Stellar Bancorp(STEL) - 2022 Q2 - Quarterly Report

PART I — FINANCIAL INFORMATION Item 1. Financial Statements – (Unaudited) Unaudited condensed consolidated financial statements are presented, detailing balance sheets, income, comprehensive income, equity, cash flows, and notes Condensed Consolidated Balance Sheets Total assets decreased by $163.7 million (3.6%) due to lower cash, offset by higher securities and loans; liabilities also decreased by $128.3 million (3.3%) | Metric | June 30, 2022 (in thousands) | December 31, 2021 (in thousands) | Change (in thousands) | % Change | | :-------------------------------- | :----------------------------- | :------------------------------- | :-------------------- | :------- | | Total Assets | $4,322,303 | $4,486,001 | $(163,698) | (3.6%) | | Total Liabilities | $3,795,624 | $3,923,876 | $(128,252) | (3.3%) | | Total Shareholders' Equity | $526,679 | $562,125 | $(35,446) | (6.3%) | | Cash and cash equivalents | $483,966 | $950,146 | $(466,180) | (49.1%) | | Loans, net | $3,000,827 | $2,836,179 | $164,648 | 5.8% | | Securities | $550,083 | $425,046 | $125,037 | 29.4% | Condensed Consolidated Statements of Income Net income remained stable at $11.7 million for the three months ended June 30, 2022, and increased by $0.58 million (2.7%) for the six months | Metric | 3 Months Ended June 30, 2022 (in thousands) | 3 Months Ended June 30, 2021 (in thousands) | 6 Months Ended June 30, 2022 (in thousands) | 6 Months Ended June 30, 2021 (in thousands) | | :------------------------------------ | :------------------------------------------ | :------------------------------------------ | :------------------------------------------ | :------------------------------------------ | | Total interest income | $36,101 | $32,506 | $70,116 | $67,167 | | Total interest expense | $1,229 | $1,488 | $2,614 | $3,059 | | Net interest income | $34,872 | $31,018 | $67,502 | $64,108 | | Provision (recapture) for credit losses | $126 | $(5,083) | $561 | $(4,671) | | Total noninterest income | $3,546 | $3,491 | $8,875 | $6,602 | | Total noninterest expense | $23,758 | $25,197 | $48,410 | $48,482 | | Net income | $11,707 | $11,703 | $22,302 | $21,722 | | Basic EPS | $0.48 | $0.48 | $0.91 | $0.89 | | Diluted EPS | $0.48 | $0.48 | $0.91 | $0.88 | Condensed Consolidated Statements of Comprehensive Income Total comprehensive income shifted from positive to negative, primarily due to substantial unrealized losses on securities in 2022 | Metric | 3 Months Ended June 30, 2022 (in thousands) | 3 Months Ended June 30, 2021 (in thousands) | 6 Months Ended June 30, 2022 (in thousands) | 6 Months Ended June 30, 2021 (in thousands) | | :---------------------------------------------------------------- | :------------------------------------------ | :------------------------------------------ | :------------------------------------------ | :------------------------------------------ | | Net income | $11,707 | $11,703 | $22,302 | $21,722 | | Change in unrealized gains (losses) on securities available for sale | $(24,800) | $2,292 | $(63,125) | $(2,047) | | Other comprehensive income (loss), net of tax | $(19,592) | $1,812 | $(49,869) | $(1,616) | | Total comprehensive income (loss) | $(7,885) | $13,515 | $(27,567) | $20,106 | Condensed Consolidated Statements of Changes in Shareholders' Equity Shareholders' equity decreased by $35.4 million to $526.7 million at June 30, 2022, mainly due to a $49.9 million other comprehensive loss | Metric | December 31, 2021 (in thousands) | June 30, 2022 (in thousands) | Change (in thousands) | | :------------------------------------ | :------------------------------- | :----------------------------- | :-------------------- | | Total Shareholders' Equity | $562,125 | $526,679 | $(35,446) | | Net income (6 months) | N/A | $22,302 | N/A | | Dividends on common stock (6 months) | N/A | $(6,287) | N/A | | Stock-based compensation expense (6 months) | N/A | $1,022 | N/A | | Other comprehensive loss, net of tax (6 months) | N/A | $(49,869) | N/A | Condensed Consolidated Statements of Cash Flows Operating cash flow decreased, while investing and financing activities shifted to significant cash usage, primarily due to increased security purchases, loan growth, and deposit outflows | Cash Flow Activity (Six Months Ended June 30) | 2022 (in thousands) | 2021 (in thousands) | Change (in thousands) | | :-------------------------------------------- | :------------------ | :------------------ | :-------------------- | | Net cash provided by operating activities | $20,851 | $24,478 | $(3,627) | | Net cash (used in) provided by investing activities | $(353,367) | $121,638 | $(475,005) | | Net cash (used in) provided by financing activities | $(133,664) | $104,286 | $(237,950) | | Net increase (decrease) in cash, cash equivalents and restricted cash | $(466,180) | $250,402 | $(716,582) | | Cash, cash equivalents and restricted cash, ending | $483,966 | $788,409 | $(304,443) | Notes to Condensed Consolidated Financial Statements Detailed disclosures cover accounting policies, asset/liability categories, fair value, derivatives, and regulatory matters, noting increased unrealized losses on securities and loan portfolio growth - The Company operates 34 branches in Texas (Houston, Beaumont/East Texas, Dallas) through its subsidiary, CommunityBank of Texas, N.A., focusing on commercial banking for small and medium-sized businesses[22] - The Company repurchased 93,415 shares at an average price of $27.66 during the six months ended June 30, 2022, compared to 181,089 shares at $27.44 in the prior year period[26] - ASU 2022-02, effective after December 31, 2022, eliminates accounting guidance for troubled debt restructurings (TDRs) and enhances disclosure requirements for loan refinancing/restructurings when borrowers face financial difficulty; the Company is evaluating its impact[27] [NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING