Stellar Bancorp Inc (STEL) 2022 Q4 法說會逐字稿

Good day and thank you for standing by. Welcome to the Stellar Bancorp, Inc. Fourth Quarter 2022 Earnings Conference Call. (Operator Instructions) Please be advised today's conference is being recorded.

I would now like to hand the conference over to your speaker today, Courtney Theriot, Chief 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 Egge. Also in attendance today are Steve Retzloff, 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.

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.

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 statements, 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.stellarbancorpinc.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.

Thank you, Courtney, and good morning. Welcome to Stellar Bancorp's fourth quarter earnings call and our first as a combined organization. I will begin by thanking our dedicated staff that is working tirelessly to make Stellar Bank an outstanding organization. This is an all-bank team effort, and our team is responding to the challenge.

We are divided by 2 operating systems, but we are fully engaged in supporting the successful system integration in February of 2023. Completion of this conversion is an important step in solidifying the combination of our 2 banks. 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. The fourth quarter is one dominated by purchase accounting adjustments and merger-related expenses. 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.

We have also been proactive in our decision making given the concurrent interest rate environment and the economic environment. Throughout the fourth quarter, we look to make business decisions that best fit our current focus on liquidity, capital, and credit. First of all, we took care to make proper reserves as we turn into a more challenged economic environment. Secondly, we sold some of our challenge credits -- our more challenged 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.

And having to mark to market the CBTX securities portfolio for the transaction meant we owned the securities today at market value. We felt it an opportune time to sell some of those securities and bolster our liquidity. Later, Paul and the team will provide more detail to aid in understanding the changes to our financials. Regulatory approval was a key factor in the timing of our closing. Between announcement and final approval, the interest rate environment changed significantly by the Federal Reserve increasing interest rates at a very rapid pace. Therefore, the purchase marks that were affected by interest rates have been a moving target.

Today, a majority of that work is done, and we have had a chance to review the results. We have never been more bullish on the long-term success of this financial combination. Our ability to deliver for our constituencies, our shareholders, our customers, our employees, and our communities in which we operate has never been better. However, in the near term, we cannot ignore the actions of the Federal Reserve is taking to slow our economy and contain inflation. 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 Egge.

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 and per share numbers adjusted for the reverse merger.

But given the transformative nature of the merger to create Stellar, I will focus my commentary on the here and now of Stellar, speaking 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'll start with our financial condition, which reflects the impact from purchase accounting 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 accounting 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 AOCI 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 goodwill 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 to loan yield over the life of the acquired loan.

The next most significant merger accounting adjustment was the $138.1 million core deposit intangible 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 9/30 and the high quality composition of the CBTX deposit franchise. The resulting CDI will be amortized on an accelerated basis over 10 years using sum-of-the-years-digits method. And this expense represents a partial offset to that benefit -- to the beneficial dynamic of purchase accounting accretion revenue from the loan marks.

The last significant merger-related item I'll note is the day 2 provision of loan losses for non-PCD loans under CECL, which totaled $28.2 million along with a $5 million day 2 provision for unfunded commitments on loans running through the income statement. We also brought over $7.5 million in allowance for credit losses on PCD loans, which did not run through the income statement.

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 marked 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 deposits. Even though we saw an incremental decrease in noninterest-bearing deposits totaling $16 million, we feel great about our deposit composition, with 45.6% of our deposits being transactional noninterest-bearing deposits. The cost of our interest-bearing deposits has continued to increase, reflective of current interest rate 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 healthy go-forward capital builds.

Pivoting to earnings, our fourth quarter results were noisy. Our bottom line was $2.1 million in net income, translating to $0.04 in EPS. These headline numbers were impacted significantly by merger-related and nonrecurring items, which obscured 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 in the 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 purchase accounting accretion, adjusted net interest margin was 4.38%. Purchase accounting accretion was $8.2 million in the quarter. The future recognition of purchase accounting accretion will be driven by scheduled and nonscheduled paydown behavior in the acquired portfolio. Our current expectations 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 interest rate environment.

Walking down the income statement, it's hard not to notice that outsized 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 2 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 the increasing economic uncertainty, loan growth, and changes in specific reserves. The total allowance for credit losses ended the year at $93.2 million, or 1.2% of loans. Before moving on, I should note that we did have a higher-than-usual net charge-offs number during the quarter totaling $5.7 million, of which $4.6 million related to the proactive sale of $35.4 million in loans. Most of these loans came over with meaningful marks such that the actual sale netted a gain despite the charge-offs.

This is a good segue into our noninterest 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 sale of 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. Bob mentioned this and we discussed this on our prior earnings call.

Moving on to noninterest expense. This was elevated in the quarter due to the recognition of $11.5 million in merger-related expenses and the introduction of merger CDI amortization into our expense base, which totaled $6.3 million for the quarter. 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. Holding aside the M&A expense noise and the introduction of CDI amortization expense, 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 noninterest 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, after excluding merger-related expenses and nonrecurring gains, purchase accounting accretion, and that CDI amortization, we feel very good about where we set the bar for our adjusted pretax pre-provision earnings power in the fourth quarter at Stellar at $53 million. This represents 1.92% of average assets. We believe this strong core operating earnings power will drive rapid capital builds. And once the nonrecurring 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 to exceed the amortization of CDI created in the merger.

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 expand 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.

(Operator Instructions) Our first question comes from the line of David Feaster with Raymond James.

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 give us a pulse from your perspective on your clients, how demand for loans is trending, and then also your appetite for credit. Obviously, the economic backdrop is a bit uncertain. So where are you still seeing good risk-adjusted returns, and ultimately, how do you think about loan growth for this year?

David, I'll start on that. This is Ray. The economic background in Houston is still strong. We had -- I 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 maybe tapered 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 $1 billion in the third quarter on a combined basis and then about $850 million or so in the fourth quarter. So knowing that the demand had tapered just a little bit in our pipeline, it did manifest that way in originations. I think I'll let Bob talk about how we've -- 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 loan growth in '23, even all of that, probably still in the low-to-mid single digits, but I'll turn it over to Bob.

Yes, 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 stuff. So we're enhancing our credit underwriting, making sure that we 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 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 rate is 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 5.25% 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 along the same line, this is where I think the timing of the deal is really opportune just given the economic backdrop. And 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 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?

Totally. No change in the 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're going to be getting perhaps almost all the way there by midyear. 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 success on cost saves. And also, we do continue to have more levers. I appreciate you're 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 cost 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 this $68 million, you touched on the CDI and some of those impacts, but is $68 million run rate a pretty good starting base on a core basis?

Actually, that's a [hair high]. I look at core expenses now that you have the introduction of that very large CDI expense coming from the merger and core nonmerger-related and nonredundant expenses in 2022, it's probably going to run around $265 million over the year. You can chop that in the quarters as you see fit. But there's a broad target for us. Naturally, our execution will be a function of what comes by way of opportunities. We're not going to shy away from opportunities if the right people and/or investments come along in 2023. But currently, that's our target, give or take.

Was that $255 million or $265 million.

65, with the CDIs, of course.

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 given the deal and the uncertain backdrop, just getting ahead of some issues or some potential issues. But just curious if you could give us some color on that. What did you sell? Were these on the Allegiance or CBTX side or both? And then was there anything unique in this pool where you're saying this is something maybe we want to pull back on or anything were a little bit -- that makes us a bit cautious at this point?

Ray?

Yes, David, we had -- what's unique to them is it was basically the hangover that we had from COVID. So we had about 4 or 5 credits that were really struggling 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. We cleared the COVID piece of that.

Got it. That makes sense.

Our next question comes from the line of Brad Milsaps with Piper Sandler.

Maybe I wanted to start with the core net interest margin, Paul. Maybe could you give us an updated sense of what you feel like your maybe loan or earning asset beta will be going forward as well as how to think about the interest-bearing or the total deposit beta at the combined company and how that would impact your core NIM?

Certainly. Well, we're actually really proud of where our 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 -- a lot of people calculate it certain different ways, but we're in the -- solidly end of the low teens relating to cumulative cycle deposit betas on the overall portfolio. This is hugely benefited from our very large noninterest-bearing deposit base, and that's been really powerful in hanging down that overall -- holding down that overall deposit beta and ultimately, giving time for our loan betas to move. Really, our loans are going to be changed as a function of repricing opportunities and -- for some loans, we have to wait there. So Ray can probably comment a little more on the composition of the loan portfolio, but we're -- we feel good about the overall 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.

Yes. Just a little color on the loan yield side or at least the average weighted rate on those loans. And 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 just to show a little bit of the intra-quarter, we did have that -- towards the last half of the quarter, loans were coming on at 6.90%. So we feel really good about where the new loan originations are as far as that rate -- the rate on those notes -- loans.

That's helpful, Ray. Can you just give us a new breakdown of variable versus fixed stuff that would reprice (inaudible) changes?

Yes. So in the combination, obviously, we had -- Community came with higher concentration of floating in the total portfolio. But on a combined basis, we're around 58% fixed, 42% floating. And I'd have to -- And I'd have to -- where we are on the floating and breaking through. I don't think I have that handy.

Yes, sure. No problem. It looked like the loan beta was just under 30% in the quarter. So basically, that should continue to improve as some of this repricing takes place.

Right.

Got it. Okay. And then, Paul, just -- I think if 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. The CDI, we gave you a little bit of guidance as to how that will -- it's scheduled expense that will come through. And we've included that in the investor presentation and I mentioned it in my comments, but we're amortizing that on an accelerated basis.

Got it. And then I know you had the loans that you sold and cleaned up this quarter. So that probably drove a little bit of higher core provision. A lot of companies when they come together, because of the marks, they maybe have a really low provision for a certain period of time. Can you help us think about how you guys will be tackling that? I know there's a lot of moving parts with CECL and marks, et cetera, but I'm just curious how to think about your core loan loss provisioning rate.

I think where we sit right now is how we're looking at net loan growth in the future. There's a lot of moving parts that got our provisions -- pardon me, our allowance for credit losses to 1.2% of loans. But in a rule of thumb as to how we were looking at the budgeting, we think that's appropriate for net loan growth expectations in 2023. There was a lot that went into it and a big piece of that is a little bit of what we're seeing in the economy. We definitely leaned 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 on go forward.

Got it. And then just final 2 for me, just for clarity. The $265 million 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 a measure of expenses that will be rolling off mostly in the fourth quarter -- first quarter, I should say, so I need to make that distinction. What was the last part of the question?

Just the tax rate for the combined company?

All right. I'd put it at a hair under 20%, and that will largely be a function of dynamics in the securities portfolio.

Got it. Okay.

And our next question comes from the line of Matt Olney with Stephens.

Just following up on that last question from Brad on expenses. Bob, what's your estimate of the remaining noncore expenses we could see for the rest of the year?

About $5 million front-end loaded, might come in less.

Might come in more.

And then [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 existing securities in the portfolio in 2023?

Sure. So we sold about just over $350 million in securities, which represented about 59% of the [CTX] portfolio that was brought over. And after that sale, we're looking at annual cash flows approximating, maybe following a hair short of $200 million a year in the first couple years. So we see a significant source of liquidity from a cash flow perspective coming out of the securities portfolio in the near term to better position us.

Okay. 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 updated thoughts you have on capital? Any other just general capital actions being considered right now?

I'd say the first capital action is to build. We -- the byproducts 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 that initial capital ratios 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 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. 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?

That excludes.

Excludes, okay. So we'll add that as well. Okay. That's all for me.

(Operator Instructions) And our next question comes from the line of Will Jones with KBW.

Paul, I just wanted to follow up on the margin discussion. Paul, it sounds like you guys expect maybe deposit cost to accelerate a little bit from here, and 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 opportunity to expand from here. Maybe this is not a peak in the fourth quarter. I was hoping you could give us a little commentary over how you think the margin proceeds from here.

Certainly. We feel like there is the possibility for additional upside, but we're not focused on that. We're focused on protecting what we feel is a superlative net interest margin profile. And it's more about protecting this on a go forward. To the extent we can add to it incrementally, that will be crazy. 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 interest rate 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 2 companies here and creating Stellar.

Great. That's super helpful. And then just thinking about the balance sheet as a whole. There's obviously a lot of moving pieces at deal close with the selling of some loans and the winddown of [CTX] bonds. It's really left you in a great spot when you think about it, though, 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 could 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. And ultimately, 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, and we'll continue to be strategic to keep ourselves in the have category in all of those important subjects.

Yes. Well, I think 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. So we're going to try to take advantage of that and utilize that to help grow our franchise in the future. We feel like 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 a more challenged economic times, at least uncertain. But there's no place I'd rather be than Houston, Texas to operate.

Yes, totally understood. And just one more if I could sneak it in. The buyback, I know you guys have talked about it before. It's been a tool in the toolbelt. Is that something that we could see come to fruition here now that you have an idea of the pro forma capital and just any thoughts on the buyback would be great?

Sure. We love and value always having that tool in our toolbelt. In the near term, we're going to be focused on building capital. But we value the flexibility of having that as the tool.

Yes, got it. Appreciate the color.

(Operator Instructions) And we do have a follow-up question from Matt Olney with Stephens.

Just want to jump on and ask Paul more about some of the commentary around the core margin. I think you said, Paul, you want to make sure you protect the core margin in 2023. We can interpret that lots of ways. I'm curious, 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 entering the time period of more rate uncertainty? Or how should we interpret that comment?

I'd interpret it more strategic and then maybe give you a preview of what you'll see when we put out our 10-K. And that is we are actually at the current juncture relatively neutral from an interest rate risk standpoint. That said, we've generally benefited on net interest income in excess of our models by virtue of our betas and our models being more conservative. So there's -- I would adjust that to say that there still is a asset-sensitive lien, but it's not necessarily as pronounced as it was historically with legacy [CTX].

Okay. And is that -- would you characterize 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.

Okay. Got it.

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 thanks, everyone, for their interest in Stellar Bancorp.

This concludes today's conference call. Thank you for participating. You may now disconnect. Everyone, have a great day.