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What changed in TEXAS CAPITAL BANCSHARES INC/TX's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of TEXAS CAPITAL BANCSHARES INC/TX's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+474 added−410 removedSource: 10-K (2025-02-11) vs 10-K (2024-02-13)

Top changes in TEXAS CAPITAL BANCSHARES INC/TX's 2024 10-K

474 paragraphs added · 410 removed · 177 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

9 edited+266 added−174 removed1 unchanged
Biggest changeTCBI is headquartered in Dallas, with primary banking offices in Austin, Dallas, Fort Worth, Houston and San Antonio, and has built a network of clients across the country. Substantially all of the Company’s business activities are conducted through its wholly-owned subsidiary bank Texas Capital Bank (the “Bank”).
Biggest changeThe Company’s business activities are conducted primarily through its wholly-owned bank subsidiary Texas Capital Bank (the “Bank”) and its wholly-owned non-bank subsidiary, TCBI Securities Inc. (“TCBI Securities”). The Bank is a Texas state-chartered bank. TCBI Securities is a registered broker-dealer with the U.S.
The 2019 CECL Rule included a transition option that allows banking organizations to phase in, over a three-year period, the day-one adverse effects of adopting the new accounting standard related to the measurement of current expected credit losses (“CECL”) on their regulatory capital ratios (three-year transition option).
The 2019 CECL Rule included a transition option that allows banking organizations to phase in, over a three-year period, the day-one adverse effects of adopting the new accounting standard related to the measurement of current expected credit losses on their regulatory capital ratios (three-year transition option).
In February 2019, the federal bank regulatory agencies issued a final rule (the “2019 CECL Rule”) that revised certain capital regulations to account for changes to credit loss accounting under accounting principles generally accepted in the United States (“GAAP”).
In February 2019, the federal bank regulatory agencies issued a final rule (the “2019 CECL Rule”) that revised certain capital regulations to account for changes to credit loss accounting under GAAP.
The Basel III Capital Rules, among other things, (i) establishes the capital measure called “Common Equity Tier 1” (“CET1”), (ii) specify that Tier 1 capital consists of CET1 and “Additional Tier 1 capital” instruments meeting stated requirements, (iii) requires that most deductions/adjustments to regulatory capital measures be made to CET1 and not to the other components of capital and (iv) defines the scope of the deductions/adjustments to the capital measures.
The Basel III Capital Rules adopted by U.S. federal banking agencies, among other things, (i) establish the capital measure called “Common Equity Tier 1” (“CET1”), (ii) specify that Tier 1 capital consists of CET1 and “Additional Tier 1 Capital” instruments meeting stated requirements, (iii) require that most deductions/adjustments to regulatory capital measures be made to CET1 and not to other components of capital and (iv) define the scope of the deductions/adjustments to the capital measures.
A financial institution with a conservation buffer of less than the required amount is subject to limitations on capital distributions, including dividend payments and stock repurchases, and certain discretionary bonus payments to executive officers.
A financial institution with a conservation buffer of less than the required amount is subject to limitations on capital distributions, including dividend payments and stock repurchases, and certain discretionary bonus payments to executive officers. No dividends were declared or paid on the Company’s common stock during the year ended December 31, 2024 or during 2023.
Because the Company had less than $15 billion in total consolidated assets as of December 31, 2009, it is allowed to continue to classify its trust preferred securities, all of which were issued prior to May 19, 2010, as Tier 1 capital up to 25% of that measure.
The ratios presented below include the effects of the election to utilize the five-year CECL transition described above. 74 Because the Bank had less than $15.0 billion in total consolidated assets as of December 31, 2009, it is allowed to continue to classify the trust preferred securities, all of which were issued prior to May 19, 2010, as Tier 1 capital.
ITEM 1. BUSINESS Background Texas Capital Bancshares, Inc. (“TCBI” or the “Company”) is a registered bank holding company and a full-service financial services firm that delivers customized solutions to businesses, entrepreneurs and individual customers.
(“TCBI” or the “Company”) is a registered bank holding company and a full-service financial services firm that delivers customized solutions to businesses, entrepreneurs and individual customers. TCBI is headquartered in Dallas, with primary banking offices in Austin, Dallas, Fort Worth, Houston and San Antonio, and has built a network of clients across the country.
The Basel III Capital Rules set the CET1 risk-based capital requirement, the Tier 1 risk-based capital requirement and the total risk-based capital requirement to a minimum of 4.5%, 6.0% and 8.0%, respectively, each plus a 2.5% capital conservation buffer composed entirely of CET1, producing targeted ratios of 7.0%, 8.5% and 10.5%, respectively.
Additionally, the Basel III Capital Rules require that the Company maintain a 2.5% capital conservation buffer comprised of CET1, with respect to each of CET1, Tier 1 and total capital to risk-weighted asset ratios.
The Company adopted CECL on January 1, 2020 and elected to utilize the five-year transition option. Regulators may change capital and liquidity requirements, including previous interpretations of practices related to risk weights, which could require an increase to the allocation of capital to assets held by the Bank.
The Company adopted CECL on January 1, 2020 and has elected to utilize the five-year transition option.
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The Company was incorporated as a Delaware corporation in 1996 and commenced banking operations in 1998. Business Strategy and Markets The Company was founded with an entrepreneurial culture and a mission to build a commercial banking presence across Texas.
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ITEM 1. FINANCIAL STATEMENTS TEXAS CAPITAL BANCSHARES, INC.
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Drawing on the banking experience and business and community ties of management, the Company’s strategy has evolved to become a Texas-based full-service financial services firm that can seamlessly serve the best clients in its markets through the entirety of their life cycles.
Added
CONSOLIDATED BALANCE SHEETS - AUDITED (in thousands except share data) December 31, 2024 December 31, 2023 Assets Cash and due from banks $ 176,501 $ 200,493 Interest bearing cash and cash equivalents 3,012,307 3,042,357 Available-for-sale debt securities 3,524,686 3,225,892 Held-to-maturity debt securities 796,168 865,477 Equity securities 75,261 51,825 Investment securities 4,396,115 4,143,194 Loans held for sale — 44,105 Loans held for investment, mortgage finance 5,215,574 3,978,328 Loans held for investment 17,234,492 16,362,230 Less: Allowance for credit losses on loans 271,709 249,973 Loans held for investment, net 22,178,357 20,090,585 Premises and equipment, net 85,443 32,366 Accrued interest receivable and other assets 881,664 801,670 Goodwill and intangibles, net 1,496 1,496 Total assets $ 30,731,883 $ 28,356,266 Liabilities and Stockholders’ Equity Liabilities: Non-interest bearing deposits $ 7,485,428 $ 7,328,276 Interest bearing deposits 17,753,171 15,043,563 Total deposits 25,238,599 22,371,839 Accrued interest payable 23,680 33,234 Other liabilities 556,322 392,904 Short-term borrowings 885,000 1,500,000 Long-term debt 660,346 859,147 Total liabilities 27,363,947 25,157,124 Stockholders’ equity: Preferred stock, $0.01 par value, $1,000 liquidation value: Authorized shares - 10,000,000 Issued shares - 300,000 at December 31, 2024 and 2023 300,000 300,000 Common stock, $0.01 par value: Authorized shares - 100,000,000 Issued shares - 51,520,315 and 51,142,979 at December 31, 2024 and 2023, respectively 515 511 Additional paid-in capital 1,056,719 1,045,576 Retained earnings 2,495,651 2,435,393 Treasury stock - 5,286,503 and 3,905,067 shares at cost at December 31, 2024 and 2023, respectively (301,842) (220,334) Accumulated other comprehensive loss, net of taxes (183,107) (362,004) Total stockholders’ equity 3,367,936 3,199,142 Total liabilities and stockholders’ equity $ 30,731,883 $ 28,356,266 See accompanying notes to consolidated financial statements. 52 TEXAS CAPITAL BANCSHARES, INC.
Removed
A core tenant of this strategy is the maintenance of financial resiliency through market and rate cycles enabling the Company to serve its clients, access markets, and support its communities through changing market conditions. The Company is well positioned with a wide range of relevant products and services along with best-in-class levels of liquidity, credit reserves and capital.
Added
CONSOLIDATED STATEMENTS OF INCOME AND OTHER COMPREHENSIVE INCOME - AUDITED Year Ended December 31, (in thousands except per share data) 2024 2023 2022 Interest income Interest and fees on loans $ 1,377,925 $ 1,300,653 $ 983,794 Investment securities 148,219 108,294 63,179 Interest bearing cash and cash equivalents 203,406 220,976 97,271 Total interest income 1,729,550 1,629,923 1,144,244 Interest expense Deposits 736,196 587,775 190,663 Short-term borrowings 49,994 70,642 29,077 Long-term debt 42,060 57,383 48,739 Total interest expense 828,250 715,800 268,479 Net interest income 901,300 914,123 875,765 Provision for credit losses 67,000 72,000 66,000 Net interest income after provision for credit losses 834,300 842,123 809,765 Non-interest income Service charges on deposit accounts 25,546 20,874 23,266 Wealth management and trust fee income 15,315 13,955 15,036 Brokered loan fees 8,961 8,918 14,159 Investment banking and advisory fees 104,965 63,670 24,974 Trading income 21,635 22,512 10,080 Gain on disposal of subsidiary — — 248,526 Available-for-sale debt securities gains/(losses), net (179,581) 489 — Other 34,205 31,001 13,481 Total non-interest income 31,046 161,419 349,522 Non-interest expense Salaries and benefits 466,578 459,700 434,906 Occupancy expense 45,266 38,494 44,222 Marketing 22,349 25,854 32,388 Legal and professional 53,783 64,924 75,858 Communications and technology 93,085 81,262 69,253 Federal Deposit Insurance Corporation insurance assessment 23,351 36,775 14,344 Other 53,873 49,938 56,561 Total non-interest expense 758,285 756,947 727,532 Income before income taxes 107,061 246,595 431,755 Income tax expense 29,553 57,454 99,277 Net income 77,508 189,141 332,478 Preferred stock dividends 17,250 17,250 17,250 Net income available to common stockholders $ 60,258 $ 171,891 $ 315,228 Other comprehensive income/(loss) Change in unrealized gain/(loss) $ (31,555) $ 4,323 $ (479,814) Amounts reclassified into net income 253,277 67,752 9,905 Other comprehensive income/(loss) 221,722 72,075 (469,909) Income tax expense/(benefit) 42,825 15,136 (98,681) Other comprehensive income/(loss), net of tax 178,897 56,939 (371,228) Comprehensive income/(loss) $ 256,405 $ 246,080 $ (38,750) Basic earnings per common share $ 1.29 $ 3.58 $ 6.25 Diluted earnings per common share $ 1.28 $ 3.54 $ 6.18 See accompanying notes to consolidated financial statements. 53 TEXAS CAPITAL BANCSHARES, INC.
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Competition The Company’s business is concentrated in Texas which is a highly competitive market for banking services. TCBI competes with national, regional, and local bank holding companies and commercial banks. The largest banking organizations operating in Texas are headquartered outside of the state and are controlled by out-of-state organizations.
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CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY Preferred Stock Common Stock Additional Treasury Stock Accumulated Other Paid-in Retained Comprehensive (in thousands except share data) Shares Amount Shares Amount Capital Earnings Shares Amount Income/(Loss) Total Balance at December 31, 2021 300,000 $ 300,000 50,618,911 $ 506 $ 1,008,559 $ 1,948,274 (417) $ (8) $ (47,715) $ 3,209,616 Comprehensive income/(loss): Net income — — — — — 332,478 — — — 332,478 Change in other comprehensive income/(loss), net of taxes — — — — — — — — (371,228) (371,228) Total comprehensive loss (38,750) Stock-based compensation expense recognized in earnings — — — — 21,246 — — — — 21,246 Preferred stock dividends — — — — — (17,250) — — — (17,250) Issuance of stock related to stock-based awards — — 248,387 3 (4,212) — — — — (4,209) Repurchase of common stock — — — — — — (2,083,118) (115,302) — (115,302) Balance at December 31, 2022 300,000 $ 300,000 50,867,298 $ 509 $ 1,025,593 $ 2,263,502 (2,083,535) $ (115,310) $ (418,943) $ 3,055,351 Comprehensive income/(loss): Net income — — — — — 189,141 — — — 189,141 Change in other comprehensive income/(loss), net of taxes — — — — — — — — 56,939 56,939 Total comprehensive income 246,080 Stock-based compensation expense recognized in earnings — — — — 24,200 — — — — 24,200 Preferred stock dividends — — — — — (17,250) — — — (17,250) Issuance of stock related to stock-based awards — — 275,681 2 (4,217) — — — — (4,215) Repurchase of common stock — — — — — — (1,821,532) (105,024) — (105,024) Balance at December 31, 2023 300,000 $ 300,000 51,142,979 $ 511 $ 1,045,576 $ 2,435,393 (3,905,067) $ (220,334) $ (362,004) $ 3,199,142 Comprehensive income/(loss): Net income — — — — — 77,508 — — — 77,508 Change in other comprehensive income/(loss), net of taxes — — — — — — — — 178,897 178,897 Total comprehensive income 256,405 Stock-based compensation expense recognized in earnings — — — — 20,212 — — — — 20,212 Preferred stock dividends — — — — — (17,250) — — — (17,250) Issuance of stock related to stock-based awards — — 377,336 4 (9,069) — — — — (9,065) Repurchase of common stock — — — — — — (1,381,436) (81,508) — (81,508) Balance at December 31, 2024 300,000 $ 300,000 51,520,315 $ 515 $ 1,056,719 $ 2,495,651 (5,286,503) $ (301,842) $ (183,107) $ 3,367,936 See accompanying notes to consolidated financial statements. 54 TEXAS CAPITAL BANCSHARES, INC.
Removed
TCBI also competes with other providers of financial services, such as non-bank financial institutions, commercial finance and leasing companies, consumer finance companies, financial technology companies, securities firms, insurance companies, full-service brokerage firms and discount brokerage firms, credit unions and savings and loan associations.
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CONSOLIDATED STATEMENTS OF CASH FLOWS Year Ended December 31, (in thousands) 2024 2023 2022 Operating activities Net income $ 77,508 $ 189,141 $ 332,478 Adjustments to reconcile net income to net cash provided by operating activities: Provision for credit losses 67,000 72,000 66,000 Deferred tax benefit (16,086) (17,784) (17,395) Depreciation and amortization 54,228 40,473 45,284 Net (gain)/loss on sale of loans held for sale — — 990 Net (gain)/loss recognized on investment securities 173,995 (4,060) — Stock-based compensation expense 24,693 24,200 21,432 Purchases and originations of loans held for sale — (15,706) (37,461) Proceeds from sales and repayments of loans held for sale 62,516 134,948 8,132 Gain on sale of subsidiary — — (248,526) Changes in operating assets and liabilities: Accrued interest receivable and other assets (1,611) (78,606) (25,482) Accrued interest payable and other liabilities 38,878 29,134 2,518 Net cash provided by operating activities 481,121 373,740 147,970 Investing activities Purchases of available-for-sale debt securities (1,999,073) (849,391) (920,217) Proceeds from sales of available-for-sale debt securities 1,057,159 56,923 — Proceeds from maturities, redemptions and pay-downs of available-for-sale debt securities 638,906 225,034 432,175 Proceeds from maturities, redemptions and pay-downs of held-to-maturity debt securities 72,812 73,770 87,945 Sales/(purchases) of equity securities, net (17,850) (14,298) 11,651 Originations of loans held for investment, mortgage finance (83,658,262) (75,671,642) (102,438,943) Proceeds from pay-offs of loans held for investment, mortgage finance 82,421,016 75,783,347 105,824,407 Net increase in loans held for investment, excluding mortgage finance loans (928,967) (1,342,840) (3,001,340) Proceeds from sale of subsidiary — — 3,324,159 Purchase of premises and equipment, net (64,841) (16,381) (11,270) Net cash provided by/(used in) investing activities (2,479,100) (1,755,478) 3,308,567 Financing activities Net increase/(decrease) in deposits 2,866,760 (485,041) (5,252,485) Issuance of stock related to stock-based awards (9,065) (4,215) (4,209) Preferred stock dividends paid (17,250) (17,250) (17,250) Repurchase of common stock (81,508) (105,024) (115,302) Net increase/(decrease) in short-term borrowings (615,000) 298,858 (1,001,690) Redemption of long-term debt (200,000) (75,000) — Net cash provided by/(used in) financing activities 1,943,937 (387,672) (6,390,936) Net decrease in cash and cash equivalents (54,042) (1,769,410) (2,934,399) Cash and cash equivalents at beginning of period 3,242,850 5,012,260 7,946,659 Cash and cash equivalents at end of period $ 3,188,808 $ 3,242,850 $ 5,012,260 Supplemental disclosures of cash flow information Cash paid during the period for interest $ 837,804 $ 773,034 $ 252,178 Cash paid during the period for income taxes 52,815 71,941 128,435 Transfers of loans from held for investment to held for sale 18,411 126,990 — Transfers of debt securities from available-for-sale to held-to-maturity — — 1,019,365 See accompanying notes to consolidated financial statements. 55 (1) Operations and Summary of Significant Accounting Policies Organization and Nature of Business Texas Capital Bancshares, Inc.
Removed
As a tenant of TCBI’s strategic plan, the Company believes that commercial businesses, entrepreneurs and professionals are interested in banking with a company both headquartered and with decision-making authority based in Texas. The Company’s banking centers in its target markets are served by experienced bankers with expertise in the specific industries found in their market areas and established community ties.
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Securities and Exchange Commission (“SEC”) and a member of the Financial Industry Regulatory Authority (“FINRA”) and Municipal Securities Rulemaking Board (“MSRB”). The Company was incorporated as a Delaware corporation in 1996 and commenced banking operations in 1998.
Removed
The Company believes it is positioned to offer clients more responsive and personalized service and advice than its competitors. By providing effective service to these customers, the Company believes it will be able to establish “first call” relationships, and provide all the banking needs of its customers, thereby enhancing its relevance and financial returns.
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Basis of Presentation The Company’s accounting and reporting policies conform to accounting principles generally accepted in the United States (“GAAP”) and to generally accepted practices within the banking industry. Certain prior period balances have been reclassified to conform to the current period presentation.
Removed
While the Texas market continues to be central to its growth and success, the Company has built several lines of business that offer specialized products and services to businesses and individuals regionally and nationwide, including mortgage finance, homebuilder finance, investment banking and Bask Bank.
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Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. Actual results could differ from those estimates.
Removed
Bask Bank is an online division of the Bank that offers depositors American Airlines AAdvantage® miles in lieu of cash interest as well as traditional interest bearing deposit products such as savings accounts and certificates of deposit. The Company believes these business lines help to mitigate its geographic concentration risk in Texas.
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The allowance for credit losses, the fair value of financial instruments and the status of contingencies are particularly susceptible to significant change. See the Allowance for Credit Losses accounting policy below for additional details of these changes.
Removed
Products and Services The Company offers a variety of loan, deposit account and other financial products and services to its customers. Business Customers.
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Basic and Diluted Earnings Per Common Share Basic earnings per common share is based on net income available to common stockholders divided by the weighted-average number of common shares outstanding during the period excluding non-vested stock-settled awards. Diluted earnings per common share include the dilutive effect of non-vested stock-settled awards granted using the treasury stock method.
Removed
The Company offers a full range of products and services oriented to the needs of its business customers including commercial loans for general corporate purposes, including financing for working capital, organic growth, and acquisitions; real estate term and construction loans; mortgage warehouse lending and mortgage finance services; treasury management services, including online banking and debit and credit card services; investment banking and advisory services; and letters of credit.
Added
Cash and Cash Equivalents Cash equivalents include amounts due from banks, interest bearing deposits in other banks and federal funds sold. Investment Securities Investment securities include debt securities and equity securities. Debt Securities Debt securities are classified as trading, available-for-sale or held-to-maturity. Debt securities not classified as held-to-maturity or trading are classified as available-for-sale.
Removed
Individual Customers. The Company also provides comprehensive banking services for its individual customers including personal wealth management and trust services; certificates of deposit; interest bearing and non-interest bearing checking accounts; traditional money market and savings accounts; loans, both secured and unsecured; online and mobile banking; investment banking and advisory services; and Bask Bank.
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Management classifies securities at the time of purchase and re-assesses such designation at each balance sheet date. The amortized cost of debt securities is adjusted for amortization of premiums and accretion of discounts to maturity, or in the case of mortgage-backed securities, over the estimated life of the security.
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Lending Activities The Company targets its lending to commercial businesses, entrepreneurs and professionals who meet certain desired client characteristics and credit standards. The credit standards are set by a standing Credit Policy Committee with the assistance of the Chief Credit Officer, who is charged with ensuring that all loans in the portfolio meet the credit standards.
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Such amortization and accretion are included in interest income from investment securities. Gains or losses realized upon the sale of debt securities are recorded in other non-interest income on the consolidated statements of income and other comprehensive income. The cost of securities sold is based on the specific identification method.
Removed
The Credit Policy 5 Committee is comprised of senior Bank officers, including the Chief Risk Officer, the Chief Credit Officer and other Bank officers as deemed appropriate, and is subject to oversight by the Risk Committee of the Company's board of directors. The Company believes it maintains an appropriately diversified loan portfolio.
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The Company has made a policy election to exclude accrued interest from the amortized cost basis of debt securities and report accrued interest separately in accrued interest and other assets on the consolidated balance sheets.
Removed
Credit policies and underwriting guidelines are tailored to address the unique risks associated with each industry represented in the portfolio. Of note, the Company’s mortgage finance business encounters seasonal demands for credit, surges and declines in consumer demand driven by changes in interest rates and month-end upticks of residential mortgage closings.
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Available-for-sale and held-to-maturity debt securities are placed on non-accrual status when management no longer expects to receive all contractual amounts due, which is generally at 90 days past due. Accrued interest receivable is reversed against interest income when a security is placed on non-accrual status. Accordingly, the Company does not recognize an allowance for credit loss against accrued interest receivable.
Removed
The credit standards for commercial borrowers are based on numerous criteria with respect to the borrower, including historical and projected financial information, strength of management, acceptable collateral and associated advance rates, and market conditions and trends in the borrower’s industry.
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Trading Account Debt securities acquired for resale in anticipation of short-term market movements are classified as trading and recorded at fair value, with realized and unrealized gains and losses recognized in income. 56 Held-to-Maturity Debt securities are classified as held-to-maturity when the Company has the positive intent and ability to hold the securities to maturity.
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In addition, prospective loans are analyzed based on current industry concentrations in the loan portfolio to prevent an unacceptable concentration of loans in any particular industry. The Company believes its credit standards are consistent with achieving its business objectives in the markets it serves and are an important part of the Company’s risk mitigation strategy.
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Held-to-maturity securities are stated at amortized cost, net of any allowance for credit losses. Management may transfer debt securities classified as available-for-sale to held-to-maturity when upon reassessment it is determined that the Company has both the positive intent and ability to hold these securities to maturity.
Removed
The Company believes that it is differentiated from its competitors by its client selection, focus on and targeted marketing to its core customers and by its ability to tailor its products to the individual needs of its customers.
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The debt securities are transferred at fair value resulting in a premium or discount recorded on transfer date. Unrealized gains or losses at the date of transfer continue to be reported as a separate component of accumulated other comprehensive income/loss, net (“AOCI”).
Removed
The Company generally extends variable rate loans in which the interest rate fluctuates with a specified reference rate and may provide for a minimum floor rate. The use of variable rate loans is designed to protect the Company from risks associated with interest rate fluctuations since the rates of interest earned will automatically reflect such fluctuations.
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The premium or discount and the unrealized gain or loss, net of tax, in AOCI will be amortized to interest income over the remaining life of the securities using the interest method. Available-for-Sale Available-for-sale debt securities are recorded at fair value, with unrealized gains and losses, net of tax, reported as a separate component of AOCI.
Removed
Treasury Solutions and Deposit Products Texas Capital Bank offers treasury solutions and deposit products to meet its customers evolving needs. For commercial business customers, the Company offers a full suite of deposit solutions including checking, money market savings, and sweep accounts with competitive industry rates.
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For available-for-sale debt securities in an unrealized loss position, the Company first assesses whether it intends to sell, or it is more-likely-than-not that it will be required to sell, the securities before recovery of the amortized cost basis.
Removed
Treasury products offered include state of the art payment and receivables solutions ranging from instant payments, wire, ACH, commercial card, merchant, and lockbox solutions underpinned by a commercial grade digital platform supporting a broad range of payment initiation, information reporting and liquidity management solutions.
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If either of these criteria is met, the securities’ amortized cost basis is written down to fair value as a current period expense recorded on the consolidated statements of income and other comprehensive income. If either of the above criteria is not met, management evaluates whether the decline in fair value is the result of credit losses or other factors.
Removed
Personal banking deposit products offered by the Bank include checking accounts, savings accounts, money market accounts and certificates of deposit. Personal banking deposit customers have online and mobile access to fully manage their accounts leveraging features that include funds transfers, peer-to-peer payments, bill pay, wire transfer requests, remote check deposit and more.
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In making this assessment, management may consider various factors including the extent to which fair value is less than amortized cost, performance of any underlying collateral and adverse conditions specifically related to the security, among other factors.
Removed
Wealth Management and Trust Texas Capital Bank Private Wealth Advisors (“PWA”) services include investment management, lending, depository products, financial planning, trust and estate services, as well as insurance services. The PWA professionals work with clients to define objectives, goals, and strategies.
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If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected are compared to the amortized cost basis of the security and any excess is recorded as an allowance for credit losses, limited to the amount by which the fair value is less than the amortized cost basis.
Removed
Investment managers work alongside the client to choose an individually tailored program that matches their financial goals and aspirations while managing their risk tolerance. PWA also offers all clients a financial plan which is used to ensure that they are on track to achieve their long term objectives.
Added
Any impairment not recorded through an allowance for credit losses is recognized in AOCI, net of tax, as a non-credit related impairment.
Removed
Throughout the relationship PWA also offers insurance solutions as well as trust and estate planning services that work towards a tax efficient transition of assets to family or charitable types of organizations. Investment Banking Texas Capital Securities (“TCS”) offers a full suite of investment banking products and services to clients.
Added
Included in debt securities available-for-sale are credit risk transfer (“CRT”) securities, which represent unsecured obligations issued by government sponsored entities (“GSEs”) such as Freddie Mac and are designed to transfer mortgage credit risk from the GSE to private investors.
Removed
TCS professionals leverage their knowledge of industry dynamics, transaction structure and market conditions complemented by a network of investors, buyers, lenders and other capital sources, to assist clients in completing underwritten and privately placed offerings of debt, convertible and equity securities, buy-side and sell-side mergers and acquisitions and other transactions.
Added
CRT securities are structured to be subject to the performance of a reference pool of mortgage loans in which the Company shares in 50% of the first losses with the GSE.
Removed
Additionally, TCS offers services to manage interest rate, foreign exchange, and commodity risks, and enable market access by offering sales, trading and other institutional services. Human Capital The Company’s focus is to attract, develop, engage and retain the best talent, and to plan for succession of key talent and executives to achieve strategic objectives.
Added
If the reference pool incurs losses, the amount the Company will recover on the notes is reduced by its share of the amount of such losses, which could potentially be up to 100% of the amount outstanding.
Removed
The Company is continually investing in its workforce to further emphasize diversity and inclusion and to foster its employees' growth and career development. Further, the Company is regularly evaluating the resources available to employees to address professional, financial and health-related matters, as the health, safety and well-being of employees and customers is of paramount importance.
Added
Unrealized losses recognized in AOCI for the CRT securities are primarily related to the difference between the current market rate for similar securities and the stated interest rate and are not considered to be related to credit loss events.
Removed
The Compensation and Human Capital Committee of the Board of Directors provides input and oversight of human capital management, including talent management, executive succession planning, diversity and inclusion and company culture. 6 At the Company, diversity, equity and inclusion (“DEI”) is an integral part of the strategy to build a strong culture where employees can reach their full potential professionally and personally.
Added
The CRT securities are generally interest-only for an initial period of time and may be restricted from being transferred until a future date. Equity Securities Equity securities with readily determinable fair values are stated at fair value with realized and unrealized gains and losses reported in income.
Removed
In 2023, the Company continued its inclusion efforts through cultural celebrations and employee engagement activities across markets, and the Company broadened communications internally and externally as it highlighted the stories and experiences of diverse leaders. Listening tours were conducted with employees to get their perspective of what DEI means to them and where the Company has opportunity to improve.
Added
Equity securities without readily determinable fair values are recorded at cost less any impairment.
Removed
In 2022, we launched Employee Resource Groups (“ERGs”). In 2023, the Company focused on ensuring charters were clear and leadership was in place. The Company also prioritized proactive planning, strong execution, and defined processes. With new leadership teams in place, there was an exponential growth in employee engagement and programming.
Added
Loans Loans Held for Sale Loans held for sale are carried at the lower of cost or fair value, unless, pursuant to the election of the fair value option in accordance with Accounting Standards Codification (“ASC”) 825, Financial Instruments , the Company elects to carry loans held for sale at fair value.
Removed
Employee participation increased by 40% and programming tripled year over year. In addition to advancing educational awareness, the ERGs led the way in creating opportunities for our employees to give back to the communities the Company serves through volunteerism.
Added
As of December 31, 2024 and December 31, 2023, the Company has no loans held for sale accounted for under the fair value option. Loans Held for Investment Loans held for investment (including financing leases) are stated at the amount of unpaid principal reduced by unearned income, net of direct loan origination costs.
Removed
The Company offers a comprehensive benefits program to its employees and designs compensation programs to attract, retain and motivate employees that align with Company performance. The Company’s performance management process is designed for succession planning deeper into the organization. The Company utilizes feedback from exit interviews to drive improvements where possible and reduced attrition by 6% in 2023.
Added
Interest on loans is recognized using the simple interest method on the daily balances of the principal amounts outstanding. Loan origination fees, net of direct loan origination costs, and commitment fees are deferred and amortized as an adjustment to yield over the life of the loan, or over the commitment period, as applicable.
Removed
The Company also continued enhancements to its training and development program during 2023, which included the completion of job profiles for roles across the Company with skills, knowledge, and abilities to empower employees to focus on targeted skill development and career ownership.
Added
A loan is considered past due when a contractually due payment has not been received by the contractual due date. The Company places a loan on non-accrual when there is a clear indication that the borrower’s cash flow may not be sufficient to meet payments as they become due, which is generally when a loan is 90 days past due.
Removed
Further, the Company expanded its use of leadership models, which identify the critical skills and behaviors necessary to be successful at every level, and success profiles, that describe the critical knowledge, skills and abilities needed for every role.
Added
When a loan is placed on non-accrual status, all previously accrued and unpaid interest is reversed as a reduction of current period interest income. Interest income is subsequently recognized on a cash basis as long as the remaining book balance of the asset is deemed to be collectible. If collectability is questionable, then cash payments are applied to principal.
Removed
To help employees be successful in their roles, the Company implemented a new Human Capital Management System, which among other things, resulted in more streamlined HR processes, and creating a more favorable employee experience and engagement in HR-related activities.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeOther Risks Affecting the Business • The business faces unpredictable economic and business conditions. • The soundness of other financial institutions could adversely affect the business. • Recent negative developments affecting the banking industry, and resulting media coverage, have eroded customer confidence in the banking system. • The Company is subject to environmental liability risk associated with lending activities. • Severe weather, earthquakes, other natural disasters, pandemics, acts of war or terrorism and other external and geopolitical events could significantly impact the business. • Climate change and related legislative and regulatory initiatives including interpretations thereof have the potential to disrupt the business and result in operational changes and expenditures that could significantly impact the business and the operations and creditworthiness of the Company’s clients. • Negative public opinion could damage the Company’s reputation and adversely affect its earnings. • Environmental, social and governance (“ESG”) risks could adversely affect the Company’s reputation and shareholder, employee, client and third-party relationships and may negatively affect the Company’s stock price.
Biggest changeOther Risks Affecting the Business • The business faces unpredictable economic and business conditions. • The soundness of other financial institutions could adversely affect the business. • Negative developments affecting the banking industry, and resulting media coverage, have eroded customer confidence in the banking system. • The Company is subject to environmental liability risk associated with lending activities. • Severe weather, earthquakes, other natural disasters, climate change, pandemics, acts of war or terrorism and other external and geopolitical events could significantly impact the business. • Negative public opinion could damage the Company’s reputation and adversely affect its earnings.
In order to execute the Company’s business strategy successfully, the Company must, among other things: • continue to identify and expand into suitable markets and lines of business, in Texas, regionally and nationally; • develop new products and services and execute the full range of products and services more efficiently and effectively; 21 • attract and retain qualified front-line personnel in each of the targeted market segments to build customer base; • respond to market opportunities promptly and nimbly while balancing the demands of risk management and compliance with regulatory requirements; • expand loan portfolio in an intensely competitive environment while maintaining credit quality; • attract sufficient deposits and capital to fund expected and anticipated loan growth and satisfy regulatory requirements; • compete effectively for investment banking and broker-dealer customers; • control expenses; and • acquire and maintain sufficient qualified staffing and information technology and operational resources to support growth and compliance with regulatory requirements.
In order to execute the Company’s business strategy successfully, the Company must, among other things: • continue to identify and expand into suitable markets and lines of business, in Texas, regionally and nationally; • develop new products and services and execute the full range of products and services more efficiently and effectively; • attract and retain qualified front-line personnel in each of the targeted market segments to build customer base; • respond to market opportunities promptly and nimbly while balancing the demands of risk management and compliance with regulatory requirements; • expand loan portfolio in an intensely competitive environment while maintaining credit quality; • attract sufficient deposits and capital to fund expected and anticipated loan growth and satisfy regulatory requirements; • compete effectively for investment banking and broker-dealer customers; • control expenses; and • acquire and maintain sufficient qualified staffing and information technology and operational resources to support growth and compliance with regulatory requirements.
Although the Company has policies and procedures requiring environmental review before initiating any foreclosure action on real property, these reviews may not be sufficient to detect all potential environmental hazards. The remediation costs and any other financial liabilities associated with an environmental hazard could have a material adverse effect on financial condition, results of operations and profitability.
Although the Company has policies and procedures requiring environmental review before initiating any foreclosure 27 action on real property, these reviews may not be sufficient to detect all potential environmental hazards. The remediation costs and any other financial liabilities associated with an environmental hazard could have a material adverse effect on financial condition, results of operations and profitability.
If the Company’s credit portfolio management routines, policies and procedures are not able to adequately adapt to changes in economic, competitive or other conditions that affect customers and the quality of the loan portfolio, the Company may incur increased losses that could adversely affect its financial results and lead to increased regulatory scrutiny, restrictions on its lending activity or financial penalties.
If the Company’s credit portfolio management routines, policies and procedures are not able to adequately adapt to 16 changes in economic, competitive or other conditions that affect customers and the quality of the loan portfolio, the Company may incur increased losses that could adversely affect its financial results and lead to increased regulatory scrutiny, restrictions on its lending activity or financial penalties.
The Company’s customers and employees have been, and 22 will continue to be, targeted by parties using fraudulent e-mails and other communications in attempts to misappropriate passwords, bank account information or other personal information or to introduce viruses or other malware through “Trojan horse” programs to the Company’s information systems, the information systems of merchants or third-party service providers and/or customers' computers.
The Company’s customers and employees have been, and will continue to be, targeted by parties using fraudulent e-mails and other communications in attempts to misappropriate passwords, bank account information or other personal information or to introduce viruses or other malware through “Trojan horse” programs to the Company’s information systems, the information systems of merchants or third-party service providers and/or customers' computers.
There is no assurance that the Company will not be materially adversely impacted by the direct and indirect effects of current and future economic conditions in Texas. 17 The Company must effectively manage its counterparty risk . Financial services institutions are interrelated as a result of trading, clearing, counterparty and other relationships.
There is no assurance that the Company will not be materially adversely impacted by the direct and indirect effects of current and future economic conditions in Texas. The Company must effectively manage its counterparty risk . Financial services institutions are interrelated as a result of trading, clearing, counterparty and other relationships.
While such an investigation is ongoing, the Company may not necessarily know the full extent of the harm caused by the cyber attack, 23 and that damage may continue to spread. These factors may inhibit the Company’s ability to provide rapid, full and reliable information about the cyber attack to its clients, customers, counterparties and regulators, and the public.
While such an investigation is ongoing, the Company may not necessarily know the full extent of the harm caused by the cyber attack, and that damage may continue to spread. These factors may inhibit the Company’s ability to provide rapid, full and reliable information about the cyber attack to its clients, customers, counterparties and regulators, and the public.
This reliance exposes the Company to the risk that these vendors will not perform as required by agreements including risks resulting from disruptions in communications with vendors, cyber-attacks and security breaches at vendors, failure of a vendor to provide services for other reasons and poor performance of services.
This reliance exposes the Company to the risk 23 that these vendors will not perform as required by agreements including risks resulting from disruptions in communications with vendors, cyber-attacks and security breaches at vendors, failure of a vendor to provide services for other reasons and poor performance of services.
These customers are more likely to actively monitor the Company’s financial condition and results of operations and could withdraw their deposits quickly upon the occurrence of a material adverse development affecting the Company or its businesses or based on market rumors regarding the Company or other regional banks.
These customers are more likely to actively monitor the Company’s financial condition and results of operations and could withdraw their deposits quickly upon the occurrence of a material adverse development affecting the Company or its businesses or based on market rumors regarding 18 the Company or other regional banks.
The Company’s principal source of funding consists of customer deposits, supplemented by its short-term and long-term borrowings, including federal funds purchased and Federal Home Loan Bank (“FHLB”) borrowings. Recently proposed changes to the FHLB system could adversely impact the 18 Company’s access to FHLB borrowings or increase the cost of such borrowings.
The Company’s principal source of funding consists of customer deposits, supplemented by its short-term and long-term borrowings, including federal funds purchased and Federal Home Loan Bank (“FHLB”) borrowings. Recently proposed changes to the FHLB system could adversely impact the Company’s access to FHLB borrowings or increase the cost of such borrowings.
The Company’s success depends to a significant extent upon its ability to attract, develop and retain experienced personnel in each of its lines of business and markets including managers in operational areas, compliance and other support areas to build and maintain the infrastructure and controls required to support continuing growth.
The Company’s success depends to a significant extent upon its ability to attract, develop and retain experienced personnel in each of its lines of business and markets including managers in operational areas, compliance and other support areas to build and maintain the infrastructure and controls required 21 to support continuing growth.
Failure to comply with relevant laws, regulations, recommendations 25 or policies could result in sanctions by regulatory agencies, civil money penalties and/or reputation damage, which could have a material adverse effect on the business, financial condition and results of operations.
Failure to comply with relevant laws, regulations, recommendations or policies could result in sanctions by regulatory agencies, civil money penalties and/or reputation damage, which could have a material adverse effect on the business, financial condition and results of operations.
Successful cyber-attacks on the Company, vendors or customers may affect the Company’s reputation, and failure to meet customer expectations could have a material impact on the Company’s ability to attract and retain deposits as a primary source of funding.
Successful cyber-attacks on the Company, vendors or customers may affect the Company’s reputation, and failure to meet 22 customer expectations could have a material impact on the Company’s ability to attract and retain deposits as a primary source of funding.
While the Company has policies and procedures designed to prevent any such violations, there can be no assurance that such violations will not occur. The Company must maintain adequate regulatory capital to support its business objectives and strategy .
While the Company has policies and procedures designed to prevent any such violations, there can be no assurance that such violations will not occur. 25 The Company must maintain adequate regulatory capital to support its business objectives and strategy .
Dollar in relation to the currencies of other advanced and emerging market countries; • the performance of both domestic and international equity and debt markets and valuation of securities traded on recognized domestic and international exchanges; • general economic consequences of international conditions and the impact of those conditions on the U.S. and global economies; • legislative and regulatory changes impacting the banking industry; • impact of the 2024 presidential and congressional elections and other political conditions; • the financial health of customers and economic conditions affecting them and the value of collateral, including effects from the COVID-19 pandemic and other pandemics and the continued price volatility of oil and gas and other commodities; • the incidence of fraud, illegal payments, security breaches and other illegal acts among or impacting the Company, its customers and third parties; • structural changes in the markets for origination, sale and servicing of residential mortgages; • changes in governmental economic and regulatory policies, including the extent and timing of intervention in credit markets by the Federal Reserve or withdrawal from that intervention, generally including changes attributable to presidential and congressional elections; • acts or threats of war, including the ongoing war in Ukraine and the Israeli Palestinian conflict; • changes in the availability of liquidity at a systemic level; and • material inflation or deflation.
Dollar in relation to the currencies of other advanced and emerging market countries; • the performance of both domestic and international equity and debt markets and valuation of securities traded on recognized domestic and international exchanges; 26 • general economic consequences of international conditions and the impact of those conditions on the U.S. and global economies; • legislative and regulatory changes impacting the banking industry; • impact of the 2024 presidential and congressional elections and other political conditions; • the financial health of customers and economic conditions affecting them and the value of collateral, including effects from the continued price volatility of oil and gas and other commodities; • the incidence of fraud, illegal payments, security breaches and other illegal acts among or impacting the Company, its customers and third parties; • structural changes in the markets for origination, sale and servicing of residential mortgages; • changes in governmental economic and regulatory policies, including the extent and timing of intervention in credit markets by the Federal Reserve or withdrawal from that intervention, generally including changes attributable to presidential and congressional elections; • acts or threats of war, including the ongoing war in Ukraine and the Israeli Palestinian conflict; • changes in the availability of liquidity at a systemic level; and • material inflation or deflation.
Its prospects for continued growth must be considered in light of the risks, expenses and difficulties frequently encountered by growing companies.
Its prospects for continued growth must be considered in light of the risks, 20 expenses and difficulties frequently encountered by growing companies.
At December 31, 2023, the Company had issued and outstanding 300,000 shares of 5.75% fixed rate non-cumulative perpetual preferred stock, Series B, with a liquidation preference of $1,000 per share (the “Series B Preferred Stock”) and 12 million depositary shares, each representing 1/40th interest in a share of the Series B preferred stock.
At December 31, 2024, the Company had issued and outstanding 300,000 shares of 5.75% fixed rate non-cumulative perpetual preferred stock, Series B, with a liquidation preference of $1,000 per share (the “Series B Preferred Stock”) and 12 million depositary shares, each representing 1/40th interest in a share of the Series B preferred stock.
Future laws or regulations or more stringent interpretations or enforcement policies with respect to existing laws and regulations may increase the Company’s exposure to environmental liability. Severe weather, earthquakes, other natural disasters, pandemics, acts of war or terrorism and other external and geopolitical events could significantly impact the business .
Future laws or regulations or more stringent interpretations or enforcement policies with respect to existing laws and regulations may increase the Company’s exposure to environmental liability. Severe weather, earthquakes, other natural disasters, climate change, pandemics, acts of war or terrorism and other external and geopolitical events could significantly impact the business .
As of December 31, 2023, the Company had $375.0 million in outstanding subordinated notes issued by the holding company, $175.0 million in outstanding subordinated notes issued by the Bank, and $113.4 million in outstanding junior subordinated notes that are held by statutory trusts which issued trust preferred securities to investors.
As of December 31, 2024, the Company had $375.0 million in outstanding subordinated notes issued by the holding company, $175.0 million in outstanding subordinated notes issued by the Bank, and $113.4 million in outstanding junior subordinated notes that are held by statutory trusts which issued trust preferred securities to investors.
Recent negative developments affecting the banking industry, and resulting media coverage, have eroded customer confidence in the banking system.
Negative developments affecting the banking industry, and resulting media coverage, have eroded customer confidence in the banking system.
Its mortgage finance customers have also provided significant low-cost deposit balances associated with the borrower escrow accounts created at the time certain mortgage loans are funded, which have benefited liquidity and net interest margin.
Its mortgage finance customers have also provided significant deposit balances associated with the borrower escrow accounts created at the time certain mortgage loans are funded, which have benefited liquidity and net interest margin.
Failure to compete effectively for deposit, loan and other banking customers in any of the lines of business could cause the Company to lose market share, slow or reverse growth rate or suffer adverse effects on financial condition, results of operations or profitability. See the discussion above at Business – Competition for additional discussion of the Company’s competition.
Failure to compete effectively for deposit, loan and other banking customers in any of the lines of business could cause the Company to lose market share, slow or reverse growth rate or suffer adverse effects on financial condition, results of operations or profitability. See the discussion above in Item 1. Business – Competition for additional discussion of the Company’s competition.
Regulators could determine that the Company’s or the Bank’s risk management practices are not adequate or the Company’s or the Bank’s capital levels are not sufficiently in excess of well capitalized levels and take action to restrain growth.
Regulators could determine that the Company’s, the Bank’s or TCBI Securities’ risk management practices are not adequate or the Company’s, the Bank’s or TCBI Securities’ capital levels are not sufficiently in excess of well capitalized levels and take action to restrain growth.
Such events could affect the stability of its deposit base, impair the ability of borrowers to repay outstanding loans, impair the value of collateral securing loans, cause significant property damage, result in loss of revenue and/or cause us to incur additional expenses.
Such events could affect the stability of its deposit base, impair the ability of borrowers to repay outstanding loans, impair the value of collateral securing loans, cause significant property damage, result in loss of revenue, cause us to incur additional expenses or disrupt the Company’s operations.
The Company’s mortgage finance business has experienced, and will likely continue to experience, highly variable usage of the Company’s funding capacity resulting from seasonal demands for credit, surges in consumer demand driven by changes in 19 interest rates and month-end “spikes” of residential mortgage closings.
The Company’s mortgage finance business has experienced, and will likely continue to experience, highly variable usage of the Company’s funding capacity resulting from seasonal demands for credit, changes in consumer demand driven by changes in interest rates, housing affordability and supply and month-end “spikes” of residential mortgage closings.
The risk of non-payment of loans is inherent in commercial banking, which may result from many factors, including: • Adverse changes in local, U.S. and global economic and industry conditions, and other geopolitical events; • Declines in the value of collateral, including asset values that are directly or indirectly related to external factors such as commodity prices, real estate values, interest rates or geopolitical risks; • Concentrations of credit associated with specific loan categories, industries or collateral types; and • Exposures to individual borrowers and to groups of entities that may be affiliated on some basis that individually and/or collectively represent a larger percentage of the Company’s total loans or capital than might be considered common at other banks of similar size. 16 The Company relies heavily on information provided by third parties when originating and monitoring loans.
The risk of non-payment of loans is inherent in commercial banking, which may result from many factors, including: • Adverse changes in local, U.S. and global economic and industry conditions, and other geopolitical events; • Declines in the value of collateral, including asset values that are directly or indirectly related to external factors such as commodity prices, real estate values, interest rates or geopolitical risks; • Concentrations of credit associated with specific loan categories, industries or collateral types; and • Exposures to individual borrowers and to groups of entities that may be affiliated on some basis that individually and/or collectively represent a larger percentage of the Company’s total loans or capital than might be considered common at other banks of similar size.
The Company requires liquidity in the form of available funds to meet deposit, debt and other obligations as they come due, borrower requests to draw on committed credit facilities including unexpected demands for cash payments.
Liquidity Risks The company must effectively manage its liquidity risk . The Company requires liquidity in the form of available funds to meet deposit, debt and other obligations as they come due, borrower requests to draw on committed credit facilities including unexpected demands for cash payments.
TCBI Securities, Inc., the Bank’s wholly owned non-bank subsidiary, is also subject to the jurisdiction of several regulatory bodies, including the SEC, FINRA and state securities regulators. These regulations affect lending practices, permissible products and services and their terms and conditions, customer relationships, capital structure, investment practices, accounting, financial reporting, operations and ability to grow, among other things.
TCBI Securities is also subject to the jurisdiction of several regulatory bodies, including the SEC, FINRA, MSRB and state securities regulators. These regulations affect lending practices, permissible products and services and their terms and conditions, customer relationships, capital structure, investment practices, accounting, financial reporting, operations and ability to grow, among other things.
If the Company were to sell such securities with embedded unrealized losses, it may incur losses, which could impair the Company’s capital, financial condition, and results of operations and require the Company to raise additional capital on unfavorable terms, thereby negatively impacting its profitability.
If the Company were to sell securities with embedded unrealized losses, as the Company did in the third quarter of 2024, it may incur losses, which could impair the Company’s capital, financial condition, and results of operations and require the Company to raise additional capital on unfavorable terms, thereby negatively impacting its profitability.
Negative public opinion can result from the actual or perceived manner in which the Company conducts its business activities; management of actual or potential conflicts of interest and ethical issues; and protection of confidential client information.
Negative public opinion can result from the actual or perceived manner in which the Company conducts its business activities; management of actual or potential conflicts of interest and ethical issues; protection of confidential client information; and public scrutiny related to environmental, social and governance issues.
The stock price can fluctuate significantly in response to a variety of factors including, among other things: • actual or anticipated variations in quarterly and annual results of operations; • changes in recommendations by securities analysts; • changes in composition and perceptions of the investors who own the Company’s stock and other securities; • changes in ratings from national rating agencies on publicly or privately-owned debt securities and deposits in the Bank; • operating and stock price performance of other companies that investors deem comparable to the Company; • news reports relating to trends, concerns and other issues in the financial services industry, including regulatory actions against other financial institutions; • actual or expected economic conditions that are perceived to affect the Company such as changes in commodity prices, real estate values or interest rates; • perceptions in the marketplace regarding the Company or its competitors; • new technology used, or services offered, by competitors; • significant acquisitions or business combinations, strategic partnerships, joint ventures or capital commitments by or involving the Company or competitors; • changes in government regulations and interpretation of those regulations, changes in practices requested or required by regulators and changes in regulatory enforcement focus; • impacts and disruptions resulting from the COVID-19 pandemic, variants or other pandemics; • environmental or ESG-related concerns or ratings; and • geopolitical conditions such as acts or threats of terrorism or military conflicts. 29 General market fluctuations, industry factors and general economic and political conditions and events, such as economic slowdowns or recessions, interest rate changes or credit loss trends, could also cause the Company’s stock price to decrease regardless of operating results.
The stock price can fluctuate significantly in response to a variety of factors including, among other things: • actual or anticipated variations in quarterly and annual results of operations; • changes in recommendations by securities analysts; • changes in composition and perceptions of the investors who own the Company’s stock and other securities; • changes in ratings from national rating agencies on publicly or privately-owned debt securities and deposits in the Bank; • operating and stock price performance of other companies that investors deem comparable to the Company; • news reports relating to trends, concerns and other issues in the financial services industry, including regulatory actions against other financial institutions; • actual or expected economic conditions that are perceived to affect the Company such as changes in commodity prices, real estate values or interest rates; • perceptions in the marketplace regarding the Company or its competitors; • new technology used, or services offered, by competitors; • significant acquisitions or business combinations, strategic partnerships, joint ventures or capital commitments by or involving the Company or competitors; • changes in government regulations and interpretation of those regulations, changes in practices requested or required by regulators and changes in regulatory enforcement focus; and • geopolitical conditions such as acts or threats of terrorism or military conflicts.
Severe weather, earthquakes, other natural disasters, pandemics (such as the COVID-19 pandemic), acts of war or terrorism and other adverse external events could have a significant impact on the Company’s ability to conduct business.
Severe weather, earthquakes, other natural disasters, pandemics, climate change, acts of war or terrorism and other adverse external events could have a significant impact on the Company’s ability to conduct business.
These market developments have negatively impacted customer confidence in the safety and soundness of regional banks. As a result, customers may choose to maintain deposits with larger financial institutions or invest in higher yielding short-term fixed income securities, all of which could materially adversely impact the Company’s liquidity, loan funding capacity, net interest margin, capital and results of operations.
As a result, customers may choose to maintain deposits with larger financial institutions or invest in higher yielding short-term fixed income securities, all of which could materially adversely impact the Company’s liquidity, loan funding capacity, net interest margin, capital and results of operations.
The Bank could also be required to suspend or eliminate deposit gathering from any source classified as brokered deposits. The FDIC can change the definition of brokered deposits or extend the classification to deposits not currently classified as brokered deposits.
The Bank could also be required to suspend or eliminate deposit gathering from any source classified as brokered deposits. The FDIC can change the definition of brokered deposits or extend the classification to deposits not currently classified as brokered deposits and the FDIC has proposed rules that would reclassify certain deposits as brokered deposits.
Failure to successfully manage these risks, generally and to the satisfaction of regulators, in the development and implementation of new lines of business or new products or services could have a material adverse effect on the business, results of operations and financial condition.
Failure to successfully manage these risks, generally and to the satisfaction of regulators, in the development and implementation of new lines of business or new products or services could have a material adverse effect on the business, results of operations and financial condition. The Company may pursue bank and non-bank acquisition opportunities as they arise.
The Company’s ability to compete successfully depends in part upon its ability to use technology to provide products and services that will satisfy customer demands. Many of the Company’s larger competitors invest substantially greater resources in technological capabilities than the Company does.
The financial services industry is undergoing rapid technological changes with frequent introductions of new technology-driven products and services. The Company’s ability to compete successfully depends in part upon its ability to use technology to provide products and services that will satisfy customer demands. Many of the Company’s larger competitors invest substantially greater resources in technological capabilities than the Company does.
Models that the Company uses to forecast and plan for the impact of rising and falling interest rates may be incorrect or fail to consider the impact of competition and other conditions affecting loans and deposits. Periods of volatile interest rates may have a material effect on the Company’s earnings.
Models that the Company uses to forecast and plan for the impact of rising and falling interest rates may be incorrect or fail to consider the impact of competition and other conditions affecting loans and deposits.
The Company must maintain an appropriate allowance for credit losses . Management’s experience in the banking industry indicates that some portion of the Company’s loans will become delinquent, and some may only be partially repaid or may never be repaid at all.
Management’s experience in the banking industry indicates that some portion of the Company’s loans will become delinquent, and some may only be partially repaid or may never be repaid at all.
Rapid and unexpected volatility in interest rates creates additional uncertainty and potential for adverse financial effects. There can be no assurance that the Company will not be materially adversely affected by future changes in interest rates. The company must effectively manage market risk associated primarily with sales and trading activities.
There can be no assurance that the Company will not be materially adversely affected by future changes in interest rates. The company must effectively manage market risk associated primarily with sales and trading activities.
Many of these competitors have substantially greater financial resources, lending limits and technological resources and larger branch networks than the Company does and are able to offer a broader range of products and services than the Company can, including systems and services that could more effectively protect customers from cyber threats.
Many of these competitors have substantially greater financial resources, lending limits and technological resources and larger branch networks than the Company does and are able to offer a broader range of products and services than the Company can.
Negative public opinion could damage the Company’s reputation and adversely affect its earnings. Reputational risk, or the risk to earnings and capital from negative public opinion, is inherent in the business.
Reputational risk, or the risk to earnings and capital from negative public opinion, is inherent in the business.
Market Risks • The Company must effectively manage its interest rate risks. • The Company must effectively manage market risk associated primarily with sales and trading activities. • Rising interest rates have decreased the value of the Company’s securities portfolio, and the Company may realize losses if it were to sell such securities.
Market Risks • The Company must effectively manage its interest rate risk. • The Company must effectively manage market risk associated primarily with sales and trading activities. • Changes in interest rates affect the value of the Company’s securities portfolio, and the Company may realize losses if it were to sell such securities at a time when interest rates are higher than the yield on the Company’s securities portfolio.
If this information is intentionally or negligently misrepresented and the Company does not detect such misrepresentations, the credit risk associated with the transaction may be increased.
The Company relies heavily on information provided by third parties when originating and monitoring loans. If this information is intentionally or negligently misrepresented and the Company does not detect such misrepresentations, the credit risk associated with the transaction may be increased.
Legal, Regulatory and Compliance Risks • The Company is subject to extensive government regulation and supervision and interpretations thereof. • The Company must maintain adequate regulatory capital to support its business objectives and strategy. • The Company is subject to claims and litigation in the ordinary course of its business, including claims that may not be covered by insurance. • Any regulatory examination scrutiny or new regulatory requirements arising from the recent events in the banking industry could increase the Company’s expenses and affect the Company’s operations.
Legal, Regulatory and Compliance Risks • The Company is subject to extensive government regulation and supervision and interpretations thereof. • The Company must maintain adequate regulatory capital to support its business objectives and strategy. • The Company is subject to claims and litigation in the ordinary course of its business, including claims that may not be covered by insurance.
The Company devotes a significant amount of management time and expense to enhancing the infrastructure to support its compliance obligations, which can pose significant regulatory enforcement, financial and reputational risks if not appropriately addressed. The Regulatory Relief Act passed on May 22, 2018, has provided a limited degree of regulatory relief for institutions of the Company’s size.
The Company devotes a significant amount of management time and expense to enhancing the infrastructure to support its compliance obligations, which can pose significant regulatory enforcement, financial and reputational risks if not appropriately addressed.
In addition, the Company’s credit risk may be increased when the collateral securing its loans cannot be realized upon or is liquidated at prices not sufficient to recover the full amount of its credit or derivative exposure. Any such losses could have a material adverse effect on the business, financial condition, results of operations or profitability.
In addition, the Company’s credit risk may be increased when the collateral securing its loans cannot be realized upon or is liquidated at prices not sufficient to recover the full amount of its credit or derivative exposure.
In recent years, hurricanes have caused extensive flooding and destruction along the coastal areas of Texas and in other areas in the U.S., including communities where the Company conducts business.
In recent years, hurricanes have caused extensive flooding and destruction along the coastal areas of Texas and in other areas in the U.S., including communities where the Company conducts business. Climate change has the potential to increase to frequency and severity of these severe weather events in the future.
While the Company has implemented an active program of oversight to address this risk, there can be no assurance that the Company will not experience material security breaches associated with vendors or other third parties. The Company must continue to attract, retain and develop key personnel .
While the Company has implemented an active program of oversight to address this risk, there can be no assurance that the Company will not experience material security breaches associated with vendors or other third parties. The development and use of AI presents risks and challenges that may adversely impact the Company’s business.
All service offerings, including current offerings and new activities, may become more risky due to changes in economic, competitive and market conditions beyond the Company’s control.
New activities necessarily entail additional risks and may present additional risks to the effectiveness of the Company’s system of internal controls and risk management strategies. All service offerings, including current offerings and new activities, may become more risky due to changes in economic, competitive and market conditions beyond the Company’s control.
As a result, the Company’s financial condition and results of operations may be strongly affected by any prolonged period of economic recession or other adverse business, economic or regulatory conditions affecting Texas businesses and financial institutions. Furthermore, while the Texas economy is increasingly more diversified, the energy sector continues to play an important role in the overall Texas economy.
As a result, the Company’s financial condition and results of operations may be strongly affected by any prolonged period of economic recession or other adverse business, economic or regulatory conditions affecting Texas businesses and financial institutions.
While the Company has taken actions to maximize its funding sources, there is no guarantee that such actions will be successful or sufficient in the event of sudden liquidity needs.
While the Company has taken actions to maximize its funding sources, there is no guarantee that such actions will be successful or sufficient in the event of sudden liquidity needs. Strategic Risks The Company competes with many banks and other traditional, non-traditional, brick and mortar and online financial service providers .
If the Company is unable to maintain effective internal controls over financial reporting and disclosure controls, the Company could become subject to investigations by the NASDAQ, the SEC or other regulatory authorities or shareholder litigation, which could require additional management attention and which could adversely affect the Company’s business, financial condition and results of operations. 24 Any system of controls, however well designed and operated, is based in part on certain assumptions and management judgment and can provide only reasonable, not absolute, assurances that the objectives of the system are met.
If the Company is unable to maintain effective internal controls over financial reporting and disclosure controls, the Company could become subject to investigations by Nasdaq, the SEC or other regulatory authorities or shareholder litigation, which could require 24 additional management attention and which could adversely affect the Company’s business, financial condition and results of operations.
Furthermore, there is no guarantee that regional bank failures or bank runs similar to the ones that occurred in 2023 will not occur in the future and, if they were to occur, they may have a material and adverse impact on customer and investor confidence in regional banks negatively impacting the Company’s liquidity, capital, results of operations and stock price.
While the Department of the Treasury, the Federal Reserve, and the FDIC historically have taken action to ensure that depositors of failed banks had access to their deposits, including uninsured deposit accounts, there is no guarantee that regional bank failures or bank runs will not occur in the future and, if they were to occur, they may have a material and adverse impact on customer and investor confidence in regional banks negatively impacting the Company’s liquidity, capital, results of operations and stock price.
Strategic Risks • The Company must be effective in developing and executing new lines of business and new products and services while managing associated risks. • The Company competes with many banks and other traditional, non-traditional, brick and mortar and online financial service providers. • The Company must effectively execute its business strategy in order to continue asset and earnings growth. 15 Operational Risks • The Company, its vendors and customers must effectively manage information systems and cyber risk and threats which may result in disruptions, failures or breaches in security. • A successful cyber attack affecting the Company could cause significant harm to the Company and its clients and customers. • The Company’s operations rely extensively on a broad range of external vendors. • The Company must continue to attract, retain and develop key personnel. • The Company’s accounting estimates and risk management processes rely on management judgment, which may prove inadequate, wrong or be adversely impacted by inaccurate or mistakes in assumptions or models. • The risk management strategies and processes may not be effective and the Company’s controls and procedures, including disclosure controls and procedures and internal control over financial reporting, may fail or be circumvented. • The business is susceptible to fraud and conduct risk.
However, even if the Company identifies attractive acquisition opportunities, it may not be able to complete such acquisitions on favorable terms or realize the anticipated benefits from such acquisitions. 15 Operational Risks • The Company must continue to attract, retain and develop key personnel. • The Company, its vendors and customers must effectively manage information systems and cyber risk and threats which may result in disruptions, failures or breaches in security. • A successful cyber attack affecting the Company could cause significant harm to the Company and its clients and customers. • The Company’s operations rely extensively on a broad range of external vendors. • The development and use of AI presents risks and challenges that may adversely impact the Company’s business. • The Company’s accounting estimates and risk management processes rely on management judgment, which may prove inadequate, wrong or be adversely impacted by inaccurate or mistakes in assumptions or models. • The risk management strategies and processes may not be effective and the Company’s controls and procedures, including disclosure controls and procedures and internal control over financial reporting, may fail or be circumvented. • The business is susceptible to fraud and conduct risk.
If the Company is unable to access funds from capital transactions, borrowing under its revolving line of credit or dividends or interest on loan payments from the Bank, the Company may be unable to satisfy its obligations to creditors or debtholders or pay dividends on its preferred stock. Market Risks The Company must effectively manage its interest rate risk .
The Company’s right to participate in any distribution from the liquidation or sale of the Bank’s assets is subject to the prior claims of the Bank’s creditors. 19 If the Company is unable to access funds from capital transactions, borrowing under its revolving line of credit or dividends or interest on loan payments from the Bank, the Company may be unable to satisfy its obligations to creditors or debtholders or pay dividends on its preferred stock.
However, brokered deposits are generally considered to be more sensitive to interest rates, with a higher withdrawal than other deposits if the rates offered are not competitive with rates offered by the Bank’s competitors. Furthermore, banks with higher levels of brokered deposits may be viewed as having higher liquidity risks, which may lead to further deposit outflow.
The deposits are subject to regulatory classification as brokered deposits, which are generally considered to be more sensitive to interest rates, with a higher withdrawal than other deposits if the rates offered are not competitive with rates offered by the Bank’s competitors.
Strategic Risks The Company must be effective in developing and executing new lines of business and new products and services while managing associated risks .
The Company must be effective in developing and executing new lines of business and new products and services while managing associated risks, including the ability to use technology to provide products and services that will satisfy customer demands .
The Company’s profitability is dependent to a large extent on its net interest income, which is the difference between the interest income paid on its loans and investments and the interest the Company pays to third parties such as its depositors, lenders and debtholders. Changes in interest rates can impact profits and the fair values of certain assets and liabilities.
Market Risks The Company must effectively manage its interest rate risk . The Company’s profitability is dependent to a large extent on its net interest income, which is the difference between the interest income paid on its loans and investments and the interest the Company pays to third parties such as its depositors, lenders and debtholders.
The credit quality of the loan portfolio necessarily reflects, among other things, the general economic conditions in the areas in which the Company and its customers conduct their respective businesses. The Company’s financial condition can be affected by other factors that are beyond its control, including: • geopolitical, national, regional and local economic conditions; • the value of the U.S.
The Company’s financial condition can be affected by other factors that are beyond its control, including: • geopolitical, national, regional and local economic conditions; • the value of the U.S.
Climate change and related legislative and regulatory initiatives including interpretations thereof have the potential to disrupt the business and result in operational changes and expenditures that could significantly impact the business and the operations and creditworthiness of the Company’s clients.
Furthermore, legislative and regulatory initiatives related to climate change have the potential to disrupt the business and result in operational changes and expenditures that could significantly impact the business and the operations and creditworthiness of the Company’s clients and also increase the compliance burden on the Company. Negative public opinion could damage the Company’s reputation and adversely affect its earnings.
The holders of the Company’s indebtedness and preferred stock have rights that are senior to those of its common stockholders .
Given the lower trading volume of the common stock, significant sales of the common stock, or the expectation of these sales, could increase the volatility of the Company’s stock price and cause the stock price to fall. The holders of the Company’s indebtedness and preferred stock have rights that are senior to those of its common stockholders .
Furthermore, energy production and related industries represent a significant part of the economies in some of the primary markets in which the Company operates.
Furthermore, while the Texas economy is increasingly more diversified, the energy sector and related industries continue to play an important role in the overall Texas economy and represent a significant part of the economies in some of the primary markets in which the Company operates.
As a result of inflationary pressures and the resulting rapid increases in interest rates over the last two years, the trading value of previously issued government and other fixed income securities has declined significantly.
As a result of inflationary pressures and the resulting rapid increases in interest rates in prior periods, the trading value of previously issued government and other fixed income securities declined significantly. These securities make up a majority of the securities portfolio of most banks in the U.S., including the Company’s, resulting in unrealized losses embedded in U.S. banks’ securities portfolios.
These non-traditional deposits are subject to greater operational and reputational risk of unexpected withdrawal than traditional demand and time deposits, particularly those provided by consumers. A significant decrease in balances of brokered deposits could have a material adverse effect on the Bank’s and the Company’s financial condition, results of operations or profitability.
These non-traditional deposits are subject to greater operational and reputational risk of unexpected withdrawal than traditional demand and time deposits, particularly those provided by consumers. The Company’s growth plans are dependent on the availability of capital and funding .
The Company competes with many banks and other traditional, non-traditional, brick and mortar and online financial service providers . Competition among providers of financial services in markets, in Texas, regionally and nationally, is intense.
Competition among providers of financial services in markets, in Texas, regionally and nationally, is intense.
Failure to effectively execute the business strategy could have a material adverse effect on the business, future prospects, financial condition, results of operations or profitability. Operational Risks The Company, its vendors and customers must effectively manage information systems and cyber risk and threats which may result in disruptions, failures or breaches in security.
Failure to effectively execute the business strategy could have a material adverse effect on the business, future prospects, financial condition, results of operations or profitability.
The Company’s business strategy involves developing and growing new lines of business and offering new products and services within existing lines of business to grow its client base, retain existing clients and realize strategic priorities for both loans and deposits. Substantial costs, risks and uncertainties are associated with these efforts, particularly in instances where the markets are not fully developed.
The Company’s business strategy involves developing and growing new lines of business and offering new products and services, including through the introduction of new technologies, within existing lines of business to grow its client base, retain existing clients and realize strategic priorities for revenue growth.
The Company could be required to pursue legal actions against insurers to obtain payment of amounts owed, and there is no assurance that such actions, if pursued, would be successful. Any regulatory examination scrutiny or new regulatory requirements arising from the recent events in the banking industry could increase the Company’s expenses and affect the Company’s operations.
The Company could be required to pursue legal actions against insurers to obtain payment of amounts owed, and there is no assurance that such actions, if pursued, would be successful. Other Risks Affecting the Business The business faces unpredictable economic and business conditions .
External factors, such as compliance with regulations, receipt of necessary licenses or permits, competitive alternatives and shifting market preferences, may also adversely impact the successful execution of new activities. New activities necessarily entail additional risks and may present additional risks to the effectiveness of the Company’s system of internal controls and risk management strategies.
Timetables for the development and launch of new activities may not be achieved and price and profitability targets may not prove feasible, or their realization may be delayed. External factors, such as compliance with regulations, receipt of necessary licenses or permits, competitive alternatives and shifting market preferences, may also adversely impact the successful execution of new activities.
The closures of Silicon Valley Bank and Signature Bank in March 2023 and First Republic Bank in 27 May 2023, and concerns about similar future events, have generated significant market volatility among publicly traded bank holding companies and, in particular, regional banks like the Company.
Any future bank failures like those experienced in 2023 or similar events may negatively impact customer confidence in the safety and soundness of regional banks and may generate market volatility among publicly traded bank holding companies and, in particular, regional banks like the Company.
In addition to interest rate risk, the Company is exposed to other forms of market risk, principally related to trading activities which support customer transactions.
In addition to interest rate risk, the Company is exposed to market risk, principally related to trading activities conducted to support customer transactions or to provide customers with liquidity. The Company typically seeks to manage the market risks of its positions with offsetting positions that eliminate or reduce market risk to fall within acceptable tolerances.
The Company, its vendors and customers all rely heavily on communications and information systems to conduct their respective businesses, store sensitive data and work effectively together. The financial services industry is undergoing rapid technological changes with frequent introductions of new technology-driven products and services.
The Company, its vendors and customers must effectively manage information systems and cyber risk and threats which may result in disruptions, failures or breaches in security. The Company, its vendors and customers all rely heavily on communications and information systems to conduct their respective businesses, store sensitive data and work effectively together.
Other Risks Affecting the Business The business faces unpredictable economic and business conditions . The business is directly impacted by general economic, business and political conditions in Texas, the United States and internationally.
The business is directly impacted by general economic, business and political conditions in Texas, the United States and internationally. The credit quality of the loan portfolio necessarily reflects, among other things, the general economic conditions in the areas in which the Company and its customers conduct their respective businesses.
Developing and marketing new activities requires that the Company invests significant time and resources before new sources of revenues, funding and profits can be realized. Timetables for the development and launch of new activities may not be achieved and price and profitability targets may not prove feasible, or their realization may be delayed.
Substantial costs, risks and uncertainties are associated with these efforts, particularly in instances where the markets are not fully developed. Developing and marketing new activities requires that the Company invests significant time and resources before new sources of revenues, funding and profits can be realized.
VaR is calculated based on one year historical moves in key market risk factors relevant to the portfolio and it estimates potential loss on current portfolio at 95th percentile confidence interval. Rising interest rates have decreased the value of the Company’s securities portfolio, and the Company may realize losses if it were to sell such securities.
The Company uses VaR as a primary risk measure to aggregate, monitor and limit risks at the portfolio level across all trading activities. VaR is calculated based on one year historical moves in key market risk factors relevant to the financial asset and any associated portfolio and estimates potential loss on subject positions at 95th percentile confidence interval.
Additionally, the trading volume in the Company’s common stock is less than that of other larger financial services companies. Given the lower trading volume of the common stock, significant sales of the common stock, or the expectation of these sales, could increase the volatility of the Company’s stock price and cause the stock price to fall.
General market fluctuations, industry factors and general economic and political conditions and events, such as economic slowdowns or recessions, interest rate changes or credit loss trends, could also cause the Company’s stock price to decrease regardless of operating results. 28 Additionally, the trading volume in the Company’s common stock is less than that of other larger financial services companies.
Removed
Historically, the Company has sought to take action prior to economic downturns by slowing growth rates and decreasing the risk level of its assets by, among other things, allowing runoff of loans that the Company believes may not perform well during a weakening or declining economic environment.
Added
Strategic Risks • The Company competes with many banks and other traditional, non-traditional, brick and mortar and online financial service providers. • The Company must effectively execute its business strategy in order to continue asset and earnings growth. • The Company must be effective in developing and executing new lines of business and new products and services while managing associated risks, including the ability to use technology to provide products and services that will satisfy customer demands. • The Company may pursue bank and non-bank acquisition opportunities as they arise.
Removed
For example, the Company adopted ASU 2016-13 Financial Instruments - Credit Losses (Topic 326) on January 1, 2020 which replaced the incurred loss methodology for determining the provision for credit losses and allowance for credit losses with the CECL model.
Added
Any such losses could have a material adverse effect on the business, financial condition, results of operations or profitability. 17 The Company must maintain an appropriate allowance for credit losses .

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeThe Risk Committee receives regular updates on cybersecurity risks and incidents and the cybersecurity program through direct interaction with the Chief Information Security Officer (“CISO”) and the Head of Information Risk and provides periodic updates regarding cybersecurity risks and the cybersecurity program to the full Board of Directors.
Biggest changeThe Risk Committee previously has received, and the Technology Committee will receive on an ongoing basis, regular updates on the Company’s cybersecurity risks and incidents and the cybersecurity program through direct interaction with the Chief Information Security Officer (“CISO”) and the Chief Security 30 Officer (“CSO”).
Key components of the cybersecurity risk management program include: • A risk assessment process that identifies and prioritizes material cybersecurity risks; defines and evaluates the effectiveness of controls to mitigate the risks; and reports results to executive management and the Board of Directors. • A third-party Managed Detection and Response (“MDR”) service, which monitors the security of our information systems around-the-clock, including intrusion detection and alerting. • A dedicated cybersecurity team covering all critical cyber defense functions such as engineering, data protection, identity and access management, insider risk management, security operations, threat emulation and threat intelligence. • A training program that educates employees about cybersecurity risks and how to protect themselves from cyberattacks. • An awareness program that keeps employees informed about cybersecurity threats and how to stay safe online. • An incident response plan that outlines the steps the Company will take to respond to a cybersecurity incident, which is tested on a periodic basis.
Key components of the cybersecurity risk management program include: • A risk assessment process that identifies and prioritizes material cybersecurity risks; defines and evaluates the effectiveness of controls to mitigate the risks; and reports results to executive management and the Board of Directors. • A third-party Managed Detection and Response (“MDR”) service, which monitors the security of the Company’s information systems around-the-clock, including intrusion detection and alerting. • A dedicated cybersecurity team covering all critical cyber defense functions such as engineering, data protection, identity and access management, insider risk management, security operations, threat emulation and threat intelligence. • A training program that educates employees about cybersecurity risks and how to protect themselves from cyberattacks. • An awareness program that keeps employees informed about cybersecurity threats and how to stay safe online. • An incident response plan that outlines the steps the Company will take to respond to a cybersecurity incident, which is tested on a periodic basis.
Information security risk is reported by both the Information Security and Information Risk departments through monthly management metric reporting working groups and multiple layers of quarterly risk committees to achieve an appropriate flow of information risk reporting to the Board.
Information security risk is reported by both the Information Security and Information Risk departments through monthly management metric reporting working groups and multiple layers of quarterly risk committees to achieve an appropriate flow of information risk reporting to the board of directors.
ITEM 1C. CYBERSECURITY Cybersecurity Risk Management and Strategy Cybersecurity risks are constantly evolving and becoming increasingly pervasive across all industries. To mitigate these risks and protect sensitive customer data, financial transactions and our information systems, the Company has implemented a comprehensive cybersecurity risk management program, which is a component of its overarching enterprise risk management program.
ITEM 1C. CYBERSECURITY Cybersecurity Risk Management and Strategy Cybersecurity risks are constantly evolving and becoming increasingly pervasive across all industries. To mitigate these risks and protect sensitive customer data, financial transactions and the Company’s information systems, the Company has 29 implemented a comprehensive cybersecurity risk management program, which is a component of its overarching enterprise risk management program.
The risk committees include the Operational Risk Management Committee, the Executive Risk Management Committee and the Risk Committee of the Board of Directors. These committees establish and oversee policies, programs, and other guidance to provide specific expectations for managing the cybersecurity risk.
The risk committees include the Operational and Information Technology Risk Management Committee, the Executive Risk Management Committee and the Risk Committee and Technology Committee of the board of directors. These committees establish and oversee policies, programs, and other guidance to provide specific expectations for managing cybersecurity risk.
Our Third-Party Risk Management program is designed to ensure that our vendors meet our cybersecurity requirements. This includes conducting periodic risk assessments of vendors, requiring vendors to implement appropriate cybersecurity controls and monitoring vendor compliance with our cybersecurity requirements.
The Company’s Third-Party Risk Management program is designed to ensure that its vendors meet its cybersecurity requirements. This includes conducting periodic risk assessments of vendors, requiring vendors to implement appropriate cybersecurity controls and monitoring vendor compliance with the Company’s cybersecurity requirements.
Additionally, awareness and training on cybersecurity topics is provided to the Board on an annual basis. Management's Role The Information Security department is responsible for implementing and maintaining the Company’s cybersecurity risk management program. The Information Security department consists of cybersecurity and information risk professionals who assess, identify, and manage cybersecurity risks.
Management's Role The Information Security department is responsible for implementing and maintaining the Company’s cybersecurity risk management program. The Information Security department consists of cybersecurity and information risk professionals who assess, identify, and manage cybersecurity risks.
As a governance and oversight function, the Information Risk department measures and reports on the quality of information and cyber risk management across all functions of the firm.
The CSO is responsible for ensuring the protection of electronic and physical information through the identification and management of risk activities. As a governance and oversight function, the Information Risk department measures and reports on the quality of information and cyber risk management across all functions of the firm.
Prior to joining the Company, the Company’s CISO served as leader of the Global Threat Management Center for a major global financial institution.
Prior to joining the Company, the Company’s CISO served as leader of the Global Threat Management Center for a major global financial institution. The Information Risk department is led by the CSO, who reports directly to the Chief Risk Officer.
Consistent with this responsibility the Board has delegated primary oversight responsibility over the Company’s risk management framework, including oversight of cybersecurity risk and cybersecurity risk management, to the 31 Risk Committee of the Board of Directors.
Consistent with this responsibility, the board of directors has delegated primary oversight responsibility (i) of the Company’s general risk management framework to the Risk Committee of the board of directors and (ii) of the Company’s information technology, cybersecurity risk and cybersecurity risk management to the Technology Committee of the board of directors, which was formed in the first quarter of 2025.
Removed
The Information Risk department, led by the Head of Information Risk who reports directly to the Chief Risk Officer, is responsible for ensuring the protection of electronic and physical information through the identification and management of risk activities.
Added
At least one member of the Risk Committee also serves as a member of the Technology Committee.
Added
The Risk Committee previously has provided, and the Technology Committee will provide on an ongoing basis, updates regarding cybersecurity risks and the cybersecurity program to the full board of directors. Additionally, awareness and training on cybersecurity topics is provided to the board of directors on an annual basis.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeThe Company also leases other facilities in its primary Texas market regions of Dallas, Fort Worth, Houston, Austin and San Antonio, as well as in New York, some of which operate as full-service banking centers. The Company also leases an operations center in Richardson, Texas that houses its loan and deposit operations and customer call center.
Biggest changeThe Company also leases other facilities in its primary Texas market regions of Austin, Dallas, Fort Worth, Houston and San Antonio, some of which operate as full-service banking centers. The Company also leases an operations center in Richardson, Texas that houses its loan and deposit operations and customer call center.
ITEM 2. PROPERTIES The Company’s corporate headquarters is located in Dallas, Texas. These facilities, which the Company leases, house its executive and primary administrative offices, as well as the principal banking headquarters of Texas Capital Bank.
ITEM 2. PROPERTIES The Company’s corporate headquarters is located in Dallas, Texas. These facilities, which the Company leases, house its executive and primary administrative offices, as well as the principal banking headquarters of Texas Capital Bank and primary office of supervisory of TCBI Securities.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe performance graph represents past performance and should not be considered to be an indication of future performance. 12/31/2018 12/31/2019 12/31/2020 12/31/2021 12/31/2022 12/31/2023 Texas Capital Bancshares, Inc. $ 100.00 $ 111.12 $ 116.46 $ 117.93 $ 118.05 $ 126.50 Russell 2000 Index 100.00 123.48 145.69 165.58 130.45 150.37 Nasdaq Bank Index 100.00 121.03 108.61 150.99 123.56 116.35 KBW Bank Index 100.00 132.99 115.79 154.25 118.38 113.82 33 Purchases of Equity Securities by the Issuer and Affiliated Purchasers The Company repurchased shares of its common stock in the open market during 2023 as follows: Total Number of Approximate Dollar Value Shares Purchased as Part of Shares That May Yet Total Number of Average Price Paid of Publicly Announced Be Purchased Under the Shares Purchased per Share Plans or Programs Plans or Programs January 2023 564,206 $ 61.50 564,206 $ 150,000,000 February 2023 — — — 150,000,000 March 2023 447,703 55.80 447,703 125,019,420 April 2023 — — — 125,019,420 May 2023 — — — 125,019,420 June 2023 — — — 125,019,420 July 2023 — — — 125,019,420 August 2023 — — — 125,019,420 September 2023 — — — 125,019,420 October 2023 301,135 54.58 301,135 108,582,560 November 2023 484,746 55.04 484,746 81,903,573 December 2023 23,742 56.22 23,742 80,568,851 Total 1,821,532 $ 57.17 1,821,532 $ 80,568,851 On April 19, 2022, the Company’s board of directors authorized a share repurchase program under which the Company could repurchase up to $150.0 million in shares of its outstanding common stock.
Biggest changeThe performance graph represents past performance and should not be considered to be an indication of future performance. 12/31/2019 12/31/2020 12/31/2021 12/31/2022 12/31/2023 12/31/2024 Texas Capital Bancshares, Inc. $ 100.00 $ 104.81 $ 106.13 $ 106.24 $ 113.85 $ 137.75 Russell 2000 Index 100.00 117.99 134.10 105.65 121.77 133.74 Nasdaq Bank Index 100.00 89.74 124.75 102.08 96.13 112.02 KBW Bank Index 100.00 87.06 115.99 89.01 85.59 112.81 32 Purchases of Equity Securities by the Issuer and Affiliated Purchasers The Company repurchased shares of its common stock in the open market during 2024 as follows: Total Number of Approximate Dollar Value Shares Purchased as Part of Shares That May Yet Total Number of Average Price Paid of Publicly Announced Be Purchased Under the Shares Purchased per Share(1) Plans or Programs Plans or Programs(1) First Quarter January 2024 — $ — — $ 150,000,000 February 2024 112,215 58.23 112,215 143,466,072 March 2024 417,123 59.55 417,123 118,624,951 Total 529,338 $ 59.27 529,338 118,624,951 Second Quarter April 2024 393,914 $ 58.46 393,914 95,596,029 May 2024 41,597 58.64 41,597 93,156,593 June 2024 416,587 57.78 416,587 69,085,247 Total 852,098 $ 58.14 852,098 69,085,247 Third Quarter July 2024 — $ — — 69,085,247 August 2024 — — — 69,085,247 September 2024 — — — 69,085,247 Total — $ — — 69,085,247 Fourth Quarter October 2024 — $ — — 69,085,247 November 2024 — — — 69,085,247 December 2024 — — — 69,085,247 Total — $ — — $ 69,085,247 Year to date total 1,381,436 $ 58.57 1,381,436 $ 69,085,247 (1) The approximate dollar value of shares that may yet be purchased under the plans or programs and average price paid per share do not include the effect of excise tax expense incurred on net stock repurchases.
The Russell 2000 Index (Bloomberg: RTY), Nasdaq Bank Index (Bloomberg: CBNK) and KBW Bank Index (Bloomberg: BKX) are based on total returns assuming reinvestment of dividends. The graph assumes an investment of $100 on December 31, 2018.
The Russell 2000 Index (Bloomberg: RTY), Nasdaq Bank Index (Bloomberg: CBNK) and KBW Bank Index (Bloomberg: BKX) are based on total returns assuming reinvestment of dividends. The graph assumes an investment of $100 on December 31, 2019.
Stock Performance Graph The following table and graph sets forth the cumulative total stockholder return for the Company’s common stock for the five-year period ending on December 31, 2023, compared to an overall stock market index (Russell 2000 Index) and two of the Company’s peer group indexes (Nasdaq Bank Index and KBW Bank Index).
Stock Performance Graph The following table and graph set forth the cumulative total stockholder return for the Company’s common stock for the five-year period ending on December 31, 2024, compared to an overall stock market index (Russell 2000 Index) and two of the Company’s peer group indexes (Nasdaq Bank Index and KBW Bank Index).
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES The Company’s common stock is traded on The Nasdaq Global Select Market under the symbol “TCBI”. On February 9, 2024, there were approximately 137 holders of record of the Company’s common stock.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES The Company’s common stock is traded on The Nasdaq Global Select Market under the symbol “TCBI”. On February 10, 2025, there were approximately 130 holders of record of the Company’s common stock.
The extent to which the Company repurchases shares, and the timing of such repurchases, will be at management’s discretion and will depend upon a variety of factors, including market conditions, our capital position and amount of retained earnings, regulatory requirements and other considerations.
The extent to which the Company repurchases shares, and the timing of such repurchases, will be at management’s discretion and will depend upon a variety of factors, including market conditions, the Company’s capital position and amount of retained earnings, regulatory requirements and other considerations. ITEM 6. [RESERVED] 33
The share repurchase program is set to expire on January 31, 2025, and the program may be suspended or discontinued at any time. Remaining repurchase authorization under the January 18, 2023 share repurchase program was terminated upon authorization of this new program. ITEM 6. [RESERVED] 34
The share repurchase program expires on January 31, 2026, but may be suspended or discontinued at any time. Remaining repurchase authorization under the January 17, 2024 share repurchase program was terminated upon authorization of this new program.
On January 17, 2024, the Company’s board of directors authorized a new share repurchase program under which the Company may repurchase up to $150.0 million in shares of its outstanding common stock. Any repurchases under the repurchase program will be made in accordance with applicable securities laws from time to time in open market or private transactions.
On January 17, 2024, the Company’s board of directors authorized a share repurchase program under which the Company could repurchase up to $150.0 million in shares of its outstanding common stock, excluding the effect of excise tax expense incurred on net stock repurchases.
In January 2023, the Company repurchased 564,206 shares of common stock at a weighted average price of $61.50, completing the full $150.0 million of repurchases authorized under this plan. A new share repurchase program was approved on January 18, 2023 under which the Company could repurchase up to $150.0 million in shares of outstanding common stock.
On January 22, 2025, the Company’s board of directors authorized a new share repurchase program under which the Company may repurchase up to $200.0 million in shares of its outstanding common stock, excluding the effect of excise tax expense incurred on net stock repurchases.
Removed
From March 2023 through December 2023, the Company repurchased 1,257,326 shares of its common stock for an aggregate purchase price of $69.4 million, at a weighted average price of $55.22 per share under this plan. The aggregate purchase price and weighted average price per share does not include the effect of excise tax expense incurred on net stock repurchases.
Added
Remaining repurchase authorization under the January 18, 2023 share repurchase program was terminated upon authorization of this new program.
Added
Any repurchases under the Company’s repurchase program will be made in accordance with applicable securities laws from time to time in open market or private transactions.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeDetails of the changes in the various components of net income are discussed below. 35 Taxable Equivalent Net Interest Income Analysis - Year to Date(1) Year ended December 31, 2023 2022 2021 (dollars in thousands) Average Balance Revenue / Expense Yield / Rate Average Balance Revenue / Expense Yield / Rate Average Balance Revenue / Expense Yield / Rate Assets Investment securities(2) $ 4,162,931 $ 108,294 2.37 % $ 3,525,986 $ 64,021 1.69 % $ 3,588,565 $ 44,636 1.24 % Interest bearing cash and cash equivalents 4,353,911 220,976 5.08 % 5,967,329 97,271 1.63 % 10,549,153 13,233 0.13 % Loans held for sale 33,166 2,856 8.61 % 528,973 23,555 4.45 % 90,066 2,481 2.75 % Loans held for investment, mortgage finance 4,080,263 107,111 2.63 % 5,285,612 189,843 3.59 % 7,881,791 239,205 3.03 % Loans held for investment(3) 16,076,646 1,191,098 7.41 % 16,063,437 770,802 4.80 % 15,328,390 579,157 3.78 % Less: Allowance for credit losses on loans 249,180 — — 221,639 — — 234,973 — — Loans held for investment, net 19,907,729 1,298,209 6.52 % 21,127,410 960,645 4.55 % 22,975,208 818,362 3.56 % Total earning assets 28,457,737 1,630,335 5.65 % 31,149,698 1,145,492 3.65 % 37,202,992 878,712 2.36 % Cash and other assets 1,079,607 900,121 937,264 Total assets $ 29,537,344 $ 32,049,819 $ 38,140,256 Liabilities and Stockholders’ Equity Transaction deposits $ 1,466,583 $ 42,561 2.90 % $ 1,659,476 $ 18,099 1.09 % $ 3,447,849 $ 20,657 0.60 % Savings deposits 10,921,264 480,106 4.40 % 9,983,571 151,400 1.52 % 11,180,645 36,459 0.33 % Time deposits 1,573,294 65,108 4.14 % 1,313,483 21,164 1.61 % 1,716,642 8,391 0.49 % Total interest bearing deposits 13,961,141 587,775 4.21 % 12,956,530 190,663 1.47 % 16,345,136 65,507 0.40 % Short-term borrowings 1,323,039 70,642 5.34 % 1,829,751 29,077 1.59 % 2,399,280 4,613 0.19 % Long-term debt 882,904 57,383 6.50 % 927,847 48,739 5.25 % 802,112 37,628 4.69 % Total interest bearing liabilities 16,167,084 715,800 4.43 % 15,714,128 268,479 1.71 % 19,546,528 107,748 0.55 % Non-interest bearing deposits 9,814,517 12,951,134 15,186,455 Other liabilities 460,779 301,251 274,357 Stockholders’ equity 3,094,964 3,083,306 3,132,916 Total liabilities and stockholders’ equity $ 29,537,344 $ 32,049,819 $ 38,140,256 Net interest income $ 914,535 $ 877,013 $ 770,964 Net interest margin 3.17 % 2.79 % 2.07 % (1) Taxable equivalent rates used where applicable.
Biggest changeDetails of the changes in the various components of net income are discussed below. 34 Taxable Equivalent Net Interest Income Analysis - Year to Date(1) Year Ended December 31, 2024 Year Ended December 31, 2023 Year Ended December 31, 2022 (dollars in thousands) Average Balance Revenue / Expense Yield / Rate Average Balance Revenue / Expense Yield / Rate Average Balance Revenue / Expense Yield / Rate Assets Investment securities(2) $ 4,386,458 $ 148,219 3.17 % $ 4,162,931 $ 108,294 2.37 % $ 3,525,986 $ 64,021 1.69 % Interest bearing cash and cash equivalents 3,940,590 203,406 5.16 % 4,353,911 220,976 5.08 % 5,967,329 97,271 1.63 % Loans held for sale 25,855 2,432 9.41 % 33,166 2,856 8.61 % 528,973 23,555 4.45 % Loans held for investment, mortgage finance(4) 4,612,994 179,233 3.89 % 4,080,263 171,366 4.20 % 5,285,612 201,680 3.82 % Loans held for investment(3)(4) 16,746,912 1,196,673 7.15 % 16,076,646 1,126,843 7.01 % 16,063,437 758,965 4.72 % Less: Allowance for credit losses on loans 263,279 — — 249,180 — — 221,639 — — Loans held for investment, net 21,096,627 1,375,906 6.52 % 19,907,729 1,298,209 6.52 % 21,127,410 960,645 4.55 % Total earning assets 29,449,530 1,729,963 5.82 % 28,457,737 1,630,335 5.65 % 31,149,698 1,145,492 3.65 % Cash and other assets 1,163,665 1,079,607 900,121 Total assets $ 30,613,195 $ 29,537,344 $ 32,049,819 Liabilities and Stockholders’ Equity Transaction deposits $ 2,049,720 $ 65,215 3.18 % $ 1,466,583 $ 42,561 2.90 % $ 1,659,476 $ 18,099 1.09 % Savings deposits 12,143,539 572,126 4.71 % 10,921,264 480,106 4.40 % 9,983,571 151,400 1.52 % Time deposits 1,946,341 98,855 5.08 % 1,573,294 65,108 4.14 % 1,313,483 21,164 1.61 % Total interest bearing deposits 16,139,600 736,196 4.56 % 13,961,141 587,775 4.21 % 12,956,530 190,663 1.47 % Short-term borrowings 933,896 49,994 5.35 % 1,323,039 70,642 5.34 % 1,829,751 29,077 1.59 % Long-term debt 739,136 42,060 5.69 % 882,904 57,383 6.50 % 927,847 48,739 5.25 % Total interest bearing liabilities 17,812,632 828,250 4.65 % 16,167,084 715,800 4.43 % 15,714,128 268,479 1.71 % Non-interest bearing deposits 9,013,038 9,814,517 12,951,134 Other liabilities 532,058 460,779 301,251 Stockholders’ equity 3,255,467 3,094,964 3,083,306 Total liabilities and stockholders’ equity $ 30,613,195 $ 29,537,344 $ 32,049,819 Net interest income $ 901,713 $ 914,535 $ 877,013 Net interest margin 3.03 % 3.17 % 2.79 % (1) Taxable equivalent rates used where applicable.
Not all significant accounting policies require management to make difficult, subjective or complex judgments. However, the policy noted below could be deemed to meet the SEC’s definition of a critical accounting policy. Allowance for Credit Losses Management considers the policies related to the allowance for credit losses as the most critical to the financial statement presentation.
Not all significant accounting policies require management to make difficult, subjective or complex judgments. However, the policy noted below could be deemed to meet the SEC’s definition of a critical accounting estimate. Allowance for Credit Losses Management considers the policies related to the allowance for credit losses as the most critical to the financial statement presentation.
The quoted sensitivity calculation reflects the sensitivity of the modeled allowance estimate to macroeconomic forecast data, but is absent of qualitative overlays and other qualitative adjustments that are part of the quarterly reserving process and does not necessarily reflect the nature and extent of future changes in the allowance for reasons including increases or decreases in qualitative adjustments, changes in the risk profile and size of the portfolio, changes in the severity of the macroeconomic scenario and the range of scenarios under management consideration. 47
The quoted sensitivity calculation reflects the sensitivity of the modeled allowance estimate to macroeconomic forecast data, but is absent of qualitative overlays and other qualitative adjustments that are part of the quarterly reserving process and does not necessarily reflect the nature and extent of future changes in the allowance for reasons including increases or decreases in qualitative adjustments, changes in the risk profile and size of the portfolio, changes in the severity of the macroeconomic scenario and the range of scenarios under management consideration. 46
The Company regularly evaluates all of its various funding sources with an emphasis on accessibility, stability, reliability and cost-effectiveness. The Company’s principal source of funding is customer deposits, supplemented by short-term borrowings, primarily from federal funds purchased and Federal Home Loan Bank (“FHLB”) borrowings, which are generally used to fund mortgage finance assets, and long-term debt.
The Company regularly evaluates all of its various funding sources with an emphasis on accessibility, stability, reliability and cost-effectiveness. The Company’s principal source of funding is customer deposits, supplemented by short-term borrowings, primarily from federal funds purchased and Federal Home Loan Bank (“FHLB”) borrowings, which are generally used to fund mortgage finance loans, and long-term debt.
Any repurchases under the repurchase program will be made in accordance with applicable securities laws from time to time in open market or private transactions.
Any repurchases under the Company’s repurchase program will be made in accordance with applicable securities laws from time to time in open market or private transactions.
As of December 31, 2023, a majority of the loans held for investment, excluding mortgage finance and other national lines of business, were to businesses with headquarters or operations in Texas. This geographic concentration subjects the Company’s loan portfolio to the general economic conditions within this state.
As of December 31, 2024, a majority of the loans held for investment, excluding mortgage finance and other national lines of business, were to businesses with headquarters or operations in Texas. This geographic concentration subjects the Company’s loan portfolio to the general economic conditions within this state.
Advances of interest reserves are discontinued if collateral values do not support the advances or if the borrower does not comply with other terms and conditions in the loan agreements. If at any time management believes that the collateral position is jeopardized, the Company 41 retains the right to stop the use of interest reserves.
Advances of interest reserves are discontinued if collateral values do not support the advances or if the borrower does not comply with other terms and conditions in the loan agreements. If at any time management believes that the collateral position is jeopardized, the Company 40 retains the right to stop the use of interest reserves.
Capital Resources The Company’s equity capital averaged $3.1 billion for the year ended December 31, 2023 compared to $3.1 billion for the same period in 2022. The Company has not paid any cash dividends on common stock since operations commenced and has no plans to do so in the foreseeable future.
Capital Resources The Company’s equity capital averaged $3.3 billion for the year ended December 31, 2024 compared to $3.1 billion for the same period in 2023. The Company has not paid any cash dividends on common stock since operations commenced and has no plans to do so in the foreseeable future.
The extent to which the Company repurchases shares, and the timing of such repurchases, will be at management’s discretion and will depend upon a variety of factors, including market conditions, our capital position and amount of retained earnings, regulatory requirements and other considerations.
The extent to which the Company repurchases shares, and the timing of such repurchases, will be at management’s discretion and will depend upon a variety of factors, including market conditions, the Company’s capital position and amount of retained earnings, regulatory requirements and other considerations.
The Company also relies on the availability of the mortgage secondary market provided by Ginnie Mae and government sponsored entities to support the liquidity of mortgage finance assets.
The Company also relies on the availability of the mortgage secondary market provided by Ginnie Mae and government sponsored entities to support the liquidity of mortgage finance loans.
This category also includes loans to companies involved in investment management and securities and commodities trading. 39 The Company believes the loans it originates are appropriately collateralized under its credit standards. Approximately 96% of the Company’s loans held for investment are secured by collateral.
This category also includes loans to companies involved in investment management and securities and commodities trading. 38 The Company believes the loans it originates are appropriately collateralized under its credit standards. Approximately 97% of the Company’s loans held for investment are secured by collateral.
The risks created by this concentration have been considered by management in the determination of the appropriateness of the allowance for credit losses.
The risks created by this concentration have been considered by management in determining the appropriateness of the allowance for credit losses.
(2) Unsecured revolving, non-amortizing line of credit with maturity date of February 8, 2025. Proceeds may be used for general corporate purposes, including funding regulatory capital infusions into the Bank. The loan agreement contains customary financial covenants and restrictions. No borrowings were made against this line of credit during the twelve months ended December 31, 2023 or 2022.
(2) Unsecured revolving, non-amortizing line of credit with maturity date of February 8, 2026. Proceeds may be used for general corporate purposes, including funding regulatory capital infusions into the Bank. The loan agreement contains customary financial covenants and restrictions. No borrowings were made against this line of credit during the year ended months ended December 31, 2024 or 2023.
Management considers a range of macroeconomic scenarios in connection with the allowance estimation process. Within the various economic scenarios considered as of December 31, 2023, the quantitative estimate of the allowance for credit loss would increase by approximately $220.4 million under sole consideration of the most severe downside scenario.
Management considers a range of macroeconomic scenarios in connection with the allowance estimation process. Within the various economic scenarios considered as of December 31, 2024, the quantitative estimate of the allowance for credit loss would increase by approximately $139.6 million under sole consideration of the most severe downside scenario.
As of December 31, 2023 and December 31, 2022, none of the loans with interest reserves were on non-accrual. Large Credit Relationships The Company originates and maintains large credit relationships with numerous customers in the ordinary course of business. The legal lending limit of the Bank is approximately $593.9 million.
As of December 31, 2024 and December 31, 2023, none of the loans with interest reserves were on non-accrual. Large Credit Relationships The Company originates and maintains large credit relationships with numerous customers in the ordinary course of business. The legal lending limit of the Bank is approximately $595.2 million.
Approximately 59% of the commercial real estate collateral is located in Texas.
Approximately 55% of the commercial real estate collateral is located in Texas.
All syndicated loans, whether the Company acts as agent or participant, are underwritten to the same standards as all other loans the Company originates. As of December 31, 2023, approximately $6.5 million of the Company’s shared national credits were on non-accrual.
All syndicated loans, whether the Company acts as agent or participant, are underwritten to the same standards as all other loans the Company originates. As of December 31, 2024, approximately $34.7 million of the Company’s shared national credits were on non-accrual.
The Company also participates in shared national credits, both as a participant and as an agent. As of December 31, 2023, the Company had $5.3 billion in shared national credits, $1.2 billion of which the Company administered as agent.
The Company also participates in shared national credits, both as a participant and as an agent. As of December 31, 2024, the Company had $5.7 billion in shared national credits, $1.1 billion of which the Company administered as agent.
Average non-interest bearing deposits for the year ended December 31, 2023 decreased to $9.8 billion from $13.0 billion for the same period in 2022. Net interest margin for the year ended December 31, 2023 was 3.17% compared to 2.79% for 2022.
Average non-interest bearing deposits for the year ended December 31, 2024 decreased to $9.0 billion from $9.8 billion for the same period in 2023. Net interest margin for the year ended December 31, 2024 was 3.03% compared to 3.17% for 2023.
The Company offers banking centers, courier services and online and mobile banking. Bask Bank, the Company’s online banking division, serves customers on a 24 hours-a-day, 7 days-a-week basis solely through online banking. Average total deposits for the year ended December 31, 2023 decreased $2.1 billion compared to 2022.
The Company offers banking centers, courier services and online and mobile banking. Bask Bank, the Bank’s digital-only online banking division, serves customers on a 24 hours-a-day, 7 days-a-week basis solely through online banking. Average total deposits for the year ended December 31, 2024 increased $1.4 billion compared to 2023.
The following table summarizes the Company’s interest bearing cash and cash equivalents: (dollars in thousands) December 31, 2023 December 31, 2022 Interest bearing cash and cash equivalents $ 3,042,357 $ 4,778,623 Interest bearing cash and cash equivalents as a percent of: Total loans held for investment 15.0 % 24.8 % Total earning assets 11.1 % 17.4 % Total deposits 13.6 % 20.9 % The Company’s goal is to obtain as much of its funding for loans held for investment and other earning assets as possible from customer deposits, which are generated principally through development of long-term customer relationships, with a significant focus on treasury management products.
The following table summarizes the Company’s interest bearing cash and cash equivalents: (dollars in thousands) December 31, 2024 December 31, 2023 Interest bearing cash and cash equivalents $ 3,012,307 $ 3,042,357 Interest bearing cash and cash equivalents as a percent of: Total loans held for investment 13.4 % 15.0 % Total earning assets 10.2 % 11.1 % Total deposits 11.9 % 13.6 % The Company’s goal is to obtain as much of its funding for loans held for investment and other earning assets as possible from customer deposits, which are generated through digital acquisition or as a result of development of long-term customer relationships, with a significant focus on treasury management products.
Interest Reserve Loans As of December 31, 2023 and December 31, 2022, the Company had $788.9 million and $854.5 million, respectively, in loans held for investment that included interest reserve arrangements, representing approximately 14% and 18%, respectively, of outstanding commercial real estate loans.
Interest Reserve Loans As of December 31, 2024 and December 31, 2023, the Company had $797.3 million and $788.9 million, respectively, in loans held for investment that included interest reserve arrangements, representing approximately 6% and 14%, respectively, of outstanding commercial real estate loans.
Year ended December 31, 2023 compared to year ended December 31, 2022 The Company reported net income of $189.1 million and net income available to common stockholders of $171.9 million for the year ended December 31, 2023, compared to net income of $332.5 million and net income available to common stockholders of $315.2 million for the same period in 2022.
Year ended December 31, 2024 compared to year ended December 31, 2023 The Company reported net income of $77.5 million and net income available to common stockholders of $60.3 million for the year ended December 31, 2024, compared to net income of $189.1 million and net income available to common stockholders of $171.9 million for the same period in 2023.
The following table presents a summary of the Company’s allowance for credit losses on loans by portfolio segment for the past two years: December 31, 2023 2022 (dollars in thousands) Allowance for Credit Losses on Loans % of Loans in each Category to Total Loans Allowance for Credit Losses on Loans % of Loans in each Category to Total Loans Commercial $ 171,437 51 % $ 185,303 51 % Mortgage finance 4,173 19 % 10,745 21 % Commercial real estate 71,829 27 % 54,268 25 % Consumer 2,534 3 % 3,153 3 % Total $ 249,973 100 % $ 253,469 100 % See Note 1 - Operations and Summary of Significant Accounting Policies and Note 4 - Loans and Allowance for Credit Losses on Loans in the accompanying notes to the consolidated financial statements included elsewhere in this report for details of the allowance for credit losses on loans.
The following table presents a summary of the Company’s allowance for credit losses on loans by portfolio segment for the past two years: December 31, 2024 2023 (dollars in thousands) Allowance for Credit Losses on Loans % of Loans in each Category to Total Loans Allowance for Credit Losses on Loans % of Loans in each Category to Total Loans Commercial $ 198,423 49 % $ 171,437 51 % Mortgage finance 2,755 23 % 4,173 19 % Commercial real estate 68,825 25 % 71,829 27 % Consumer 1,706 3 % 2,534 3 % Total $ 271,709 100 % $ 249,973 100 % See Note 1 - Operations and Summary of Significant Accounting Policies and Note 4 - Loans and Allowance for Credit Losses on Loans in the accompanying notes to the consolidated financial statements included elsewhere in this report for details of the allowance for credit losses on loans.
On a fully diluted basis, earnings per common share were $3.54 for the year ended December 31, 2023, compared to $6.18 for the same period in 2022. ROE was 6.15% and ROA was 0.64% for the twelve months ended December 31, 2023, compared to 11.33% and 1.04%, respectively, for the same period in 2022.
On a fully diluted basis, earnings per common share was $1.28 for the year ended December 31, 2024, compared to $3.54 for the same period in 2023. ROE was 2.04% and ROA was 0.25% for the year ended December 31, 2024, compared to 6.15% and 0.64%, respectively, for the same period in 2023.
The yield on total loans held for investment, net, increased to 6.52% for the year ended December 31, 2023 compared to 4.55% for the same period in 2022 and the yield on earning assets increased to 5.65% for the year ended December 31, 2023 compared to 3.65% for the same period in 2022.
The yield on total loans held for investment, net, of 6.52% for the year ended December 31, 2024 was unchanged compared to the same period in 2023 and the yield on earning assets increased to 5.82% for the year ended December 31, 2024 compared to 5.65% for the same period in 2023.
Criticized loans totaled $738.2 million at December 31, 2023, compared to $513.2 million at December 31, 2022. 43 The table below presents key metrics related to the Company’s credit loss experience: December 31, 2023 December 31, 2022 Allowance for credit losses on loans to total loans held for investment 1.23 % 1.31 % Allowance for credit losses on loans to average total loans held for investment 1.24 % 1.19 % Total allowance for credit losses to total loans held for investment 1.46 % 1.43 % Total provision for credit losses to average total loans held for investment 0.36 % 0.31 % The table below details net charge-offs/(recoveries) as a percentage of average total loans by portfolio segment: 2023 2022 (dollars in thousands) Net Charge-offs Net Charge-offs to Average Loans(1) Net Charge-offs Net Charge-offs to Average Loans(1) Commercial $ 45,395 0.44 % $ 19,542 0.18 % Mortgage finance — — % — — % Commercial real estate 5,496 0.10 % 350 0.01 % Consumer 36 0.01 % (23) — % Total $ 50,927 0.25 % $ 19,869 0.09 % The allowance for credit losses on loans totaled $250.0 million at December 31, 2023 and $253.5 million at December 31, 2022.
Criticized loans totaled $714.0 million at December 31, 2024, compared to $738.2 million at December 31, 2023. 42 The table below presents key metrics related to the Company’s credit loss experience: December 31, 2024 December 31, 2023 Allowance for credit losses on loans to total loans held for investment 1.21 % 1.23 % Allowance for credit losses on loans to average total loans held for investment 1.27 % 1.24 % Total allowance for credit losses to total loans held for investment 1.45 % 1.46 % Total provision for credit losses to average total loans held for investment 0.31 % 0.36 % The table below details net charge-offs/(recoveries) as a percentage of average total loans by portfolio segment: Year Ended December 31, 2024 2023 (dollars in thousands) Net Charge-offs Net Charge-offs to Average Loans Net Charge-offs Net Charge-offs to Average Loans Commercial $ 32,612 0.31 % $ 45,395 0.44 % Mortgage finance — — % — — % Commercial real estate 8,246 0.15 % 5,496 0.10 % Consumer 15 — % 36 0.01 % Total $ 40,873 0.19 % $ 50,927 0.25 % The allowance for credit losses on loans totaled $271.7 million at December 31, 2024 and $250.0 million at December 31, 2023.
The following table summarizes short-term borrowings, all of which mature within one year: (in thousands) December 31, 2023 December 31, 2022 Repurchase agreements $ — $ 1,142 FHLB borrowings 1,500,000 1,200,000 Total short-term and other borrowings $ 1,500,000 $ 1,201,142 The following table summarizes the Company’s short-term borrowing capacities net of balances outstanding: (in thousands) December 31, 2023 December 31, 2022 FHLB borrowing capacity relating to loans and pledged securities $ 2,602,092 $ 2,621,218 FHLB borrowing capacity relating to unencumbered securities 3,737,615 3,539,297 Total FHLB borrowing capacity(1) $ 6,339,707 $ 6,160,515 Unused federal funds lines available from commercial banks $ 1,188,000 $ 1,479,000 Unused Federal Reserve borrowings capacity $ 4,094,801 $ 3,574,762 Unused revolving line of credit(2) $ 100,000 $ 75,000 (1) FHLB borrowings are collateralized by a blanket floating lien on certain real estate secured loans, mortgage finance assets and certain pledged securities.
The following table summarizes short-term borrowings, all of which mature within one year: (in thousands) December 31, 2024 December 31, 2023 FHLB borrowings $ 885,000 $ 1,500,000 Total short-term and other borrowings $ 885,000 $ 1,500,000 The following table summarizes the Company’s short-term borrowing capacities net of balances outstanding: (in thousands) December 31, 2024 December 31, 2023 FHLB borrowing capacity relating to loans and pledged securities $ 4,664,703 $ 2,602,092 FHLB borrowing capacity relating to unencumbered securities 4,189,993 3,737,615 Total FHLB borrowing capacity(1) $ 8,854,696 $ 6,339,707 Unused federal funds lines available from commercial banks $ 1,370,000 $ 1,188,000 Unused Federal Reserve borrowings capacity $ 5,436,652 $ 4,094,801 Unused revolving line of credit(2) $ 75,000 $ 100,000 (1) FHLB borrowings are collateralized by a blanket floating lien on certain real estate secured loans, mortgage finance loans and certain pledged securities.
Results of Operations Selected income statement data and key performance indicators are presented in the table below: For the Year Ended December 31, (dollars in thousands except per share data) 2023 2022 2021 Net interest income $ 914,123 $ 875,765 $ 768,781 Provision for credit losses 72,000 66,000 (30,000) Non-interest income 161,419 349,522 138,286 Non-interest expense 756,947 727,532 599,012 Income before income taxes 246,595 431,755 338,055 Income tax expense 57,454 99,277 84,116 Net income 189,141 332,478 253,939 Preferred stock dividends 17,250 17,250 18,721 Net income available to common stockholders $ 171,891 $ 315,228 $ 235,218 Basic earnings per common share $ 3.58 $ 6.25 $ 4.65 Diluted earnings per common share $ 3.54 $ 6.18 $ 4.60 Net interest margin 3.17 % 2.79 % 2.07 % Return on average assets (“ROA”) 0.64 % 1.04 % 0.67 % Return on average common equity (“ROE”) 6.15 % 11.33 % 8.35 % Efficiency ratio(1) 70.4 % 59.4 % 66.0 % Non-interest income to average earning assets 0.57 % 1.12 % 0.37 % Non-interest expense to average earning assets 2.66 % 2.34 % 1.61 % (1) Non-interest expense divided by the sum of net interest income and non-interest income.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations Selected income statement data and key performance indicators are presented in the table below: For the Year Ended December 31, (dollars in thousands except per share data) 2024 2023 2022 Net interest income $ 901,300 $ 914,123 $ 875,765 Provision for credit losses 67,000 72,000 66,000 Non-interest income 31,046 161,419 349,522 Non-interest expense 758,285 756,947 727,532 Income before income taxes 107,061 246,595 431,755 Income tax expense 29,553 57,454 99,277 Net income 77,508 189,141 332,478 Preferred stock dividends 17,250 17,250 17,250 Net income available to common stockholders $ 60,258 $ 171,891 $ 315,228 Basic earnings per common share $ 1.29 $ 3.58 $ 6.25 Diluted earnings per common share $ 1.28 $ 3.54 $ 6.18 Net interest margin 3.03 % 3.17 % 2.79 % Return on average assets (“ROA”) 0.25 % 0.64 % 1.04 % Return on average common equity (“ROE”) 2.04 % 6.15 % 11.33 % Efficiency ratio(1) 81.3 % 70.4 % 59.4 % Non-interest income to average earning assets 0.11 % 0.57 % 1.12 % Non-interest expense to average earning assets 2.57 % 2.66 % 2.34 % (1) Non-interest expense divided by the sum of net interest income and non-interest income.
See Note 10 - Regulatory Ratios and Capital in the accompanying notes to the consolidated financial statements included elsewhere in this report for additional information regarding dividend restrictions and “Liquidity Risks” included in Part I, Item 1A of the 2022 Form 10-K.
See Note 10 - Regulatory Ratios and Capital in the accompanying notes to the consolidated financial statements included elsewhere in this report for additional information regarding dividend restrictions and “ Liquidity Risks ” included in Part I, Item 1A. Risk Factors.
See Note 1 - Operations and Summary of Significant Accounting Policies in the accompanying notes to the consolidated financial statements included elsewhere in this report for details of these portfolio segments.
Analysis of Financial Condition Loans Held for Investment The following table summarizes the Company’s loans held for investment by portfolio segment. See Note 1 - Operations and Summary of Significant Accounting Policies in the accompanying notes to the consolidated financial statements included elsewhere in this report for details of these portfolio segments.
The aggregate purchase price and weighted average price per share does not include the effect of excise tax expense incurred on net stock repurchases. 46 On January 17, 2024, the Company’s board of directors authorized a new share repurchase program under which the Company may repurchase up to $150.0 million in shares of its outstanding common stock.
On January 17, 2024, the Company’s board of directors authorized a share repurchase program under which the Company could repurchase up to $150.0 million in shares of its outstanding common stock, excluding the effect of excise tax expense incurred on net stock repurchases.
Average earning assets for the year ended December 31, 2023 decreased $2.7 billion compared to the same period in 2022, which included a $1.6 billion decrease in average interest bearing cash and cash equivalents and a $1.7 billion decrease in average total loans, partially offset by a $636.9 million increase in investment securities.
Average earning assets for the year ended December 31, 2024 increased $1.0 billion compared to the same period in 2023, which included increases of $1.2 billion in average total loans and $223.5 million in average investment securities, partially offset by a $413.3 million decrease in average interest bearing cash and cash equivalents.
Average interest bearing liabilities increased $453.0 million for the year ended December 31, 2023 compared to the same period in 2022, primarily due to a $1.0 billion increase in average interest bearing deposits, partially offset by a $506.7 million decrease in average short-term borrowings and a $44.9 million decrease in average long-term debt.
Average interest bearing liabilities increased $1.6 billion for the year ended December 31, 2024 compared to the same period in 2023, primarily due to a $2.2 billion increase in average interest bearing deposits, partially offset by decreases of $389.1 million in average short-term borrowings and $143.8 million in average long-term debt.
The table below sets forth information regarding the distribution of loans held for investment on a gross basis among various types of collateral at December 31, 2023: (dollars in thousands) Amount Percent of Total Commercial: Business assets $ 8,848,736 43.4 % Other assets 337,444 1.7 % Highly liquid assets 330,767 1.6 % Municipal tax- and revenue-secured 89,079 0.4 % Rolling stock 30,415 0.1 % U.
The table below sets forth information regarding the distribution of loans held for investment on a gross basis among various types of collateral at December 31, 2024: (dollars in thousands) Amount Percent of Total Commercial: Business assets $ 9,733,194 43.2 % Highly liquid assets 320,950 1.4 % Other assets 174,560 0.8 % Municipal tax- and revenue-secured 99,844 0.4 % Rolling stock 37,604 0.2 % U.
The share repurchase program is set to expire on January 31, 2025, and the program may be suspended or discontinued at any time. Remaining repurchase authorization under the January 18, 2023 share repurchase program was terminated upon authorization of this new program.
The share repurchase program expires on January 31, 2026, but may be suspended or discontinued at any time. Remaining repurchase authorization under the January 17, 2024 share repurchase program was terminated upon authorization of this new program.
(dollars in thousands) December 31, 2023 December 31, 2022 Non-accrual loans held for investment Commercial: Business assets $ 63,094 $ 41,448 Oil and gas properties 2,543 3,658 Machinery and equipment 3,332 — Accounts receivable and inventory — 1,405 Other 79 531 Total commercial 69,048 47,042 Commercial real estate: Hotel/motel 12,350 — Commercial property — 1,263 Total commercial real estate 12,350 1,263 Consumer Other — 33 Total consumer — 33 Total non-accrual loans held for investment 81,398 48,338 Non-accrual loans held for sale — — Other real estate owned (“OREO”) — — Total non-performing assets $ 81,398 $ 48,338 Non-accrual loans held for investment to total loans held for investment 0.40 % 0.25 % Total non-performing assets to total assets 0.29 % 0.17 % Allowance for credit losses on loans to non-accrual loans held for investment 3.1x 5.2x Loans held for investment past due 90 days and accruing $ 19,523 $ 131 Loans held for investment past due 90 days to total loans held for investment 0.10 % — % Loans held for sale past due 90 days and accruing $ — $ — Summary of Credit Loss Experience The provision for credit losses, comprised of a provision for loans and off-balance sheet credit losses, is a charge to earnings to maintain the allowance for credit losses at a level consistent with management’s assessment of expected losses at each balance sheet date.
(dollars in thousands) December 31, 2024 December 31, 2023 Non-accrual loans held for investment Commercial: Business assets $ 64,481 $ 63,094 Oil and gas properties — 2,543 Accounts receivable and inventory 6,315 — Machinery and equipment 2,729 3,332 Unsecured 60 79 Highly liquid assets 1,340 — Other 639 — Total commercial 75,564 69,048 Commercial real estate: Industrial buildings 20,637 — Office buildings 14,000 — Hotel/motel buildings — 12,350 Total commercial real estate 34,637 12,350 Consumer: Single family residences 964 — Total consumer 964 — Total non-accrual loans held for investment 111,165 81,398 Non-accrual loans held for sale — — Other real estate owned (“OREO”) — — Total non-performing assets $ 111,165 $ 81,398 Non-accrual loans held for investment to total loans held for investment 0.50 % 0.40 % Total non-performing assets to total assets 0.36 % 0.29 % Allowance for credit losses on loans to non-accrual loans held for investment 2.4x 3.1x Loans held for investment past due 90 days and accruing $ 4,265 $ 19,523 Loans held for investment past due 90 days to total loans held for investment 0.02 % 0.10 % Loans held for sale past due 90 days and accruing $ — $ — Summary of Credit Loss Experience The provision for credit losses, comprised of a provision for loans and off-balance sheet credit losses, is a charge to earnings to maintain the allowance for credit losses at a level consistent with management’s assessment of expected losses at each balance sheet date.
The Company recorded a provision for credit losses on loans of $47.4 million for the year ended December 31, 2023 compared to a provision of $61.5 million for the year ended December 31, 2022.
The Company recorded a provision for credit losses of $67.0 million for the year ended December 31, 2024, compared to a provision of $72.0 million for the year ended December 31, 2023.
Non-interest Expense Year ended December 31, (in thousands) 2023 2022 2021 Salaries and benefits $ 459,700 $ 434,906 $ 350,197 Occupancy expense 38,494 44,222 33,232 Marketing 25,854 32,388 10,006 Legal and professional 64,924 75,858 41,152 Communications and technology 81,262 69,253 75,185 Federal Deposit Insurance Corporation (“FDIC”) insurance assessment 36,775 14,344 21,027 Servicing-related expenses — — 27,765 Other 49,938 56,561 40,448 Total non-interest expense $ 756,947 $ 727,532 $ 599,012 Non-interest expense for the year ended December 31, 2023 increased $29.4 million compared to the same period in 2022 primarily due to an increase in salaries and benefits, communications and technology and FDIC insurance assessment, which included $19.9 million in special assessment expense in 2023, partially offset by a decrease in legal and professional expense.
Non-interest Expense Year Ended December 31, (in thousands) 2024 2023 2022 Salaries and benefits $ 466,578 $ 459,700 $ 434,906 Occupancy expense 45,266 38,494 44,222 Marketing 22,349 25,854 32,388 Legal and professional 53,783 64,924 75,858 Communications and technology 93,085 81,262 69,253 Federal Deposit Insurance Corporation (“FDIC”) insurance assessment 23,351 36,775 14,344 Other 53,873 49,938 56,561 Total non-interest expense $ 758,285 $ 756,947 $ 727,532 Non-interest expense was $758.3 million for the year ended December 31, 2024, an increase of $1.3 million as compared to the same period in 2023, primarily due to increases in salaries and benefits, occupancy expense and communications and technology expense, partially offset by decreases in legal and professional expense and FDIC insurance assessment.
(in thousands) December 31, 2023 December 31, 2022 Commercial $ 10,410,766 $ 9,832,676 Mortgage finance 3,978,328 4,090,033 Commercial real estate 5,500,774 4,875,363 Consumer 530,948 552,848 Gross loans held for investment 20,420,816 19,350,920 Unearned income (net of direct origination costs) (80,258) (63,580) Total loans held for investment $ 20,340,558 $ 19,287,340 38 Total loans held for investment were $20.3 billion at December 31, 2023, an increase of $1.1 billion from December 31, 2022.
(in thousands) December 31, 2024 December 31, 2023 Commercial $ 11,145,591 $ 10,410,766 Mortgage finance 5,215,574 3,978,328 Commercial real estate 5,616,282 5,500,774 Consumer 565,376 530,948 Gross loans held for investment 22,542,823 20,420,816 Unearned income (net of direct origination costs) (92,757) (80,258) Total loans held for investment $ 22,450,066 $ 20,340,558 Total loans held for investment were $22.5 billion at December 31, 2024, an increase of $2.1 billion from December 31, 2023.
Mortgage finance loans relate to the mortgage warehouse lending operations in which the Company purchases mortgage loan ownership interests that are typically sold within 10 to 20 days and represent 19% and 21% of gross loans held for investment at December 31, 2023 and December 31, 2022, respectively.
Mortgage finance loans include legal ownership interests in mortgage loans that the Company purchases from unaffiliated mortgage originators, either directly or through a special purpose entity structure, that are typically sold within 10 to 20 days and represent 23% and 19% of gross loans held for investment at December 31, 2024 and December 31, 2023, respectively.
The Company recorded $50.9 million in net charge-offs during the year ended December 31, 2023 compared to $19.9 million in net charge-offs during the same period in 2022.
The provision for credit losses for the year ended December 31, 2024 reflects growth in loans held for investment and $40.9 million in net charge-offs recorded during the year ended December 31, 2024, compared to $50.9 million in net charge-offs during the same period in 2023.
The average cost of total deposits increased to 2.47% for 2023 from 0.74% for the same period in 2022 and total funding costs, including all deposits, long-term debt and stockholders' equity, increased to 2.46% for 2023 compared to 0.85% for the same period 2022. 37 Non-interest Income Year Ended December 31, (in thousands) 2023 2022 2021 Service charges on deposit accounts $ 20,874 $ 23,266 $ 19,054 Wealth management and trust fee income 13,955 15,036 13,173 Brokered loan fees 8,918 14,159 27,954 Investment banking and trading income 86,182 35,054 24,441 Gain on disposal of subsidiary — 248,526 — Other 31,490 13,481 53,664 Total non-interest income $ 161,419 $ 349,522 $ 138,286 Non-interest income decreased by $188.1 million during the year ended December 31, 2023 to $161.4 million, compared to $349.5 million for the same period in 2022.
The average cost of total deposits increased to 2.93% for 2024 from 2.47% for the same period in 2023 and total funding costs, including all deposits, long-term debt and stockholders' equity, increased to 2.75% for 2024 compared to 2.46% for the same period 2023. 36 Non-interest Income Year Ended December 31, (in thousands) 2024 2023 2022 Service charges on deposit accounts $ 25,546 $ 20,874 $ 23,266 Wealth management and trust fee income 15,315 13,955 15,036 Brokered loan fees 8,961 8,918 14,159 Investment banking and advisory fees 104,965 63,670 24,974 Trading income 21,635 22,512 10,080 Gain on disposal of subsidiary — — 248,526 Available-for-sale debt securities gains/(losses), net (179,581) 489 — Other 34,205 31,001 13,481 Total non-interest income $ 31,046 $ 161,419 $ 349,522 Non-interest income was $31.0 million for the year ended December 31, 2024, a $130.4 million decrease as compared to the same period in 2023, primarily due to the $179.6 million loss on sale of available-for-sale debt securities recognized during the third quarter of 2024, partially offset by an increase in investment banking and advisory fees.
The table below summarizes the commercial real estate loan portfolio, by property type as of December 31, 2023: (dollars in thousands) Amount Percent of Total Apartment/condominium buildings $ 2,196,299 39.9 % Industrial buildings 1,032,647 18.8 % Office buildings 451,660 8.2 % 1-4 Family dwellings (other than condominium) 340,632 6.2 % Shopping center/mall buildings 265,938 4.8 % Senior housing buildings 260,656 4.7 % Self-storage buildings 212,571 3.9 % Commercial buildings 166,405 3.0 % Hotel/motel buildings 162,585 3.0 % Residential lots 92,037 1.7 % Student housing 84,003 1.5 % Commercial lots 78,192 1.4 % Other 157,149 2.9 % Total commercial real estate loans $ 5,500,774 100.0 % 40 The table below summarizes the Company’s commercial real estate portfolio at December 31, 2023 as segregated by the geographic region in which the property is located.
The table below summarizes the commercial real estate loan portfolio on a gross basis, by property type as of December 31, 2024: (dollars in thousands) Amount Percent of Total Apartment/condominium buildings $ 2,347,883 41.8 % Industrial buildings 1,092,380 19.5 % 1-4 Family dwellings (other than condominium) 390,235 6.9 % Office buildings 361,941 6.4 % Senior housing buildings 318,580 5.7 % Shopping center/mall buildings 285,257 5.1 % Commercial buildings 210,702 3.8 % Hotel/motel buildings 136,767 2.4 % Self-storage buildings 113,861 2.0 % Student housing 72,695 1.3 % Commercial lots 67,705 1.2 % Residential lots 46,265 0.8 % Other 172,011 3.1 % Total commercial real estate loans $ 5,616,282 100.0 % 39 The table below summarizes the Company’s commercial real estate portfolio on a gross basis at December 31, 2024 as segregated by the geographic region in which the property is located.
(2) Yields on investment securities are calculated using available-for-sale securities at amortized cost. (3) Average balances include non-accrual loans.
(2) Yields on investment securities are calculated using available-for-sale securities at amortized cost. (3) Average balances include non-accrual loans. Loan interest income includes loan fees totaling $54.6 million, $47.2 million and $37.2 million for the years ended December 31, 2024, 2023 and 2022, respectively.
The Company experienced loan growth in the commercial and commercial real estate categories as it has continued to execute on its long-term strategy.
The Company experienced loan growth in all loan categories as it has continued to execute on its long-term strategy. Commercial loan growth includes the impact of the acquisition of a $332.0 million loan portfolio completed during the third 37 quarter of 2024.
Average non-interest bearing deposits for the year ended December 31, 2023 decreased $3.1 billion compared to 2022 and average interest bearing deposits increased $1.0 billion. The average cost of total deposits increased to 2.47% in 2023 from 0.74% in 2022 primarily due to rising interest rates.
Average non-interest bearing deposits for the year ended December 31, 2024 decreased $801.5 million compared to 2023 and average interest bearing deposits increased $2.2 billion compared to 2023.
(dollars in thousands) Amount Percent of Total Texas geographic region: Dallas/Fort Worth $ 1,140,779 20.7 % Houston 881,487 16.0 % San Antonio 515,875 9.4 % Austin 503,052 9.2 % Other Texas cities 181,278 3.3 % Total Texas 3,222,471 58.6 % Other states 2,278,303 41.4 % Total commercial real estate loans $ 5,500,774 100.0 % The determination of collateral value is critically important when financing real estate.
(dollars in thousands) Amount Percent of Total Texas geographic region: Dallas/Fort Worth $ 975,287 17.3 % Houston 745,756 13.3 % San Antonio 627,445 11.2 % Austin 537,600 9.6 % Other Texas cities 179,083 3.2 % Total Texas 3,065,171 54.6 % Other states 2,551,111 45.4 % Total commercial real estate loans $ 5,616,282 100.0 % The determination of collateral value is critically important when financing real estate.
The table below summarizes the industry concentrations of loans held for investment on a gross basis at December 31, 2023: (dollars in thousands) Amount Percent of Total Commercial: Financials (excluding banks) $ 3,950,879 19.4 % Oil and gas and pipelines 1,205,100 5.9 % Technology, telecom and media 1,004,186 4.9 % Real estate related services (not secured by real estate) 947,494 4.6 % Commercial services 419,065 2.1 % Retail 410,162 2.0 % Machinery, equipment and parts manufacturing 300,606 1.5 % Entertainment and recreation 291,146 1.4 % Transportation services 236,100 1.2 % Healthcare and pharmaceuticals 217,558 1.1 % Government and education 208,828 1.0 % Food and beverage manufacturing and wholesale 179,673 0.9 % Materials and commodities 173,574 0.8 % Utilities 146,923 0.7 % Consumer services 137,823 0.7 % Diversified or miscellaneous 581,649 2.8 % Total commercial 10,410,766 51.0 % Mortgage finance 3,978,328 19.5 % Commercial real estate 5,500,774 26.9 % Consumer 530,948 2.6 % Total $ 20,420,816 100.0 % The Company’s largest concentration of commercial loans held for investment in any single industry is in financials excluding banks.
The table below summarizes the industry concentrations of loans held for investment on a gross basis at December 31, 2024: (dollars in thousands) Amount Percent of Total Commercial: Financials (excluding banks) $ 3,991,253 17.7 % Energy 1,226,290 5.4 % Technology, telecom and media 1,141,324 5.1 % Real estate related services (not secured by real estate) 960,319 4.3 % Healthcare and pharmaceuticals 651,417 2.9 % Commercial services 584,910 2.6 % Retail 388,120 1.7 % Machinery, equipment and parts manufacturing 361,545 1.6 % Entertainment and recreation 283,499 1.3 % Government and education 226,498 1.0 % Food and beverage manufacturing and wholesale 185,241 0.8 % Materials and commodities 180,240 0.8 % Transportation services 172,949 0.8 % Consumer services 139,321 0.6 % Utilities 77,780 0.3 % Diversified or miscellaneous 574,885 2.6 % Total commercial 11,145,591 49.5 % Mortgage finance 5,215,574 23.1 % Commercial real estate 5,616,282 24.9 % Consumer 565,376 2.5 % Total $ 22,542,823 100.0 % The Company’s largest concentration of commercial loans held for investment in any single industry is in financials excluding banks.
Government guaranty 1,261 — % Unsecured 773,064 3.8 % Total commercial 10,410,766 51.0 % Mortgage finance 3,978,328 19.5 % Commercial real estate 5,500,774 26.9 % Consumer 530,948 2.6 % Total $ 20,420,816 100.0 % As noted in the tables above, approximately 27% of loans held for investment as of December 31, 2023 are commercial real estate loans that are generally secured by real property.
Government guaranty 448 — % Unsecured 778,991 3.5 % Total commercial 11,145,591 49.5 % Mortgage finance 5,215,574 23.1 % Commercial real estate 5,616,282 24.9 % Consumer 565,376 2.5 % Total $ 22,542,823 100.0 % As noted in the tables above, approximately 25% of loans held for investment as of December 31, 2024 are commercial real estate loans that are generally secured by real property.
The increase was primarily due to an increase in yields on average earning assets, partially offset by an increase in funding costs and a decrease in average earning assets.
The decrease was primarily due to an increase in interest bearing deposit yields, partially offset by higher yields on investment securities compared to the same period in 2023.
In the second quarter of 2023, the Company partially paid down $75.0 million of the senior unsecured credit-linked notes in accordance with the terms of the notes. See Note 8 - Short-Term Borrowings and Long-Term Debt in the accompanying notes to the consolidated financial statements included elsewhere in this report for additional information.
The Company has long-term debt outstanding of $660.3 million as of December 31, 2024, comprised of trust preferred securities and subordinated notes with maturity dates ranging from January 2026 to December 2036. See Note 8 - Short-Term Borrowings and Long-Term Debt in the accompanying notes to the consolidated financial statements included elsewhere in this report for additional information.
(2) Taxable equivalent rates used where applicable assuming a 21% tax rate. Net Interest Income Net interest income was $914.1 million for the year ended December 31, 2023 compared to $875.8 million for 2022.
(2) Taxable equivalent rates used where applicable. Net Interest Income Net interest income was $901.3 million for the year ended December 31, 2024 compared to $914.1 million for 2023. The decrease was primarily due to increases in average interest bearing liabilities and deposit costs, partially offset by increases in average earning assets and yields on average earning assets.
Such borrowings are generally used to fund mortgage finance loans, due to their liquidity, short duration and interest spreads available.
The uninsured amounts are estimated based on the methodologies and assumptions used for the Bank’s regulatory reporting requirements. The Company has short-term borrowing sources available to supplement deposits and meet its funding needs. Such borrowings are generally used to fund mortgage finance loans, due to their liquidity, short duration and interest spreads available.
The decrease in net income for the year ended December 31, 2023 compared to the same period in 2022 resulted primarily from a decrease in non-interest income.
The decrease in net income for the year ended December 31, 2024 compared to the same period in 2023 resulted primarily from a decrease in non-interest income, primarily as a result of the $179.6 million loss on sale of available-for-sale debt securities recognized during the third quarter of 2024 in connection with strategic balance sheet repositioning undertaken by the Company.
Years Ended December 31, 2023/2022 2022/2021 Net Change Change Due To(1) Net Change Change Due To(1) (in thousands) Volume Yield/Rate(2) Volume Yield/Rate(2) Interest income Investment securities $ 44,273 $ 10,764 $ 33,509 $ 19,385 $ (752) $ 20,137 Interest bearing cash and cash equivalents 123,705 (26,299) 150,004 84,038 (5,731) 89,769 Loans held for sale (20,699) (22,063) 1,364 21,074 6,995 14,079 Loans held for investment, mortgage finance (82,732) (43,272) (39,460) (49,362) (78,274) 28,912 Loans held for investment 420,296 634 419,662 191,645 27,721 163,924 Total interest income 484,843 (80,236) 565,079 266,780 (50,041) 316,821 Interest expense Transaction deposits 24,462 (2,103) 26,565 (2,558) (10,747) 8,189 Savings deposits 328,706 14,253 314,453 114,941 (3,947) 118,888 Time deposits 43,944 4,183 39,761 12,773 (2,273) 15,046 Short-term borrowings 41,565 (8,057) 49,622 24,464 (1,315) 25,779 Long-term debt 8,644 (2,360) 11,004 11,111 6,287 4,824 Total interest expense 447,321 5,916 441,405 160,731 (11,995) 172,726 Net interest income $ 37,522 $ (86,152) $ 123,674 $ 106,049 $ (38,046) $ 144,095 (1) Yield/rate and volume variances are allocated to yield/rate.
Years Ended December 31, 2024/2023 2023/2022 Net Change Change Due To(1) Net Change Change Due To(1) (in thousands) Volume Yield/Rate(2) Volume Yield/Rate(2) Interest income Investment securities $ 39,925 $ 5,298 $ 34,627 $ 44,273 $ 10,764 $ 33,509 Interest bearing cash and cash equivalents (17,570) (20,997) 3,427 123,705 (26,299) 150,004 Loans held for sale (424) (629) 205 (20,699) (22,063) 1,364 Loans held for investment, mortgage finance 7,867 22,375 (14,508) (30,314) (46,044) 15,730 Loans held for investment 69,830 46,986 22,844 367,878 623 367,255 Total interest income 99,628 53,033 46,595 484,843 (83,019) 567,862 Interest expense Transaction deposits 22,654 16,911 5,743 24,462 (2,103) 26,565 Savings deposits 92,020 53,780 38,240 328,706 14,253 314,453 Time deposits 33,747 15,444 18,303 43,944 4,183 39,761 Short-term borrowings (20,648) (20,780) 132 41,565 (8,057) 49,622 Long-term debt (15,323) (9,345) (5,978) 8,644 (2,360) 11,004 Total interest expense 112,450 56,010 56,440 447,321 5,916 441,405 Net interest income $ (12,822) $ (2,977) $ (9,845) $ 37,522 $ (88,935) $ 126,457 (1) Yield/rate and volume variances are allocated to yield/rate.
The following table summarizes period-end total deposits: December 31, 2023 December 31, 2022 (dollars in thousands) Balance % of Total Balance % of Total Customer deposits $ 21,454,568 95.9 % $ 21,247,999 93.0 % Brokered deposits 917,271 4.1 % 1,608,881 7.0 % Total deposits $ 22,371,839 100.0 % $ 22,856,880 100.0 % 45 The Company has short-term borrowing sources available to supplement deposits and meet its funding needs.
The following table summarizes period-end total deposits: December 31, 2024 December 31, 2023 (dollars in thousands) Balance % of Total Balance % of Total Customer deposits $ 24,704,091 97.9 % $ 21,454,568 95.9 % Brokered deposits 534,508 2.1 % 917,271 4.1 % Total deposits $ 25,238,599 100.0 % $ 22,371,839 100.0 % 44 Estimated uninsured deposits, including accrued interest, were 41% of total deposits at December 31, 2024, compared to 43% of total deposits at December 31, 2023.
Loan interest income includes loan fees totaling $47.2 million, $37.2 million and $47.8 million for the years ended December 31, 2023, 2022 and 2021, respectively. 36 Volume/Rate Analysis The following table presents the changes in taxable equivalent net interest income and identifies the changes due to differences in the average volume of earning assets and interest bearing liabilities and the changes due to differences in the average interest rate on those assets and liabilities.
To conform to the current period presentation, certain prior period interest income amounts have been reclassified from loans held for investment, mortgage finance to loans held for investment and related yields have been adjusted accordingly. 35 Volume/Rate Analysis The following table presents the changes in taxable equivalent net interest income and identifies the changes due to differences in the average volume of earning assets and interest bearing liabilities and the changes due to differences in the average interest rate on those assets and liabilities.
The following table shows scheduled maturities of time deposits greater than $250,000: (in thousands) December 31, 2023 December 31, 2022 Months to maturity: Three or less $ 79,162 $ 70,008 Over three through six 127,289 50,282 Over six through twelve 150,382 117,435 Over twelve 19,535 20,715 Total $ 376,368 $ 258,440 Liquidity and Capital Resources Liquidity In general terms, liquidity is a measurement of the Company’s ability to meet its cash needs.
The average cost of total deposits increased to 2.93% in 2024 from 2.47% in 2023. 43 The following table discloses average deposits and weighted-average cost of deposits by type: Year Ended December 31, 2024 2023 (dollars in thousands) Average Balance Average Rate Paid Average Balance Average Rate Paid Non-interest bearing $ 9,013,038 — % $ 9,814,517 — % Interest bearing transaction 2,049,720 3.18 % 1,466,583 2.90 % Savings 12,143,539 4.71 % 10,921,264 4.40 % Time deposits 1,946,341 5.08 % 1,573,294 4.14 % Total $ 25,152,638 2.93 % $ 23,775,658 2.47 % The following table shows scheduled maturities of time deposits greater than $250,000: (in thousands) December 31, 2024 December 31, 2023 Months to maturity: Three or less $ 181,982 $ 79,162 Over three through six 84,889 127,289 Over six through twelve 186,469 150,382 Over twelve 42,148 19,535 Total $ 495,488 $ 376,368 Liquidity and Capital Resources Liquidity In general terms, liquidity is a measurement of the Company’s ability to meet its cash needs.
On April 19, 2022, the Company’s board of directors authorized a share repurchase program under which the Company could repurchase up to $150.0 million in shares of its outstanding common stock. In January 2023, the Company repurchased 564,206 shares of common stock at a weighted average price of $61.50, completing the full $150.0 million of repurchases authorized under this plan.
During the year ended December 31, 2024, the Company repurchased 1,381,436 shares of its common stock for an aggregate purchase price, including excise tax expense, of $81.5 million, at a weighted average price of $58.57 per share. 45 On January 22, 2025, the Company’s board of directors authorized a new share repurchase program under which the Company may repurchase up to $200.0 million in shares of its outstanding common stock, excluding the effect of excise tax expense incurred on net stock repurchases.
The following table provides additional information on large held for investment credit relationships outstanding at year-end: December 31, 2023 December 31, 2022 Period End Balances Period End Balances (dollars in thousands) Number of Relationships Committed Outstanding Number of Relationships Committed Outstanding $30.0 million and greater 344 $ 18,053,123 $ 11,794,216 315 $ 16,287,723 $ 10,515,253 $20.0 million to $29.9 million 215 5,245,658 3,493,601 216 5,262,032 3,485,755 Loan Maturities and Interest Rate Sensitivity December 31, 2023 (in thousands) Total Within 1 Year 1-5 Years 5-15 Years After 15 Years Loan maturity: Commercial $ 10,410,766 $ 1,897,320 $ 7,870,372 $ 635,042 $ 8,032 Mortgage finance 3,978,328 3,978,328 — — — Commercial real estate 5,500,774 1,516,284 3,643,612 303,895 36,983 Consumer 530,948 207,616 19,220 4,242 299,870 Total loans held for investment $ 20,420,816 $ 7,599,548 $ 11,533,204 $ 943,179 $ 344,885 Interest rate sensitivity for selected loans with: Fixed interest rates $ 1,133,129 $ 72,272 $ 506,292 $ 536,237 $ 18,328 Floating or adjustable interest rates 19,287,687 7,527,276 11,026,912 406,942 326,557 Total loans held for investment $ 20,420,816 $ 7,599,548 $ 11,533,204 $ 943,179 $ 344,885 42 Non-performing Assets Non-performing assets include non-accrual loans and leases and repossessed assets.
The following table provides additional information on large held for investment credit relationships outstanding at year-end: December 31, 2024 December 31, 2023 Period End Balances Period End Balances (dollars in thousands) Number of Relationships Committed Outstanding Number of Relationships Committed Outstanding $30.0 million and greater 373 $ 20,195,542 $ 13,965,661 344 $ 18,053,123 $ 11,794,216 $20.0 million to $29.9 million 225 5,516,052 3,792,528 215 5,245,658 3,493,601 Loan Maturities and Interest Rate Sensitivity The following table shows the contractual maturity distribution of loans held for investment on a gross basis as of December 31, 2024: (in thousands) Within 1 Year 1-5 Years 5-15 Years After 15 Years Total Commercial $ 1,945,669 $ 8,854,449 $ 332,219 $ 13,254 $ 11,145,591 Mortgage finance 5,215,574 — — — 5,215,574 Commercial real estate 1,941,802 3,405,219 225,391 43,870 5,616,282 Consumer 222,541 13,551 4,180 325,104 565,376 Total loans held for investment $ 9,325,586 $ 12,273,219 $ 561,790 $ 382,228 $ 22,542,823 The following table shows the interest rate composition of loans held for investment on a gross basis with a maturity date over one year as of December 31, 2024: (in thousands) Fixed Interest Rate Floating Interest Rate Total Commercial $ 667,754 $ 8,532,168 $ 9,199,922 Mortgage finance — — — Commercial real estate 270,721 3,403,759 3,674,480 Consumer 13,498 329,337 342,835 Total loans held for investment $ 951,973 $ 12,265,264 $ 13,217,237 41 Non-performing Assets Non-performing assets include non-accrual loans and leases, and repossessed assets.
Removed
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Overview Recent Industry Developments During 2023, the banking industry experienced significant volatility with multiple high-profile bank failures and industry wide concerns related to liquidity, deposit outflows, unrealized securities losses, eroding consumer confidence and increased regulatory scrutiny.
Added
(4) In the first quarter of 2024, enhancements were made to the Company’s methodology for applying relationship pricing credits to mortgage client loans.
Removed
Despite these negative industry developments, the Company’s liquidity position and balance sheet remains robust. Furthermore, the Company’s capital remains at historically high levels with CET1 and total capital ratios of 12.6% and 17.1%, respectively, as of December 31, 2023. The Company’s total deposits decreased by 2% as compared to December 31, 2022, to $22.4 billion at December 31, 2023.
Added
Non-interest expense for the year ended December 31, 2024 included restructuring expenses of $4.4 million recorded in salaries and benefits, $476,000 recorded in occupancy expense and $3.1 million recorded in communications and technology expense.
Removed
In response to the industry-wide concerns, the Company took a number of preemptive actions, which included pro-active outreach to clients and an enhanced review of its borrowing and liquidity positions to ensure that the Company’s liquidity and capital positions remain strong and that the Company is positioned to best serve its clients.
Added
The decrease in legal and professional expense for the year ended December 31, 2024 resulted primarily from declines in professional services, partially offset by a $5.0 million legal settlement expense recognized in the first quarter of 2024. FDIC insurance assessment included a $2.8 million special assessment expense in 2024, as compared to a $19.9 million special assessment expense in 2023.
Removed
The increase was primarily due to the effect of rising interest rates on earning asset yields and a shift in earning asset composition, partially offset by higher funding costs, also as a result of rising interest rates, compared to the same period in 2022.
Added
Remaining repurchase authorization under the January 18, 2023 share repurchase program was terminated upon authorization of this new program.
Removed
The decrease was primarily due to a non-recurring $248.5 million gain related to the sale of our premium finance subsidiary recorded in 2022, partially offset by increases in investment banking and trading income and other non-interest income.
Removed
Full-year 2022 legal and professional expense included $15.9 million in expenses related to the sale of our premium finance subsidiary.
Removed
Analysis of Financial Condition Loans Held for Investment As discussed in Note 1 - Operations and Summary of Significant Accounting Policies in the accompanying notes to the consolidated financial statements included elsewhere in this report, in the second quarter of 2023, changes were made to certain estimates used in the Company’s current expected credit loss model which resulted in adjustments being made to the Company’s portfolio segments.
Removed
As a result, certain prior period balances below have been reclassified to conform to the current period presentation of portfolio segments. The following table summarizes the Company’s loans held for investment by portfolio segment.
Removed
Commercial real estate net charge-offs totaled $5.5 million in 2023, primarily related to a single hospitality loan that was significantly impacted by the COVID-19 pandemic, as compared to $350,000 in 2022.
Removed
Below is a discussion of provision for credit losses on loans.
Removed
The changes made to the Company’s current expected credit loss model, as discussed in Note 1 - Operations and Summary of Significant Accounting Policies in the accompanying notes to the consolidated financial statements included elsewhere in this report, resulted in a reallocation of the allowance for credit losses between loan portfolio segments and allowance balances allocated to off-balance sheet financial instruments.
Removed
The changes made result in a higher allocation of losses to off-balance sheet financial statements. See Note 9 - Financial Instruments with Off-Balance Sheet Risk in the accompanying notes to the consolidated financial statements included elsewhere in this report for presentation of the activity in the allowance for credit losses for off-balance asset credit losses.
Removed
The provision for credit losses on loans for the year ended December 31, 2023 reflects increases in total loans held for investment, criticized and non-accrual loans and net charge-offs during the year ended December 31, 2023.
Removed
The following table discloses average deposits and weighted-average cost of deposits by type: Year Ended December 31, 2023 2022 (dollars in thousands) Average Balance Average Rate Paid Average Balance Average Rate Paid Non-interest bearing $ 9,814,517 — % $ 12,951,134 — % Interest bearing transaction 1,466,583 2.90 % 1,659,476 1.09 % Savings 10,921,264 4.40 % 9,983,571 1.52 % Time deposits 1,573,294 4.14 % 1,313,483 1.61 % Total $ 23,775,658 2.47 % $ 25,907,664 0.74 % 44 Estimated uninsured deposits at December 31, 2023 were $9.7 billion (43% of total deposits), compared to $12.4 billion (54% of total deposits) at December 31, 2022.
Removed
The uninsured amounts are estimated based on the methodologies and assumptions used for the Bank’s regulatory reporting requirements.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

11 edited+2 added−3 removed17 unchanged
Biggest changeChanges in prepayment behavior of mortgage-backed securities, residential and commercial mortgage loans in each rate environment are captured using industry estimates of prepayment speeds for various coupon segments of the portfolio. The impact of these changes is factored into the simulation model results for 2023.
Biggest changeThese assumptions have been developed through a combination of historical analysis and projection of future expected pricing behavior. Changes in prepayment behavior of mortgage-backed securities and residential and commercial mortgage loans in each rate environment are captured using industry estimates of prepayment speeds for various coupon segments of the portfolio.
As of December 31, 2023, the Company’s exposure through its trading desk does not pose a significant market risk to the Company. All statistical models involve a degree of uncertainty and VaR is calculated at a statistical confidence interval of the 95th percentile based on one-year daily historic market moves.
As of December 31, 2024, the Company’s exposure through its trading desk does not pose a significant market risk to the Company. All statistical models involve a degree of uncertainty and VaR is calculated at a statistical confidence interval of the 95th percentile based on one-year daily historic market moves.
Oversight of the Company’s compliance with the guidelines is the ongoing responsibility of the ALCO, with exceptions reported to the Executive Risk Committee and the board of directors, if necessary, on a quarterly basis. Interest Rate Risk Management The Company’s interest rate sensitivity as of December 31, 2023 is illustrated in the following table.
Oversight of the Company’s compliance with the guidelines is the ongoing responsibility of the ALCO, with exceptions reported to the Executive Risk Committee and the board of directors, if necessary, on a quarterly basis. Interest Rate Risk Management The Company’s interest rate sensitivity as of December 31, 2024 is illustrated in the following table.
(2) Total loans include gross loans held for investment and loans held for sale. 48 While a gap interest table is useful in analyzing interest rate sensitivity, an interest rate sensitivity simulation provides a better illustration of the sensitivity of earnings to changes in interest rates.
(2) Total loans include gross loans held for investment and loans held for sale. 47 While a gap interest table is useful in analyzing interest rate sensitivity, an interest rate sensitivity simulation provides a better illustration of the sensitivity of earnings to changes in interest rates.
The table reflects rate-sensitive positions as of December 31, 2023 and is not necessarily indicative of positions on other dates. The table does not take into account the effect of the Company’s derivatives designated as cash flow hedges.
The table reflects rate-sensitive positions as of December 31, 2024 and is not necessarily indicative of positions on other dates. The table does not take into account the effect of the Company’s derivatives designated as cash flow hedges.
For additional information regarding derivatives, see Note 14 - Derivative Financial Instruments in the accompanying notes to the consolidated financial statements included elsewhere in this report. 49
For additional information regarding derivatives, see Note 14 - Derivative Financial Instruments in the accompanying notes to the consolidated financial statements included elsewhere in this report. 48
Management also quantifies and measures interest rate risk exposure using a model to dynamically simulate the effect of changes in net interest income relative to changes in interest rates over the next twelve months based on three interest rate scenarios. These are a static rate scenario and two “shock test” scenarios.
Management also quantifies and measures interest rate risk exposure using a model to dynamically simulate the effect of changes in net interest income relative to changes in interest rates over the next twelve months based on different interest rate scenarios. These are a static rate scenario and “shock test” scenarios, as described below.
For modeling purposes, the “shock test” scenarios as of December 31, 2023 assume immediate, sustained 100 and 200 basis point increases in interest rates as well as 100 and 200 basis point decreases in interest rates.
For modeling purposes, the “shock test” scenarios as of December 31, 2024 and December 31, 2023 assume immediate parallel, sustained 100 and 200 basis point increases in interest rates as well as 100 and 200 basis point decreases in interest rates. The Company will continue to evaluate these scenarios as interest rates change.
This modeling indicated interest rate sensitivity as follows: Annualized Hypothetical Change in Net Interest Income December 31, 2023 December 31, 2022 + 200 basis points 3.2 % 14.5 % + 100 basis points 1.6 % 8.0 % - 100 basis points (4.4) % (10.2) % - 200 basis points (9.1) % N/A The simulations used to manage market risk are based on numerous assumptions regarding the effect of changes in interest rates on the timing and extent of repricing characteristics, future cash flows and customer behavior.
The impact of these changes is factored into the simulation model results and indicated interest rate sensitivity as follows: Annualized Hypothetical Change in Net Interest Income December 31, 2024 December 31, 2023 + 200 basis points 6.8 % 3.2 % + 100 basis points 3.4 % 1.6 % - 100 basis points (6.8) % (4.4) % - 200 basis points (13.7) % (9.1) % The simulations used to manage interest risk are based on numerous assumptions regarding the effect of changes in interest rates on the timing and extent of repricing characteristics, future cash flows and customer behavior.
During 2023, the Company’s interest rate risk exposure model incorporated updated assumptions regarding the level of interest rate, including indeterminable maturity deposits (non-interest bearing deposits, interest bearing transaction accounts and savings accounts) and loan and security prepayments behaviors for a given level of market rate change.
The Company’s interest rate risk exposure model incorporates assumptions regarding the level of interest rate, including indeterminable maturity deposits (non-interest bearing deposits, interest bearing transaction accounts and savings accounts) and loan and security prepayment behaviors for a given level of market rate change. In the current environment of changing short-term rates, deposit pricing can vary by product and customer.
In addition, the Company has exposure to market risk through its trading desk that engages in fixed income and equity securities, derivatives and foreign exchange transactions to support the investing and hedging activities of customers. The Company uses Value-at-Risk (“VaR”) as a means to measure, monitor, and limit aggregate market risk on the trading portfolio.
In addition, the Company has exposure to market risk through its trading desks that engage in securities, derivatives and foreign exchange transactions to support the capital raising, investing and hedging activities of customers.
Removed
(in thousands) 0-3 months 4-12 months 1-3 years 3+ years Total Assets Interest bearing cash and cash equivalents $ 3,042,357 $ — $ — $ — $ 3,042,357 Investment securities(1) 314,764 899 299,493 3,528,038 4,143,194 Variable loans 18,741,790 216,809 96,449 276,745 19,331,793 Fixed loans 25,780 46,491 240,407 820,450 1,133,128 Total loans(2) 18,767,570 263,300 336,856 1,097,195 20,464,921 Total interest sensitive assets $ 22,124,691 $ 264,199 $ 636,349 $ 4,625,233 $ 27,650,472 Liabilities Interest bearing customer deposits $ 13,264,838 $ — $ — $ — $ 13,264,838 CDs 500,262 1,252,576 25,177 710 1,778,725 Total interest bearing deposits 13,765,100 1,252,576 25,177 710 15,043,563 Short-term borrowings 1,500,000 — — — 1,500,000 Long-term debt 312,905 — 174,457 371,785 859,147 Total borrowings 1,812,905 — 174,457 371,785 2,359,147 Total interest sensitive liabilities $ 15,578,005 $ 1,252,576 $ 199,634 $ 372,495 $ 17,402,710 GAP $ 6,546,686 $ (988,377) $ 436,715 $ 4,252,738 $ — Cumulative GAP $ 6,546,686 $ 5,558,309 $ 5,995,024 $ 10,247,762 $ 10,247,762 Non-interest bearing deposits 7,328,276 Stockholders’ equity 3,199,142 Total $ 10,527,418 (1) Available-for-sale debt securities and equity securities based on fair market value.
Added
The Company may manage or reduce market risk through the use of hedging, short sale or other similar transactions intended to reduce market risk to be within tolerance levels designated by the Company’s market risk management strategy. The Company uses Value-at-Risk (“VaR”) as a means to measure, monitor, and limit aggregate market risk on the trading portfolio.
Removed
As of December 31, 2022, the scenarios assumed a sustained 100 and 200 basis point increase in interest rates, as well as a 100 basis point decrease in interest rates. The Company will continue to evaluate these scenarios as interest rates change.
Added
(in thousands) 0-3 months 4-12 months 1-3 years 3+ years Total Assets Interest bearing cash and cash equivalents $ 3,012,307 $ — $ — $ — $ 3,012,307 Investment securities(1) 87,458 183,652 374,873 3,750,132 4,396,115 Variable loans 21,046,263 117,120 135,404 199,105 21,497,892 Fixed loans 27,032 65,925 207,981 743,993 1,044,931 Total loans(2) 21,073,295 183,045 343,385 943,098 22,542,823 Total interest sensitive assets $ 24,173,060 $ 366,697 $ 718,258 $ 4,693,230 $ 29,951,245 Liabilities Interest bearing customer deposits $ 15,500,423 $ — $ — $ — $ 15,500,423 CDs 768,124 1,298,625 185,879 120 2,252,748 Total interest bearing deposits 16,268,547 1,298,625 185,879 120 17,753,171 Short-term borrowings 885,000 — — — 885,000 Long-term debt 113,406 — 174,717 372,223 660,346 Total borrowings 998,406 — 174,717 372,223 1,545,346 Total interest sensitive liabilities $ 17,266,953 $ 1,298,625 $ 360,596 $ 372,343 $ 19,298,517 GAP $ 6,906,107 $ (931,928) $ 357,662 $ 4,320,887 $ — Cumulative GAP $ 6,906,107 $ 5,974,179 $ 6,331,841 $ 10,652,728 $ 10,652,728 Non-interest bearing deposits 7,485,428 Stockholders’ equity 3,367,936 Total $ 10,853,364 (1) Available-for-sale debt securities and equity securities based on fair market value.
Removed
In the current environment of changing short-term rates, deposit pricing can vary by product and customer. These assumptions have been developed through a combination of historical analysis and projection of future expected pricing behavior.

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