BORROWINGS AND BORROWING CAPACITY

12 Months Ended

Dec. 31, 2023

Debt Disclosure [Abstract]

BORROWINGS AND BORROWING CAPACITY

BORROWINGS AND BORROWING CAPACITY

The Company has an available line of credit with the FHLB, which allows the Company to borrow on a collateralized basis. FHLB advances are used to manage liquidity as needed. The advances are secured by a blanket lien on certain loans. Maturing advances are replaced by drawing on available cash, making additional borrowings or through increased customer deposits. At December 31, 2023, the Company had total borrowing capacity of $3.48 billion of which $1.61 billion was available under this agreement and $1.87 billion was outstanding pursuant to FHLB advances and letters of credit. FHLB advances of $50.0 million were outstanding at December 31, 2023, at a weighted average rate of 5.75%.

FHLB letters of credit were $1.82 billion at December 31, 2023 and will expire in the following periods (in thousands):

2024	$	926,290
2025	295,500
2026	57,300
2027	448,000
Thereafter	97,000
Total	$	1,824,090

On December 13, 2022, the Company entered into a loan agreement with another financial institution (the “Loan Agreement”), that provides for a $75.0 million revolving line of credit. At December 31, 2023, there were no outstanding borrowings on this line of credit and the Company did not draw on this line of credit during 2023 or 2022. The Company can make draws on the line of credit for a period of 24 months, which began on December 13, 2022, after which the Company will not be permitted to make further draws and the outstanding balance will amortize over a period of 60 months. Interest accrues on outstanding borrowings at a per annum rate equal to the prime rate quoted by The Wall Street Journal and with a floor rate of 3.50% calculated in accordance with the terms of the revolving promissory note and payable quarterly through the first 24 months. The entire outstanding balance and unpaid interest is payable in full on December 13, 2024. The Company may prepay the principal amount of the line of credit without premium or penalty. The obligations of the Company under the Loan Agreement are secured by a pledge of all the issued and outstanding shares of capital stock of Stellar Bank.

Covenants made under the Loan Agreement include, among other things, while there any obligations outstanding under Loan Agreement, the Company shall maintain a cash flow to debt service (as defined in the Loan Agreement) of not less than 1.25, the Bank’s Texas Ratio (as defined in the Loan Agreement) not to exceed 25.0% and the Bank shall maintain a Tier 1 Leverage Ratio (as defined under the Loan Agreement) of at least 7.0% and restrictions on the ability of the Company and its subsidiaries to incur certain additional debt. As of December 31, 2023, the Company believes it was in compliance with all such debt covenants and had not been made aware of any noncompliance by the lender.