Stellar Bancorp(STEL) - 2022 Q1 - Quarterly Report

PART I — FINANCIAL INFORMATION Item 1. Financial Statements CBTX, Inc. reported $4.45 billion in total assets and $10.6 million net income for Q1 2022, with noninterest income driving growth Condensed Consolidated Balance Sheet Summary (in thousands) | Account | March 31, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Total cash and cash equivalents | $770,991 | $950,146 | | Loans, net | $2,848,438 | $2,836,179 | | Securities | $547,979 | $425,046 | | Total assets | $4,445,977 | $4,486,001 | | Total deposits | $3,821,225 | $3,831,284 | | Total liabilities | $3,906,254 | $3,923,876 | | Total shareholders' equity | $539,723 | $562,125 | Condensed Consolidated Statement of Income Summary (in thousands) | Account | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :--- | :--- | :--- | | Net interest income | $32,630 | $33,090 | | Provision for credit losses | $435 | $412 | | Noninterest income | $5,329 | $3,111 | | Noninterest expense | $24,652 | $23,285 | | Net income | $10,595 | $10,019 | | Diluted EPS | $0.43 | $0.41 | Condensed Consolidated Statement of Cash Flows Summary (in thousands) | Activity | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :--- | :--- | :--- | | Net cash provided by operating activities | $6,504 | $15,900 | | Net cash used in investing activities | ($172,282) | ($24,682) | | Net cash (used) provided by financing activities | ($13,377) | $75,446 | | Net (decrease) increase in cash | ($179,155) | $66,664 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the pending merger, economic uncertainties, and Q1 2022 net income growth driven by noninterest income - CBTX entered into a definitive merger agreement with Allegiance Bancshares, Inc. for an all-stock merger of equals, with the transaction expected to close in the second quarter of 2022, pending shareholder and regulatory approvals[165] - The economic outlook is uncertain due to the ongoing impacts of the COVID-19 pandemic, instability in the oil and gas industry, the conflict in Ukraine, and rising inflation, which could materially affect future financial results[182] Results of Operations Summary (in thousands) | Metric | Q1 2022 | Q1 2021 | Change (%) | | :--- | :--- | :--- | :--- | | Net Interest Income | $32,630 | $33,090 | (1.4%) | | Noninterest Income | $5,329 | $3,111 | 71.3% | | Noninterest Expense | $24,652 | $23,285 | 5.9% | | Net Income | $10,595 | $10,019 | 5.7% | Financial Condition Summary (in thousands) | Metric | March 31, 2022 | Dec 31, 2021 | Change (%) | | :--- | :--- | :--- | :--- | | Total Assets | $4,445,977 | $4,486,001 | (0.9%) | | Loans, net | $2,848,438 | $2,836,179 | 0.4% | | Total Deposits | $3,821,225 | $3,831,284 | (0.3%) | | Shareholders' Equity | $539,723 | $562,125 | (4.0%) | Item 3. Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk, interest rate risk, is detailed in the MD&A section of the report - The company's primary market risk is interest rate risk; disclosures and management strategies regarding this risk are detailed in the MD&A section of the report[259] Item 4. Controls and Procedures Disclosure controls were effective as of March 31, 2022, with no material changes to internal controls during Q1 - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by the report[260] - No changes in internal control over financial reporting occurred during the quarter ended March 31, 2022, that have materially affected, or are reasonably likely to materially affect, the company's internal controls[261] PART II — OTHER INFORMATION Item 1. Legal Proceedings No material legal proceedings are ongoing, with ordinary course litigation not expected to materially affect financials - The company is not currently involved in any material legal proceedings; any ongoing litigation is considered part of the ordinary course of business and is not expected to have a material adverse effect[262][263] Item 1A. Risk Factors No material changes to risk factors were reported compared to the Annual Report on Form 10-K for fiscal year 2021 - No material changes in risk factors were reported compared to those disclosed in the Annual Report on Form 10-K for the year ended December 31, 2021[264] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds No unregistered equity sales or program repurchases occurred in Q1 2022, aside from tax-related employee share repurchases - The company has a share repurchase program authorizing up to $40.0 million in repurchases, valid through September 30, 2022[266] - No shares were purchased under the publicly announced 2021 Repurchase Program during the first quarter of 2022[271] Item 3. Defaults Upon Senior Securities The company reported no defaults upon senior securities during the period - None[272] Item 4. Mine Safety Disclosures This item is not applicable to the company - Not Applicable[273] Item 5. Other Information The company reported no other information for this item - None[274] Item 6. Exhibits This section lists all exhibits filed, including executive agreements, loan amendments, and officer certifications - The report includes certifications from the Principal Executive Officer and Principal Financial Officer pursuant to Rule 13a-14(a) and 18 U.S.C. Section 1350[277] - Exhibits filed include various agreements, such as an Executive Employment Agreement, a Change in Control Severance Agreement, and amendments to a loan agreement[276]