost of funds here in the fourth quarter, but if you
Lot of people calculated certain different ways, but we're in the look solidly in the low end of the low teams relating to cumulative cycle deposit betas on the overall portfolio this is Hugely benefited from our very large Donish brand deposit base and That that's been really powerful and hanging down that overall
some loans we have to wait there. So Ray can probably comment a little more on the competition of the loan portfolio.
We feel good about the overall kind of pace of things notwithstanding the fact that we've seen the cost of deposits start to accelerate a little more to give time for that repricing on the asset side.
Just a little color on the loan yield side, or at least the average weighted rate on those loans. For the fourth quarter, loans came on at weighted average rate of $6.64, which was a nice increase from the previous quarter. And then, kind of...
just to show a little bit of the interquarter, we did have that towards the last half of the quarter, loans were coming on at 690. So feel really good about where the new loan originations are as far as that rate.
the rate on those nodes loads.
That's helpful. Ray, can you just give us a new kind of profile breakdown of variable versus fixed?
stuff that would be priced, that would change.
Yeah, so in the combination, obviously, we had, you know, community came with.
higher concentration of floating in the total portfolio, but but on a combined basis, we're around 58 percent fixed 42 percent floating
and I'd have to...
where we are on the floating and kind of breaking through. I don't think I have that handy.
Yeah, sure. No problem. I mean, it looked like the loan beta was just under 30% in the corridor. So basically, that should continue to improve as some of this.
reprising takes place.
Right.
Got it, got it. Okay. And then Paul, just, I think I heard you correctly.
It looks like you have about a little over 150 million in discount in total that you'll recognize over the life of loans. That's versus about 130 million of CDI or so that you set up. Is that the way to think about it?
That's the way to think about it. That was the CDI. We gave you a little bit of guidance as to how that will, it's scheduled expense that will come through. I think we've included that in the investor presentation and I mentioned it in my comments. But we're...
Amortizing that on an accelerated basis.
as he got on an accelerated basis. Got it.
And then I know you you had the loans that that you sold and cleaned up this quarter So that probably drew drove a little bit of higher core provision You know a lot of companies when they come together, you know because of the marks they you know Maybe have a really low provision, you know for a for a certain period of time Can you sort of help us think about you know, how you guys will be tackling that? I know there's a lot of moving parts with see-saw and
Marks etc. But I'm just kind of curious how to think about sort of your core loan loss provisioning rate
I think where we sit right now is how we're looking at
net long growth in the future.
It's it's a there's a lot of moving parts that got our provisions pardon me our allowance for credit losses to 1.2% of loans on that note. yo
kind of in a rule of thumb as to how we were looking at budgeting, we think that's appropriate for net loan growth expectations in 2023. There was a lot that went into it.
A big piece of that is...
little bit of what we're seeing in the economy we definitely
We need a little bit more conservative relative to prior periods and we believe that's appropriate and We'll continue to keep our finger on the pulse and go forward
Got it. And then just final two for me, just for clarity, the 265 expense number, does that include CDI? And then what would be a good combined tax rate for the combined company?
All right, so that includes CDI, but it doesn't include non M&A expenses and measure of Expenses that will be rolling off Mostly in the fourth quarter first quarter I should say
So, there.
I need to make that distinction And what was the last part of the question?
Just the tax rate for the combined company.
All right, I I put it at a hair under 20 and that'll largely be a function of
really dynamic and security software.
Got it. Okay. Thank you very much. I appreciate it.
Thank you.
Thank you. Thank you. We have a moment for our next question.
Our next question comes from Lina Mattolme with Steven. Your line is open. Please go ahead.
Thanks, good morning everybody.
Amen.
Just following up on that last question from Brad on expenses, Bob, what's your estimate of the remaining non-core...
expenses we could see for the rest of the year.
About $5 million.
Try to unload it.
Might come in last.
Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. And then, I want to hit on liquidity. I think you mentioned on the last call that you sold some securities immediately following the deal closing. Remind me of that amount of securities and I guess from here, what kind of cash flow are you looking for from your...
brought over. And after that sale, we're looking at annual cash flows approximating maybe falling a hair short of $200 million a year in the first couple of years. So we see a significant source of liquidity from a cash flow perspective coming out of Boys In
the securities portfolio in the near term to better petition us. Okay, thanks for that Paul. And then on the capital front, looks like the CET1 is around 10%. It feels like that could build pretty quickly given the profitability here. But any update of thoughts you have on the
on capital, any other general capital actions being considered right now.
I'd say the first capital action is to build.
The byproduct of these merger accounting adjustments ended up with lower capital than we're used to carrying and lower capital than we expected to be carrying post-merger. Obviously a function of the interest rate environment. We wouldn't trade it, by the way, because we've got a great earnings stream that comes from this interest rate environment.
But it did obviously put a transitory hit on kind of that initial capital ratio that's coming out of the deal here. We feel good about where we stand, but given all the uncertainties in the economy, we're looking forward to seeing that capital build.
relatively rapidly to give us more financial flexibility going forward to consider other capital strategies. But first and foremost, we want to see that build. We're fine with where it is, but we're more is better in the current environment and we look forward to seeing that build first and foremost.
such that we can be strategic down the line.
Okay, thanks for that, Paul. And then I guess a clarification point from...
Previously, I think you mentioned the expected CDI expense from the transaction in 2023, the $24.5 million in the presentation. Did that include or exclude the additional $2 million from prior deals? I'll switch to a exact-
You mentioned the expected CDI expense from the transaction in 2023, the $24.5 million in the presentation. Did that include or exclude the additional $2 million from prior deals? That excludes. Leave any dooruations in the comments below if you have any questions.
Okay, so we'll add that as well.
Okay, that's all from me. Thanks guys.
Okay, that's all from me. Thanks guys.
Thank you and again if you would like to ask a question at this time please press star 1 1 on your telephone. One moment for our next question.
And our next question comes from the line of Will Jones with KBW. Your line is open. Please go ahead. You are oats.
Hey, great things. Good morning, guys.
Hey, great things. Good morning guys.
So I just wanted to follow up on the margin discussion. Paul, it sounds like you guys expect maybe deposit costs to accelerate a little bit from here, but you're also optimistic on the loan side with some repricing opportunities upcoming and you're getting good yields on your new loans coming on. It feels like just reading the whole picture that maybe the margin has a little bit of a difference.
There is the possibility for additional outside, but we're not focused on that. We're focused on protecting what we feel is.
Let's see, correlated net interest margin profile and
It's it's more about protecting this on the go forward to the extent we can add to it incrementally That will be gravy but the real task in 2023 and beyond is protecting the advances we've
really built into our business model through this merger and the NIM profile is a big piece of that. So we're humbled by the current industry environment so it's extremely competitive out there but we are bullish about our ability to maintain.
the strategic and absolute advantages of merging our two companies here and creating Stella.
Great. That's super helpful. Thank you for that. And then just thinking about the balance sheet as a whole, you know, there's obviously a lot of moving pieces that deal close with, you know, the selling of some loans and the wind down of CBTX bonds. It's really left you in a great spot when you think about it, though. You know, minimal wholesale reliance and a good cash position.
Are you guys happy with where the balance sheet landed post-deal close? Is there any more heavy lifting to be done in terms of some restructuring? And then just given the added flexibility you guys have built into the balance sheet.
Do you feel like maybe you could be a little bit more aggressive on the loan growth front in the coming year? Ray, I think you've mentioned a low to mid single digit growth range, but do you at least come at the high end of that?
We want to afford ourselves the flexibility to be on the high end of that, but we don't want to be in a position where we need to be on the high end of that. This isn't the market to be a hero in. A lot of us each should be on our side.
We are managing our balance sheet for ultimate financial flexibility. We just don't want to find ourselves in a pinch relating to capital, liquidity, or credit. We will continue to be strategic to keep ourselves in the have category in all of those important subjects.
Yeah, well, I think, you know.
we finally get an opportunity to shine as a core funded institution. And it's something that it's been a while since relationship banking and core funding has been celebrated. And I think this is a better time to recognize the value of this franchise.
We're going to try to take advantage of that and utilize that to help grow our franchise in the future. We're well capitalized.
Nothing is off the table for us as far as the options that we have.
and we're going to just see what the right things to do. And it also provides us a good backdrop as we move through sort of a more challenged economic times, at least uncertain. But there's no place I'd rather be than Houston, Texas.
to operate. Yep, totally understood. Thanks again, guys. Just one more, if I could sneak it in. The buyback, I know you guys have talked about it before, being a tool in the tool belt. Is that something that we can see kind of fruition here?
you know, now that you have an idea of the pro forma capital and
Just any thoughts of the buyback of the grid? Sure, we love and value always having that tool in our tool belt. In the near term, we're going to be focused on building capital. But we value the flexibility of having that as a tool.
Thanks, guys. Appreciate the color.
Thanks, Will. Thank you.
Thank you. And one moment, please.
And we do have a follow-up question from only with Steven. Your line is reopened. Please go ahead. The line has suspended mutants because London has shut down on the machine.
Thanks for taking the follow up. I just want to jump on and ask Paul more about some of the commentary around.
the core margin. I think you said, Paul, you wanna make sure you protect the core margin in 2023. We can interpret that lots of ways. I'm curious to any other color you can give us about protecting that margin. Should we assume that's around from the perspective of the bank being pretty asset sensitive, kind of entering that time period of more rate uncertainty or how...
That said, um...
We've...
generally benefited
on net interest income in excess of our models by virtue of our betas in our models being more conservative.
I would adjust that to say that there still is an asset-sensitive lien, but it's not necessarily as pronounced as it was historically with legacy QQI. Okay, and would you characterize the...
the bank is satisfied with the current interest rate positioning and the lien that you mentioned, or are you suggesting there could be potentially additional actions in the future?
We're continually evaluating how we manage the balance sheet. Right now we feel good about the direction of our net interest income and the absolute value of our net interest income and margin.
And the real goal is to protect it and a real bonus if we're able to meaningfully grow it.
questions are
Okay, got it. Thanks guys
Thank you, and I'm showing no further questions, and I'd like to hand the conference back over to CEO Bob Franklin for any further remarks.
Michelle, thank you and thank everyone for their interest in stellar bank war.
This concludes today's conference call. Thank you for participating. You may now disconnect. Everyone have a great day.
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