TCBI 10-Q Quarterly Report Sept. 30, 2024 | Alphaminr
TEXAS CAPITAL BANCSHARES INC/TX
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TCBI 10-Q Quarter ended Sept. 30, 2024

Balance Sheet
Cash Flow
Income Statement
Debt
TEXAS CAPITAL BANCSHARES INC/TX
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tcbi-20240930
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒ Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
For the quarterly period ended September 30, 2024
☐ Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
For the transition period from to
Commission file number 001-34657
TEXAS CAPITAL BANCSHARES, INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware 75-2679109
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification Number)
2000 McKinney Avenue
Suite 700
Dallas TX USA 75201
(Address of principal executive offices) (Zip Code)
214 / 932-6600
(Registrant’s telephone number, including area code)

Securities registered under Section 12(b) of the Exchange Act:
Title of each class Trading Symbol(s) Name of each exchange on which registered
Common Stock, par value $0.01 per share TCBI Nasdaq Stock Market
5.75% Non-Cumulative Perpetual Preferred Stock Series B, par value $0.01 per share TCBIO Nasdaq Stock Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ ☐ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
Large Accelerated Filer x Accelerated Filer ☐
Non-Accelerated Filer ☐ Smaller Reporting Company ☐
Emerging Growth Company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act. Yes ☐ No ý
On October 16, 2024, the number of shares set forth below was outstanding with respect to each of the issuer’s classes of common stock:
Common Stock, par value $0.01 per share 46,211,695

Texas Capital Bancshares, Inc.
Form 10-Q
Quarter Ended September 30, 2024

Index
Item 1.
Item 2.
Item 3.
Item 4.
Item 1.
Item 1A.
Item 2.
Item 6.


PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
TEXAS CAPITAL BANCSHARES, INC.
CONSOLIDATED BALANCE SHEETS - UNAUDITED
(in thousands except share data) September 30, 2024 December 31, 2023
Assets
Cash and due from banks $ 297,048 $ 200,493
Interest bearing cash and cash equivalents 3,894,537 3,042,357
Available-for-sale debt securities 3,518,662 3,225,892
Held-to-maturity debt securities 812,432 865,477
Equity securities 74,426 51,825
Investment securities 4,405,520 4,143,194
Loans held for sale 9,022 44,105
Loans held for investment, mortgage finance 5,529,659 3,978,328
Loans held for investment 16,764,512 16,362,230
Less: Allowance for credit losses on loans 273,143 249,973
Loans held for investment, net 22,021,028 20,090,585
Premises and equipment, net 81,577 32,366
Accrued interest receivable and other assets 919,071 801,670
Goodwill and intangibles, net 1,496 1,496
Total assets $ 31,629,299 $ 28,356,266
Liabilities and Stockholders’ Equity
Liabilities:
Non-interest bearing deposits $ 9,070,804 $ 7,328,276
Interest bearing deposits 16,794,451 15,043,563
Total deposits 25,865,255 22,371,839
Accrued interest payable 18,679 33,234
Other liabilities 696,149 392,904
Short-term borrowings 1,035,000 1,500,000
Long-term debt 660,172 859,147
Total liabilities 28,275,255 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 September 30, 2024 and December 31, 2023
300,000 300,000
Common stock, $ 0.01 par value:
Authorized shares - 100,000,000
Issued shares - 51,494,260 and 51,142,979 at September 30, 2024 and December 31, 2023, respectively
515 511
Additional paid-in capital 1,054,614 1,045,576
Retained earnings 2,428,940 2,435,393
Treasury stock - 5,286,503 and 3,905,067 shares at cost at September 30, 2024 and December 31, 2023, respectively
( 301,868 ) ( 220,334 )
Accumulated other comprehensive loss, net of taxes ( 128,157 ) ( 362,004 )
Total stockholders’ equity 3,354,044 3,199,142
Total liabilities and stockholders’ equity $ 31,629,299 $ 28,356,266
See accompanying notes to consolidated financial statements.
3
TEXAS CAPITAL BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF INCOME AND OTHER
COMPREHENSIVE INCOME - UNAUDITED
Three Months Ended September 30, Nine Months Ended September 30,
(in thousands except per share data) 2024 2023 2024 2023
Interest income
Interest and fees on loans $ 361,407 $ 345,138 $ 1,037,537 $ 975,443
Investment securities 38,389 27,070 104,117 79,840
Interest bearing cash and cash equivalents 52,737 53,561 150,325 157,568
Total interest income 452,533 425,769 1,291,979 1,212,851
Interest expense
Deposits 190,255 160,117 547,135 417,602
Short-term borrowings 13,784 19,576 39,316 52,573
Long-term debt 8,392 14,005 33,835 43,270
Total interest expense 212,431 193,698 620,286 513,445
Net interest income 240,102 232,071 671,693 699,406
Provision for credit losses 10,000 18,000 49,000 53,000
Net interest income after provision for credit losses 230,102 214,071 622,693 646,406
Non-interest income
Service charges on deposit accounts 6,307 5,297 18,557 15,477
Wealth management and trust fee income 4,040 3,509 11,306 10,653
Brokered loan fees 2,400 2,532 6,442 6,842
Investment banking and advisory fees 34,753 23,099 78,225 56,764
Trading income 5,786 6,092 16,148 18,693
Available-for-sale debt securities gains/(losses), net
( 179,581 ) — ( 179,581 ) 489
Other 11,524 6,343 25,875 21,368
Total non-interest income ( 114,771 ) 46,872 ( 23,028 ) 130,286
Non-interest expense
Salaries and benefits 121,138 110,010 368,705 351,730
Occupancy expense 12,937 9,910 33,340 29,011
Marketing 5,863 4,757 17,895 20,168
Legal and professional 11,135 17,614 38,603 47,797
Communications and technology 25,951 19,607 69,078 57,655
Federal Deposit Insurance Corporation insurance assessment 4,906 5,769 18,897 11,632
Other 13,394 12,224 39,608 37,569
Total non-interest expense 195,324 179,891 586,126 555,562
Income/(loss) before income taxes ( 79,993 ) 81,052 13,539 221,130
Income tax expense/(benefit) ( 18,674 ) 19,373 7,054 52,139
Net income/(loss) ( 61,319 ) 61,679 6,485 168,991
Preferred stock dividends 4,313 4,313 12,938 12,938
Net income/(loss) available to common stockholders $ ( 65,632 ) $ 57,366 $ ( 6,453 ) $ 156,053
Other comprehensive income/(loss)
Change in unrealized gain/(loss) $ 109,849 $ ( 102,330 ) $ 53,567 $ ( 158,619 )
Amounts reclassified into net income/(loss) 199,599 19,285 239,132 48,531
Other comprehensive income/(loss) 309,448 ( 83,045 ) 292,699 ( 110,088 )
Income tax expense/(benefit) 69,873 ( 17,441 ) 58,852 ( 23,119 )
Other comprehensive income/(loss), net of tax 239,575 ( 65,604 ) 233,847 ( 86,969 )
Comprehensive income/(loss) $ 178,256 $ ( 3,925 ) $ 240,332 $ 82,022
Basic earnings/(loss) per common share $ ( 1.42 ) $ 1.19 $ ( 0.14 ) $ 3.24
Diluted earnings/(loss) per common share $ ( 1.41 ) $ 1.18 $ ( 0.14 ) $ 3.20
See accompanying notes to consolidated financial statements.
4
TEXAS CAPITAL BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY - UNAUDITED

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 June 30, 2023 300,000 $ 300,000 51,087,965 $ 511 $ 1,035,063 $ 2,362,189 ( 3,095,444 ) $ ( 175,528 ) $ ( 440,308 ) $ 3,081,927
Comprehensive income/(loss):
Net income — — — — — 61,679 — — — 61,679
Change in other comprehensive income/(loss), net of taxes — — — — — — — — ( 65,604 ) ( 65,604 )
Total comprehensive loss
( 3,925 )
Stock-based compensation expense recognized in earnings — — — — 4,441 — — — — 4,441
Preferred stock dividend — — — — — ( 4,313 ) — — — ( 4,313 )
Issuance of stock related to stock-based awards — — 22,482 — ( 430 ) — — — — ( 430 )
Balance at September 30, 2023 300,000 $ 300,000 51,110,447 $ 511 $ 1,039,074 $ 2,419,555 ( 3,095,444 ) $ ( 175,528 ) $ ( 505,912 ) $ 3,077,700
Balance at June 30, 2024 300,000 $ 300,000 51,474,581 $ 515 $ 1,050,114 $ 2,494,572 ( 5,286,503 ) $ ( 301,868 ) $ ( 367,732 ) $ 3,175,601
Comprehensive income/(loss):
Net loss — — — — — ( 61,319 ) — — — ( 61,319 )
Change in other comprehensive income/(loss), net of taxes — — — — — — — — 239,575 239,575
Total comprehensive income
178,256
Stock-based compensation expense recognized in earnings — — — — 4,957 — — — — 4,957
Preferred stock dividend — — — — — ( 4,313 ) — — — ( 4,313 )
Issuance of stock related to stock-based awards — — 19,679 — ( 457 ) — — — — ( 457 )
Balance at September 30, 2024 300,000 $ 300,000 51,494,260 $ 515 $ 1,054,614 $ 2,428,940 ( 5,286,503 ) $ ( 301,868 ) $ ( 128,157 ) $ 3,354,044
See accompanying notes to consolidated financial statements.
5
TEXAS CAPITAL BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY - UNAUDITED

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, 2022 (audited)
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 — — — — — 168,991 — — — 168,991
Change in other comprehensive income/(loss), net of taxes
— — — — — — — — ( 86,969 ) ( 86,969 )
Total comprehensive income
82,022
Stock-based compensation expense recognized in earnings
— — — — 17,948 — — — — 17,948
Preferred stock dividend — — — — — ( 12,938 ) — — — ( 12,938 )
Issuance of stock related to stock-based awards
— — 243,149 2 ( 4,467 ) — — — — ( 4,465 )
Repurchase of common stock — — — — — — ( 1,011,909 ) ( 60,218 ) — ( 60,218 )
Balance at September 30, 2023 300,000 $ 300,000 51,110,447 $ 511 $ 1,039,074 $ 2,419,555 ( 3,095,444 ) $ ( 175,528 ) $ ( 505,912 ) $ 3,077,700
Balance at December 31, 2023 (audited)
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
— — — — — 6,485 — — — 6,485
Change in other comprehensive income/(loss), net of taxes — — — — — — — — 233,847 233,847
Total comprehensive income 240,332
Stock-based compensation expense recognized in earnings
— — — — 18,229 — — — — 18,229
Preferred stock dividend — — — — — ( 12,938 ) — — — ( 12,938 )
Issuance of stock related to stock-based awards
— — 351,281 4 ( 9,191 ) — — — — ( 9,187 )
Repurchase of common stock — — — — — — ( 1,381,436 ) ( 81,534 ) — ( 81,534 )
Balance at September 30, 2024 300,000 $ 300,000 51,494,260 $ 515 $ 1,054,614 $ 2,428,940 ( 5,286,503 ) $ ( 301,868 ) $ ( 128,157 ) $ 3,354,044
See accompanying notes to consolidated financial statements.
6
TEXAS CAPITAL BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended September 30,
(in thousands) 2024 2023
Operating activities
Net income $ 6,485 $ 168,991
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses 49,000 53,000
Depreciation and amortization 38,917 30,870
Net (gain)/loss recognized on investment securities 173,708 ( 1,423 )
Stock-based compensation expense 21,208 17,948
Purchases and originations of loans held for sale — ( 706 )
Proceeds from sales and repayments of loans held for sale 53,494 8,980
Changes in operating assets and liabilities:
Accrued interest receivable and other assets ( 60,683 ) ( 76,697 )
Accrued interest payable and other liabilities 180,584 ( 14,890 )
Net cash provided by operating activities 462,713 186,073
Investing activities
Purchases of available-for-sale debt securities ( 1,793,339 ) ( 849,392 )
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 514,159 169,938
Proceeds from maturities, redemptions and pay-downs of held-to-maturity debt securities 55,696 57,009
Sales/(purchases) of equity securities, net ( 16,728 ) ( 5,610 )
Originations of loans held for investment, mortgage finance ( 60,379,814 ) ( 59,161,293 )
Proceeds from pay-offs of loans held for investment, mortgage finance 58,828,483 58,821,837
Net increase in loans held for investment, excluding mortgage finance loans ( 446,916 ) ( 1,150,655 )
Purchase of premises and equipment, net ( 57,435 ) ( 12,649 )
Net cash used in investing activities ( 2,238,735 ) ( 2,073,892 )
Financing activities
Net increase in deposits 3,493,416 1,022,098
Issuance of stock related to stock-based awards ( 9,187 ) ( 4,465 )
Preferred dividends paid ( 12,938 ) ( 12,938 )
Repurchase of common stock ( 81,534 ) ( 60,218 )
Net increase/(decrease) in short-term borrowings ( 465,000 ) 198,858
Redemption of long-term debt ( 200,000 ) ( 75,000 )
Net cash provided by financing activities 2,724,757 1,068,335
Net increase/(decrease) in cash and cash equivalents 948,735 ( 819,484 )
Cash and cash equivalents at beginning of period 3,242,850 5,012,260
Cash and cash equivalents at end of period $ 4,191,585 $ 4,192,776
Supplemental disclosures of cash flow information
Cash paid during the period for interest $ 672,199 $ 506,296
Cash paid during the period for income taxes 48,040 56,161
Transfers of loans from held for investment to held for sale 18,411 126,990
See accompanying notes to consolidated financial statements.
7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
(1) Operations and Summary of Significant Accounting Policies
Organization and Nature of Business
Texas Capital Bancshares, Inc. (“TCBI” or the “Company”), a Delaware corporation, was incorporated in 1996 and commenced banking operations in 1998. The consolidated financial statements include the accounts of TCBI and its wholly owned subsidiary, Texas Capital Bank (the “Bank”). TCBI is a full-service financial services firm that delivers customized solutions to businesses, entrepreneurs and individual customers. The Company 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.
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.
The consolidated interim financial statements are unaudited, and certain information and disclosures in the notes to consolidated unaudited financial statements that are presented in accordance with GAAP have been condensed or omitted. In the opinion of management, the interim financial statements include all normal and recurring adjustments and the disclosures made present a fair presentation of the Company’s financial position and results of operations. The consolidated financial statements have been prepared in accordance with GAAP for interim financial information and the instructions to Form 10-Q adopted by the U.S. Securities and Exchange Commission (“SEC”). Accordingly, the financial statements and the notes to the consolidated unaudited financial statements required by GAAP for complete annual financial statements do not include all of the information and should be read in conjunction with the consolidated financial statements, and notes thereto, for the year ended December 31, 2023, included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 (the “2023 Form 10-K”). Operating results for the interim periods disclosed herein are not necessarily indicative of the results that may be expected for a full year or any future period.
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. The allowance for credit losses, the fair value of financial instruments and the status of contingencies are particularly susceptible to significant change.
(2) Earnings Per Share
The following table presents the computation of basic and diluted earnings per share:
Three Months Ended September 30, Nine Months Ended September 30,
(in thousands except share and per share data) 2024 2023 2024 2023
Numerator:
Net income/(loss) $ ( 61,319 ) $ 61,679 $ 6,485 $ 168,991
Preferred stock dividends 4,313 4,313 12,938 12,938
Net income/(loss) available to common stockholders $ ( 65,632 ) $ 57,366 $ ( 6,453 ) $ 156,053
Denominator:
Basic earnings per common share—weighted average common shares 46,201,518 48,007,466 46,674,034 48,168,486
Effect of dilutive outstanding stock-settled awards 407,224 521,232 379,683 555,542
Dilutive earnings per common share—weighted average diluted common shares 46,608,742 48,528,698 47,053,717 48,724,028
Basic earnings/(loss) per common share $ ( 1.42 ) $ 1.19 $ ( 0.14 ) $ 3.24
Diluted earnings/(loss) per common share $ ( 1.41 ) $ 1.18 $ ( 0.14 ) $ 3.20
Anti-dilutive outstanding stock-settled awards 622 87,738 62,560 319,021

8
(3) Investment Securities
The following is a summary of the Company’s investment securities:
(in thousands) Amortized
Cost(1) 		Gross
Unrealized
Gains 		Gross
Unrealized
Losses 		Estimated
Fair
Value
September 30, 2024
Available-for-sale debt securities:
U.S. Treasury securities $ 278,200 $ — $ ( 2,396 ) $ 275,804
Residential mortgage-backed securities 3,323,351 19,768 ( 112,263 ) 3,230,856
CRT securities 12,791 — ( 789 ) 12,002
Total available-for-sale debt securities 3,614,342 19,768 ( 115,448 ) 3,518,662
Held-to-maturity debt securities:
Residential mortgage-backed securities 812,432 — ( 84,689 ) 727,743
Total held-to-maturity debt securities 812,432 — ( 84,689 ) 727,743
Equity securities 74,426
Total investment securities(2) $ 4,405,520
December 31, 2023
Available-for-sale debt securities:
U.S. Treasury securities $ 651,112 $ — $ ( 14,639 ) $ 636,473
U.S. government agency securities 125,000 — ( 18,408 ) 106,592
Residential mortgage-backed securities 2,782,734 540 ( 312,442 ) 2,470,832
CRT securities 13,636 — ( 1,641 ) 11,995
Total available-for-sale debt securities 3,572,482 540 ( 347,130 ) 3,225,892
Held-to-maturity securities:
Residential mortgage-backed securities 865,477 — ( 101,633 ) 763,844
Total held-to-maturity securities 865,477 — ( 101,633 ) 763,844
Equity securities 51,825
Total investment securities(2) $ 4,143,194
(1)    Excludes accrued interest receivable of $ 13.9 million and $ 9.5 million at September 30, 2024 and December 31, 2023, respectively, related to available-for-sale debt securities and $ 1.3 million and $ 1.4 million at September 30, 2024 and December 31, 2023, respectively, related to held-to-maturity debt securities that is recorded in accrued interest receivable and other assets on the consolidated balance sheets.
(2)    Includes available-for-sale debt securities and equity securities at estimated fair value and held-to-maturity debt securities at amortized cost.
Debt Securities
During the third quarter of 2024, the Company sold available-for-sale debt securities with an amortized cost basis of $ 1.2 billion, realizing a loss of $ 179.6 million, and repositioned the proceeds into a purchase of available-for-sale residential mortgage-backed securities with an amortized cost basis of $ 1.1 billion. In the first quarter of 2023, the Company sold available-for-sale U.S. Treasury securities with an amortized cost of $ 56.4 million and realized a gain of $ 489,000 .
The amortized cost and estimated fair value as of September 30, 2024, excluding accrued interest receivable, of available-for-sale and held-to-maturity debt securities are presented below by contractual maturity. Actual maturities may differ from contractual maturities of mortgage-backed securities because borrowers may have the right to call or prepay obligations with or without prepayment penalties.
Available-for-sale Held-to-maturity
(in thousands) Amortized Cost Fair Value Amortized Cost Fair Value
Due within one year $ 58,784 $ 58,315 $ — $ —
Due after one year through five years 219,416 217,489 — —
Due after five years through ten years 13,774 13,001 — —
Due after ten years 3,322,368 3,229,857 812,432 727,743
Total $ 3,614,342 $ 3,518,662 $ 812,432 $ 727,743
9
The table below presents the weighted average yields for the Company’s available-for-sale debt securities for the nine months ended September 30, 2024. Weighted average yields are calculated based on amortized cost on a tax-exempt basis assuming a 21% federal tax rate, where applicable.
U.S. Treasury securities U.S. government agency securities Residential mortgage-backed securities CRT securities
Due within one year 3.15 % — % — % — %
Due after one year through five years 3.12 — — —
Due after five years through ten years — — 3.91 4.95
Due after ten years — — 4.68 —
Total 3.13 % — % 4.68 % 4.95 %
The following table discloses the Company’s available-for-sale debt securities that have been in a continuous unrealized loss position for less than 12 months and those that have been in a continuous unrealized loss position for 12 or more months:
Less Than 12 Months 12 Months or Longer Total
(in thousands) Fair Value Unrealized Loss Fair Value Unrealized Loss Fair Value Unrealized Loss
September 30, 2024
U.S. Treasury securities $ — $ — $ 275,804 $ ( 2,396 ) $ 275,804 $ ( 2,396 )
U.S. government agency securities — — — — — —
Residential mortgage-backed securities 458,752 ( 873 ) 1,404,200 ( 111,390 ) 1,862,952 ( 112,263 )
CRT securities — — 12,002 ( 789 ) 12,002 ( 789 )
Total $ 458,752 $ ( 873 ) $ 1,692,006 $ ( 114,575 ) $ 2,150,758 $ ( 115,448 )
December 31, 2023
U.S. Treasury securities $ — $ — $ 636,473 $ ( 14,639 ) $ 636,473 $ ( 14,639 )
U.S. government agency securities — — 106,592 ( 18,408 ) 106,592 ( 18,408 )
Residential mortgage-backed securities 910,999 ( 19,751 ) 1,501,340 ( 292,691 ) 2,412,339 ( 312,442 )
CRT securities — — 11,995 ( 1,641 ) 11,995 ( 1,641 )
Total $ 910,999 $ ( 19,751 ) $ 2,256,400 $ ( 327,379 ) $ 3,167,399 $ ( 347,130 )
At September 30, 2024, the Company had 43 available-for-sale debt securities in an unrealized loss position, comprised of 6 U.S. Treasury securities, 35 residential mortgage-backed securities and two CRT securities. The unrealized losses on the available-for-sale debt securities were the result of changes in market interest rates compared to the date the securities were acquired rather than the credit quality of the issuers or underlying loans. The Company does not currently intend to sell and based on current conditions it does not believe it is likely that the Company will be required to sell these available-for-sale debt securities before recovery of the amortized cost of such securities in an unrealized loss position and has therefore recorded the unrealized losses related to this portfolio in accumulated other comprehensive income/(loss), net (“AOCI”). Held-to-maturity securities consist of government guaranteed securities for which no loss is expected. At September 30, 2024 and December 31, 2023, no allowance for credit losses was established for available-for-sale or held-to-maturity debt securities.
At September 30, 2024 and December 31, 2023, debt securities with carrying values of approximately $ 425,000 and $ 1.6 million, respectively, were pledged to secure certain customer deposits.
Equi ty Securities
Equity securities consist of investments that qualify for consideration under the regulations implementing the Community Reinvestment Act and investments in exchange traded funds. The following is a summary of unrealized and realized gains/(losses) recognized on equity securities included in other non-interest income on the consolidated statements of income and other comprehensive income:
Three Months Ended September 30, Nine Months Ended September 30,
(in thousands) 2024 2023 2024 2023
Net gains/(losses) recognized during the period $ 2,752 $ ( 1,262 ) $ 6,727 $ 934
Less: Realized net gains/(losses) recognized on securities sold 482 ( 70 ) 853 ( 676 )
Unrealized net gains/(losses) recognized on securities still held $ 2,270 $ ( 1,192 ) $ 5,874 $ 1,610
10
(4) Loans and Allowance for Credit Losses on Loans
Loans are summarized by portfolio segment as follows:
(in thousands) September 30, 2024 December 31, 2023
Loans held for investment(1):
Commercial $ 10,967,807 $ 10,410,766
Mortgage finance 5,529,659 3,978,328
Commercial real estate 5,314,814 5,500,774
Consumer 568,962 530,948
Gross loans held for investment 22,381,242 20,420,816
Unearned income (net of direct origination costs) ( 87,071 ) ( 80,258 )
Total loans held for investment 22,294,171 20,340,558
Allowance for credit losses on loans ( 273,143 ) ( 249,973 )
Total loans held for investment, net $ 22,021,028 $ 20,090,585
Loans held for sale:
Mortgage loans, at fair value $ — $ 706
Non-mortgage loans, at lower of cost or fair value 9,022 43,399
Total loans held for sale $ 9,022 $ 44,105
(1)    Excludes accrued interest receivable of $ 114.8 million and $ 118.1 million at September 30, 2024 and December 31, 2023, respectively, that is recorded in accrued interest receivable and other assets on the consolidated balance sheets.
During the third quarter of 2024, the Company purchased a $ 332.0 million commercial loan portfolio, which included certain loans that had experienced a more than insignificant deterioration in credit quality since origination (“PCD loans”). PCD loans are recorded at fair value at the acquisition date along with an allowance for credit losses determined using the same methodology as originated loans. The sum of the loan’s purchase price and allowance for credit losses becomes its initial amortized cost basis. The difference between the initial amortized cost basis and the par value of the loan is a non-credit discount or premium, which is amortized into interest income over the life of the loan. Subsequent changes to the allowance for credit losses are recorded through provision for credit losses. The following table provides a summary of PCD loans purchased and the associated credit loss reserve at acquisition date:
(in thousands) Total
Par value (unpaid principal balance) $ 20,139
Allowance for credit losses on loans at acquisition
( 2,579 )
Non-credit premium
2,448
Purchase price
$ 20,008

11
The following tables summarize gross loans held for investment by year of origination and internally assigned credit grades:
(in thousands) 2024 2023 2022 2021 2020 2019
and prior 		Revolving lines of credit Revolving lines of credit converted to term loans Total
September 30, 2024
Commercial
(1-7) Pass $ 1,206,729 $ 1,189,307 $ 1,330,253 $ 336,556 $ 90,941 $ 194,600 $ 5,939,588 $ 12,458 $ 10,300,432
(8) Special mention 20,805 39,957 146,912 22,833 40 6,754 197,723 — 435,024
(9) Substandard - accruing — 45,275 60,646 8,107 341 3,435 28,734 — 146,538
(9+) Non-accrual — 9,370 2,593 287 897 24,810 47,549 307 85,813
Total commercial $ 1,227,534 $ 1,283,909 $ 1,540,404 $ 367,783 $ 92,219 $ 229,599 $ 6,213,594 $ 12,765 $ 10,967,807
Mortgage finance
(1-7) Pass $ — $ — $ — $ — $ — $ — $ 5,529,659 $ — $ 5,529,659
(8) Special mention — — — — — — — — —
(9) Substandard - accruing — — — — — — — — —
(9+) Non-accrual — — — — — — — — —
Total mortgage finance $ — $ — $ — $ — $ — $ — $ 5,529,659 $ — $ 5,529,659
Commercial real estate
(1-7) Pass $ 193,065 $ 844,988 $ 1,751,369 $ 913,488 $ 333,252 $ 755,864 $ 275,717 $ 18,933 $ 5,086,676
(8) Special mention 589 5,001 77,796 — 322 59,922 — 898 144,528
(9) Substandard - accruing — — 44,607 15,831 — 20,989 — — 81,427
(9+) Non-accrual — — 2,183 — — — — — 2,183
Total commercial real estate $ 193,654 $ 849,989 $ 1,875,955 $ 929,319 $ 333,574 $ 836,775 $ 275,717 $ 19,831 $ 5,314,814
Consumer
(1-7) Pass $ 34,545 $ 28,741 $ 53,741 $ 76,839 $ 46,699 $ 109,562 $ 216,621 $ — $ 566,748
(8) Special mention — — — — — — 250 — 250
(9) Substandard - accruing — — — — — — 1,000 — 1,000
(9+) Non-accrual — — — — — 964 — — 964
Total consumer $ 34,545 $ 28,741 $ 53,741 $ 76,839 $ 46,699 $ 110,526 $ 217,871 $ — $ 568,962
Total $ 1,455,733 $ 2,162,639 $ 3,470,100 $ 1,373,941 $ 472,492 $ 1,176,900 $ 12,236,841 $ 32,596 $ 22,381,242
Gross charge-offs $ — $ 7,542 $ 550 $ 3,775 $ — $ 7,212 $ 10,266 $ 44 $ 29,389
(in thousands) 2023 2022 2021 2020 2019 2018
and prior 		Revolving lines of credit Revolving lines of credit converted to term loans Total
December 31, 2023
Commercial
(1-7) Pass $ 1,546,257 $ 1,408,672 $ 279,266 $ 144,699 $ 142,301 $ 157,808 $ 6,284,464 $ 16,580 $ 9,980,047
(8) Special mention 22,148 118,991 35,619 285 823 13,385 40,647 89 231,987
(9) Substandard - accruing 12,477 50,876 9,334 18,547 — 78 38,372 — 129,684
(9+) Non-accrual 9,395 34,229 340 2,085 15,080 7,840 79 — 69,048
Total commercial $ 1,590,277 $ 1,612,768 $ 324,559 $ 165,616 $ 158,204 $ 179,111 $ 6,363,562 $ 16,669 $ 10,410,766
Mortgage finance
(1-7) Pass $ — $ — $ — $ — $ — $ — $ 3,978,328 $ — $ 3,978,328
(8) Special mention — — — — — — — — —
(9) Substandard - accruing — — — — — — — — —
(9+) Non-accrual — — — — — — — — —
Total mortgage finance $ — $ — $ — $ — $ — $ — $ 3,978,328 $ — $ 3,978,328
Commercial real estate
(1-7) Pass $ 561,801 $ 1,689,325 $ 1,042,953 $ 419,703 $ 317,480 $ 559,026 $ 575,928 $ 28,175 $ 5,194,391
(8) Special mention — 136,801 32,937 24,440 34,181 22,833 7,895 — 259,087
(9) Substandard - accruing — 2,232 — — — 28,573 4,141 — 34,946
(9+) Non-accrual — — 12,350 — — — — — 12,350
Total commercial real estate $ 561,801 $ 1,828,358 $ 1,088,240 $ 444,143 $ 351,661 $ 610,432 $ 587,964 $ 28,175 $ 5,500,774
Consumer
(1-7) Pass $ 31,876 $ 56,425 $ 78,096 $ 47,423 $ 14,141 $ 102,691 $ 199,171 $ — $ 529,823
(8) Special mention — — — — — — 100 41 141
(9) Substandard - accruing — — — — — 984 — — 984
(9+) Non-accrual — — — — — — — — —
Total Consumer $ 31,876 $ 56,425 $ 78,096 $ 47,423 $ 14,141 $ 103,675 $ 199,271 $ 41 $ 530,948
Total $ 2,183,954 $ 3,497,551 $ 1,490,895 $ 657,182 $ 524,006 $ 893,218 $ 11,129,125 $ 44,885 $ 20,420,816
Gross charge-offs $ 8,364 $ 5,090 $ 25,578 $ — $ 15,243 $ 883 $ 698 $ 871 $ 56,727
12
The following table details activity in the allowance for credit losses on loans. Allocation of a portion of the allowance to one category does not preclude its availability to absorb losses in other categories.
(in thousands) Commercial Mortgage
Finance 		Commercial Real Estate Consumer Total
Nine Months Ended September 30, 2024
Beginning balance $ 171,437 $ 4,173 $ 71,829 $ 2,534 $ 249,973
Allowance established for acquired PCD loans 2,579 — — — 2,579
Provision for credit losses on loans 54,529 1,290 ( 6,840 ) 414 49,393
Charge-offs 23,661 — 5,698 30 29,389
Recoveries 587 — — — 587
Net charge-offs (recoveries) 23,074 — 5,698 30 28,802
Ending balance $ 205,471 $ 5,463 $ 59,291 $ 2,918 $ 273,143
Nine Months Ended September 30, 2023
Beginning balance $ 185,303 $ 10,745 $ 54,268 $ 3,153 $ 253,469
Provision for credit losses on loans 20,569 ( 4,438 ) 12,935 ( 543 ) 28,523
Charge-offs 42,830 — — 41 42,871
Recoveries 5,776 — — 5 5,781
Net charge-offs (recoveries) 37,054 — — 36 37,090
Ending balance $ 168,818 $ 6,307 $ 67,203 $ 2,574 $ 244,902
The Company recor ded a $ 49.4 million provision for credit losses on loans for the nine months ended September 30, 2024, compared to $ 28.5 million for the same period of 2023. T he $ 49.4 million provision for credit losses on loans resulted primarily from growth in loans held for investment and $ 28.8 million in net charge-offs du ring the nine months ended September 30, 2024. Net charge-offs of $ 28.8 million were recorded during the nine months ended September 30, 2024, compared to net charge-offs of $ 37.1 million during the same period of 2023. Criticized loans totaled $ 897.7 million at September 30, 2024, compared to $ 738.2 million at December 31, 2023.
A loan is considered collateral-dependent when the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral. At September 30, 2024, the Company had $ 44.0 million in collateral-dependent commercial loans, collateralized by business assets, and $ 2.2 million and $ 1.0 million in collateral-dependent commercial real estate and consumer loans, respectively, both of which are collateralized by real estate.
The table below provides an age analysis of gross loans held for investment:
(in thousands) 30-59 Days
Past Due 		60-89 Days
Past Due 		90 Days or More Past Due Total Past
Due 		Non-accrual(1) Current Total Non-accrual With No Allowance
September 30, 2024
Commercial $ 1,933 $ 40,718 $ 5,281 $ 47,932 $ 85,813 $ 10,834,062 $ 10,967,807 $ 12,086
Mortgage finance — — — — — 5,529,659 5,529,659 —
Commercial real estate 501 648 — 1,149 2,183 5,311,482 5,314,814 —
Consumer 1,966 — — 1,966 964 566,032 568,962 964
Total $ 4,400 $ 41,366 $ 5,281 $ 51,047 $ 88,960 $ 22,241,235 $ 22,381,242 $ 13,050
(1) As of September 30, 2024, $ 1.1 million of non-accrual loans were earning interest income on a cash basis compared to $ 358,000 as of December 31, 2023. Additionally, $ 272,000 of interest income was recognized on non-accrual loans for the nine months ended September 30, 2024 compared to $ 37,000 for the same period in 2023. Accrued interest of $ 917,000 and $ 1.7 million was reversed during the nine months ended September 30, 2024 and September 30, 2023, respectively.
13
Modifications to Borrowers Experiencing Financial Difficulty
The table below details gross loans held for investment as of September 30, 2024 and September 30, 2023 made to borrowers experiencing financial difficulty that were modified during the three and nine months ended September 30, 2024 and September 30, 2023, by type of modification granted and the financial effect of those modifications:
Financial Statement Impact
($ in thousands) Payment
Deferral 		Term
Extension 		Payment
Deferral
and Term
Extension 		Interest Rate
Reduction
and Term
Extension 		Total Percentage of Loans Held for Investment Interest Rate Reduction Term Extension (in months) Payment Deferrals
Three Months Ended September 30, 2024
Commercial $ 360 $ — $ — $ — $ 360 — % — %
0
$ 42
Total $ 360 $ — $ — $ — $ 360 — %
Three Months Ended September 30, 2023
Commercial $ 271 $ 6,372 $ — $ — $ 6,643 0.03 % — %
1
$ 59
Total $ 271 $ 6,372 $ — $ — $ 6,643 0.03 %
Nine Months Ended September 30, 2024
Commercial $ 6,762 $ 974 $ 6,929 $ — $ 14,665 0.07 % — %
12 to 13
$ 826
Commercial real estate — 15,831 — — 15,831 0.07 % — %
3
—
Total $ 6,762 $ 16,805 $ 6,929 $ — $ 30,496 0.14 %
Nine Months Ended September 30, 2023
Commercial $ 31,327 $ 7,065 $ 5,893 $ 14,332 $ 58,617 0.28 % 0.70 %
1 to 36
$ 5,139
Total $ 31,327 $ 7,065 $ 5,893 $ 14,332 $ 58,617 0.28 %
The table below details gross loans held for investment as of September 30, 2024 and September 30, 2023 that experienced a default during the periods presented subsequent to being granted a modification in the prior twelve months. Default is defined as movement to nonperforming status, foreclosure or charge-off, whichever occurs first.
(in thousands)
Payment
Deferral 		Term
Extension
Payment Deferral
and Term Extension
Total
Three Months Ended September 30, 2024
Commercial $ 2,902 $ — $ — $ 2,902
Total $ 2,902 $ — $ — $ 2,902
Three Months Ended September 30, 2023
Commercial $ — $ — $ — $ —
Commercial $ — $ — $ — $ —
Nine Months Ended September 30, 2024
Commercial $ 2,902 $ — $ 1,370 $ 4,272
Total $ 2,902 $ — $ 1,370 $ 4,272
Nine Months Ended September 30, 2023
Commercial $ — $ 161 $ — $ 161
Commercial $ — $ 161 $ — $ 161
14
The table below provides an age analysis of gross loans held for investment as of September 30, 2024 made to borrowers experiencing financial difficulty that were modified in the prior twelve months, and as of September 30, 2023 for loans that were modified since January 1, 2023, the date of adoptions of Accounting Standards Update 2022-02:
(in thousands) 30-89 Days
Past Due 		90+ Days
Past Due 		Non-Accrual Current Total
September 30, 2024
Commercial $ — $ — $ 10,191 $ 4,474 $ 14,665
Commercial real estate
— — — 15,831 15,831
Total $ — $ — $ 10,191 $ 20,305 $ 30,496
September 30, 2023
Commercial $ — $ — $ 5,893 $ 52,724 $ 58,617
Total $ — $ — $ 5,893 $ 52,724 $ 58,617
(5) Short-Term Borrowings and Long-Term Debt
The table below presents a summary of short-term borrowings:
(in thousands) September 30, 2024 December 31, 2023
Federal Home Loan Bank borrowings $ 1,035,000 $ 1,500,000
Total short-term borrowings $ 1,035,000 $ 1,500,000
The table below presents a summary of long-term debt:
(in thousands) September 30, 2024 December 31, 2023
Bank-issued floating rate senior unsecured credit-linked notes due 2024 $ — $ 199,499
Bank-issued 5.25 % fixed rate subordinated notes due 2026
174,652 174,457
Company-issued 4.00 % fixed rate subordinated notes due 2031
372,114 371,785
Trust preferred floating rate subordinated debentures due 2032 to 2036 113,406 113,406
Total long-term debt $ 660,172 $ 859,147
During the second quarter of 2024, the bank-issued senior unsecured credit-linked notes were redeemed in full.
(6) Financial Instruments with Off-Balance Sheet Risk
The table below presents the Company’s financial instruments with off-balance sheet risk, as well as the activity in the allowance for off-balance sheet credit losses related to those financial instruments.
(in thousands) Commercial Mortgage
Finance 		Commercial
Real Estate 		Consumer Total
Nine Months Ended September 30, 2024
Beginning balance $ 36,040 $ 6 $ 10,147 $ 169 $ 46,362
Provision for off-balance sheet credit losses 5,701 26 ( 6,100 ) ( 20 ) ( 393 )
Ending balance $ 41,741 $ 32 $ 4,047 $ 149 $ 45,969
Nine Months Ended September 30, 2023
Beginning balance $ 16,550 $ — $ 5,222 $ 21 $ 21,793
Provision for off-balance sheet credit losses 15,799 13 8,533 132 24,477
Ending balance $ 32,349 $ 13 $ 13,755 $ 153 $ 46,270
(in thousands) September 30, 2024 December 31, 2023
Commitments to extend credit - period end balance $ 9,476,459 $ 9,749,085
Standby letters of credit - period end balance 534,570 595,079
15
(7) Regulatory Ratios and Capital
The Company and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory (and possibly additional discretionary) actions by regulators that, if undertaken, could have a direct material adverse effect on the Company’s and the Bank’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and the Bank must meet specific capital guidelines that involve quantitative measures of the Company’s and the Bank’s assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The Company’s and the Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.
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.
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. 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 nine months ended September 30, 2024 or during 2023. On January 17, 2024, the Company’s board of directors authorized a new share repurchase program under which the Company could repurchase up to $ 150.0 million in shares of its outstanding common stock, which is set to expire on January 31, 2025. During the nine months ended September 30, 2024, the Company repurchased 1,381,436 shares of its common stock for an aggregate price, including excise tax expense, of $ 81.5 million, at a weighted average price of $ 58.57 per share.
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 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 March 2020, the federal bank regulatory agencies issued an interim final rule that maintains the three-year transition option of the 2019 CECL Rule and also provides banking organizations that were required under GAAP to implement CECL before the end of 2020 the option to delay for two years an estimate of the effect of CECL on regulatory capital, relative to the incurred loss methodology's effect on regulatory capital, followed by a three-year transition period (five-year transition option). The Company adopted CECL on January 1, 2020 and has elected to utilize the five-year transition option. The ratios presented below include the effects of the election to utilize the five-year CECL transition described above.
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.
At the beginning of each of the last five years of the life of the Bank-issued fixed rate subordinated notes due 2026, the amount that is eligible to be included in Tier 2 capital is reduced by 20% of the original amount of the notes (net of redemptions). In 2024, the amount of the notes that qualify as Tier 2 capital has been reduced by 80%.
16
The table below summarizes the Company’s and the Bank’s actual and required capital ratios under the Basel III Capital Rules and other standards. As shown in the table below, the Company’s and Bank’s capital ratios exceeded the regulatory definition of well capitalized as of September 30, 2024 and December 31, 2023.
September 30, 2024 December 31, 2023
(dollars in thousands) Minimum Capital Required(2) Capital Required to be Well Capitalized Capital Amount Ratio Capital Amount Ratio
The Company
CET1 capital (to risk-weighted assets) 7.00 % N/A $ 3,183,035 11.19 % $ 3,264,609 12.65 %
Tier 1 capital (to risk-weighted assets) 8.50 % 6.00 % 3,593,035 12.63 % 3,674,609 14.24 %
Total capital (to risk-weighted assets) 10.50 % 10.00 % 4,315,608 15.17 % 4,405,575 17.07 %
Tier 1 capital (to average assets)(1) 4.00 % N/A 3,593,035 11.44 % 3,674,609 12.21 %
The Bank
CET1 capital (to risk-weighted assets) 7.00 % 6.50 % $ 3,570,548 12.65 % $ 3,599,919 14.01 %
Tier 1 capital (to risk-weighted assets) 8.50 % 8.00 % 3,570,548 12.65 % 3,599,919 14.01 %
Total capital (to risk-weighted assets) 10.50 % 10.00 % 3,921,007 13.89 % 3,959,100 15.41 %
Tier 1 capital (to average assets)(1) 4.00 % 5.00 % 3,570,548 11.44 % 3,599,919 12.00 %
(1)    The Tier 1 capital ratio (to average assets) is not impacted by the Basel III Capital Rules; however, the Federal Reserve Board and the FDIC may require the Company and the Bank, respectively, to maintain a Tier 1 capital ratio (to average assets) above the required minimum.
(2)    Percentages represent the minimum capital ratios plus, as applicable, the fully phased-in 2.5% CET1 capital buffer under the Basel III Capital Rules.
(8) Stock-Based Compensation
The Company has long-term incentive plans under which stock-based compensation awards are granted to employees and directors by the Company’s board of directors or its designated committee. Grants are subject to vesting requirements and may include, among other things, nonqualified stock options, stock appreciation rights, restricted stock units (“RSUs”), restricted stock and performance units, or any combination thereof.
The table below summarizes the Company’s stock-based compensation expense:
Three Months Ended September 30, Nine Months Ended September 30,
(in thousands) 2024 2023 2024 2023
Stock-settled awards:
RSUs $ 4,957 $ 4,441 $ 18,229 $ 17,948
Cash-settled units 1,496 — 2,979 —
Total $ 6,453 $ 4,441 $ 21,208 $ 17,948
(in thousands except period data) September 30, 2024
Unrecognized compensation expense related to unvested stock-settled awards $ 32,278
Weighted average period over which stock-settled awards expense is expected to be recognized, in years 1.9
Unrecognized compensation expense related to cash-settled units $ 11,039
Weighted average period over which cash-settled units expense is expected to be recognized, in years 2.4
(9) Fair Value Disclosures
The Company determines the fair market values of its assets and liabilities measured at fair value on a recurring and nonrecurring basis using the fair value hierarchy as prescribed in Accounting Standards Codification 820, Fair Value Measurements and Disclosures. See Note 1 - Operations and Summary of Significant Accounting Policies in our 2023 Form 10-K for information regarding the fair value hierarchy and a description of the methods and significant assumptions used by the Company in estimating its fair value disclosures for financial statements.
17
Assets and liabilities measured at fair value are as follows:
Fair Value Measurements Using
(in thousands) Level 1 Level 2 Level 3
September 30, 2024
Available-for-sale debt securities:(1)
U.S. Treasury securities $ 275,804 $ — $ —
Residential mortgage-backed securities — 3,230,856 —
CRT securities — — 12,002
Equity securities(1)(2) 58,140 16,286 —
Loans held for investment(4)
— — 20,709
Derivative assets(5)
— 43,030 —
Securities sold not yet purchased(6)
33,244 — —
Derivative liabilities(5)
— 31,675 —
Non-qualified deferred compensation plan liabilities(7)
18,727 — —
December 31, 2023
Available-for-sale debt securities:(1)
U.S. Treasury securities $ 636,473 $ — $ —
U.S. government agency securities — 106,592 —
Residential mortgage-backed securities — 2,470,832 —
CRT securities — — 11,995
Equity securities(1)(2) 40,661 11,164 —
Mortgage loans held for sale(3) — 706 —
Loans held for investment(4) — — 38,341
Derivative assets(5)
— 32,944 —
Securities sold not yet purchased(6)
10,602 — —
Derivative liabilities(5)
— 70,917 —
Non-qualified deferred compensation plan liabilities(7)
20,387 — —
(1) Available-for-sale debt securities and equity securities are measured at fair value on a recurring basis, generally monthly.
(2) Equity securities consist of investments that qualify for consideration under the regulations implementing the Community Reinvestment Act and investments in exchange traded funds.
(3) Loans held for sale are measured at fair value on a recurring basis, generally monthly.
(4) Includes certain collateral-dependent loans held for investment for which a specific allocation of the allowance for credit losses is based upon the fair value of the loan’s underlying collateral. These loans held for investment are measured on a nonrecurring basis, generally annually or more often as warranted by market and economic conditions.
(5) Derivative assets and liabilities are measured at fair value on a recurring basis, generally quarterly.
(6) Securities sold not yet purchased are measured at fair value on a recurring basis, generally monthly.
(7) Non-qualified deferred compensation plan liabilities represent the fair value of the obligation to the employee, which generally corresponds to the fair value of the invested assets, and are measured at fair value on a recurring basis, generally monthly.
18
Level 3 Valuations
The following table presents a reconciliation of the level 3 fair value category measured at fair value on a recurring basis:
Net Gains/(Losses)
(in thousands) Balance at Beginning of Period Purchases / Additions Sales / Reductions Realized Unrealized Balance at End of Period
Three Months Ended September 30, 2024
Available-for-sale debt securities:(1)
CRT securities $ 12,328 $ — $ ( 346 ) $ — $ 20 $ 12,002
Three Months Ended September 30, 2023
Available-for-sale debt securities:(1)
CRT securities $ 11,756 $ — $ ( 341 ) $ — $ 676 $ 12,091
Nine Months Ended September 30, 2024
Available-for-sale debt securities:(1)
CRT securities $ 11,995 $ — $ ( 846 ) $ — $ 853 $ 12,002
Nine Months Ended September 30, 2023
Available-for-sale debt securities:(1)
CRT securities $ 11,861 $ — $ ( 828 ) $ — $ 1,058 $ 12,091
(1) Unrealized gains/(losses) on available-for-sale debt securities are recorded in AOCI . Realized gains/(losses) are recorded in other non-interest income on the consolidated statements of income and other comprehensive income/(loss).
CRT securities
The fair value of CRT securities is based on a discounted cash flow model, which utilizes Level 3 inputs, the most significant of which were a discount rate and weighted-average life. At September 30, 2024, the discount rates utilized ranged from 4.52 % to 6.09 % and the weighted-average life ranged from 4.63 years to 6.91 years. On a combined amortized cost weighted-average basis a discount rate of 5.12 % and a weighted-average life of 5.50 years were utilized to determine the fair value of these securities at September 30, 2024. At December 31, 2023, the combined weighted-average discount rate and weighted-average life utilized were 6.57 % and 6.06 years, respectively.
Loans held for investment
Certain collateral-dependent loans held for investment are reported at fair value when, based upon an individual evaluation, the specific allocation of the allowance for credit losses that is deducted from the loan's amortized cost is based upon the fair value of the loan's underlying collateral. The $ 20.7 million fair value of loans held for investment at September 30, 2024 reported above includes impaired loans with a carrying value of $ 47.1 million that were reduced by specific allowance allocations totaling $ 26.4 million based on collateral valuations utilizing Level 3 inputs. The $ 38.3 million fair value of loans held for investment at December 31, 2023 reported above includes impaired loans with a carrying value of $ 58.3 million that were reduced by specific allowance allocations totaling $ 20.0 million based on collateral valuations utilizing Level 3 inputs.
19
Fair Value of Financial Instruments
A summary of the carrying amounts and estimated fair values of financial instruments is as follows:
Carrying
Amount 		Estimated Fair Value
(in thousands) Total Level 1 Level 2 Level 3
September 30, 2024
Financial assets:
Cash and cash equivalents $ 4,191,585 $ 4,191,585 $ 4,191,585 $ — $ —
Available-for-sale debt securities 3,518,662 3,518,662 275,804 3,230,856 12,002
Held-to-maturity debt securities 812,432 727,743 — 727,743 —
Equity securities 74,426 74,426 58,140 16,286 —
Loans held for sale 9,022 9,022 — 9,022 —
Loans held for investment, net 22,021,028 21,978,258 — — 21,978,258
Derivative assets 43,030 43,030 — 43,030 —
Financial liabilities:
Total deposits 25,865,255 25,873,387 — — 25,873,387
Short-term borrowings 1,035,000 1,035,000 — 1,035,000 —
Long-term debt 660,172 624,776 — 624,776 —
Securities sold not yet purchased 33,244 33,244 33,244 — —
Derivative liabilities 31,675 31,675 — 31,675 —
December 31, 2023
Financial assets:
Cash and cash equivalents $ 3,242,850 $ 3,242,850 $ 3,242,850 $ — $ —
Available-for-sale debt securities 3,225,892 3,225,892 636,473 2,577,424 11,995
Held-to-maturity debt securities 865,477 763,844 — 763,844 —
Equity securities 51,825 51,825 40,661 11,164 —
Loans held for sale 44,105 44,105 15,000 29,105 —
Loans held for investment, net 20,090,585 20,050,974 — — 20,050,974
Derivative assets 32,944 32,944 — 32,944 —
Financial liabilities:
Total deposits 22,371,839 22,379,452 — — 22,379,452
Short-term borrowings 1,500,000 1,500,000 — 1,500,000 —
Long-term debt 859,147 801,309 — 801,309 —
Securities sold not yet purchased 10,602 10,602 10,602 — —
Derivative liabilities 70,917 70,917 — 70,917 —
20
(10) Derivative Financial Instruments
The notional amounts and estimated fair values of derivative positions outstanding are presented in the following table.
September 30, 2024 December 31, 2023
Estimated Fair Value Estimated Fair Value
(in thousands) Notional
Amount 		Asset Derivative Liability Derivative Notional
Amount 		Asset Derivative Liability Derivative
Derivatives designated as hedges
Cash flow hedges:
Interest rate contracts:
Swaps hedging loans $ 2,850,000 $ 964 $ 25,745 $ 2,850,000 $ 668 $ 57,961
Non-hedging derivatives
Customer-initiated and other derivatives:
Foreign currency forward contracts 382,981 3,946 3,743 4,824 52 31
Interest rate contracts:
Swaps 5,938,223 51,466 51,466 5,673,822 65,247 69,863
Caps and floors written 778,995 2,074 1,320 637,971 1,654 2,228
Caps and floors purchased 778,995 1,320 2,034 637,971 2,228 1,654
Forward contracts 22,299,994 38,529 37,167 8,665,675 39,123 38,570
Gross derivatives 98,299 121,475 108,972 170,307
Netting adjustment - offsetting derivative assets/liabilities ( 38,072 ) ( 38,072 ) ( 37,346 ) ( 37,346 )
Netting adjustment - cash collateral received/posted ( 17,197 ) ( 51,728 ) ( 38,682 ) ( 62,044 )
Net derivatives included on the consolidated balance sheets $ 43,030 $ 31,675 $ 32,944 $ 70,917
The Company’s credit exposure on derivative instruments is limited to the net favorable value and interest payments by each counterparty. In some cases, collateral may be required from the counterparties involved if the net value of the derivative instruments exceeds a nominal amount. The Company’s credit exposure associated with these instruments, net of any collateral pledged, was approximately $ 43.0 million at September 30, 2024 and approximately $ 32.9 million at December 31, 2023. Collateral levels are monitored and adjusted on a regular basis for changes in the value of derivative instruments. At September 30, 2024, the Company had $ 101.5 million in cash collateral pledged to counterparties included in interest bearing cash and cash equivalents on the consolidated balance sheet and $ 17.7 million in cash collateral received from counterparties included in interest bearing deposits on the consolidated balance sheet. The comparative amounts at December 31, 2023, were $ 119.0 million in cash collateral pledged to counterparties and $ 42.3 million cash collateral received from counterparties.
The Company also enters into credit risk participation agreements with financial institution counterparties for interest rate swaps related to loans in which the Company is either a participant or a lead bank. The risk participation agreements entered into by the Company as a participant bank provide credit protection to the financial institution counterparty should the borrower fail to perform on its interest rate derivative contract with that financial institution. The Company is party to 16 risk participation agreements where it acts as a participant bank with a notional amount of $ 219.0 million at September 30, 2024, compared to 14 risk participation agreements with a notional amount of $ 230.7 million at December 31, 2023. The maximum estimated exposure to these agreements, assuming 100% default by all obligors, was approximately $ 2.3 million at September 30, 2024 and $ 4.5 million at December 31, 2023. The fair value of these exposures was insignificant to the consolidated financial statements at both September 30, 2024 and December 31, 2023. Risk participation agreements entered into by the Company as the lead bank provide credit protection should the borrower fail to perform on its interest rate derivative contract. The Company is party to 19 risk participation agreements where the Company acts as the lead bank having a notional amount of $ 253.0 million at September 30, 2024, compared to 15 agreements having a notional amount of $ 204.8 million at December 31, 2023.
Derivatives Designated as Cash Flow Hedges
The Company enters into interest rate derivative contracts that are designated as qualifying cash flow hedges to hedge the exposure to variability in expected future cash flows attributable to changes in a contractually specified interest rate.
During the nine months ended September 30, 2024, the Company recorded $ 17.8 million in unrealized losses to adjust its cash flow hedges to fair value, which was recorded net of tax to AOCI, and reclassified $ 54.4 million from AOCI as a decrease to interest income on loans. Based on current market conditions, the Company estimates that during the next 12 months, an additional $ 26.0 million related to active and terminated hedges will be reclassified from AOCI as a decrease to interest income. As of September 30, 2024, the maximum length of time over which forecasted transactions are hedged is 1.42 years.
21
(11) Accumulated Other Comprehensive Income
The following table provides the change in AOCI by component:
(in thousands) Cash Flow Hedges Available-for-Sale Securities Held-to-Maturity Securities Total
Three Months Ended September 30, 2024
Beginning balance $ ( 45,215 ) $ ( 283,559 ) $ ( 38,958 ) $ ( 367,732 )
Change in unrealized gain/(loss) 18,849 91,000 — 109,849
Amounts reclassified into net income 18,251 179,581 1,767 199,599
Total other comprehensive income/(loss) 37,100 270,581 1,767 309,448
Income tax expense/(benefit) 8,377 61,097 399 69,873
Total other comprehensive income/(loss), net of tax 28,723 209,484 1,368 239,575
Ending balance $ ( 16,492 ) $ ( 74,075 ) $ ( 37,590 ) $ ( 128,157 )
Three Months Ended September 30, 2023
Beginning balance $ ( 81,785 ) $ ( 313,196 ) $ ( 45,327 ) $ ( 440,308 )
Change in unrealized gain/(loss) ( 20,572 ) ( 81,758 ) — ( 102,330 )
Amounts reclassified into net income 17,378 — 1,907 19,285
Total other comprehensive income/(loss) ( 3,194 ) ( 81,758 ) 1,907 ( 83,045 )
Income tax expense/(benefit) ( 671 ) ( 17,170 ) 400 ( 17,441 )
Total other comprehensive income/(loss), net of tax ( 2,523 ) ( 64,588 ) 1,507 ( 65,604 )
Ending balance $ ( 84,308 ) $ ( 377,784 ) $ ( 43,820 ) $ ( 505,912 )
Nine Months Ended September 30, 2024
Beginning balance $ ( 45,749 ) $ ( 273,806 ) $ ( 42,449 ) $ ( 362,004 )
Change in unrealized gain/(loss) ( 17,762 ) 71,329 — 53,567
Amounts reclassified into net income 54,371 179,581 5,180 239,132
Total other comprehensive income/(loss) 36,609 250,910 5,180 292,699
Income tax expense/(benefit) 7,352 51,179 321 58,852
Total other comprehensive income/(loss), net of tax 29,257 199,731 4,859 233,847
Ending balance $ ( 16,492 ) $ ( 74,075 ) $ ( 37,590 ) $ ( 128,157 )
Nine Months Ended September 30, 2023
Beginning balance $ ( 66,394 ) $ ( 304,309 ) $ ( 48,240 ) $ ( 418,943 )
Change in unrealized gain/(loss) ( 66,101 ) ( 92,518 ) — ( 158,619 )
Amounts reclassified into net income 43,426 ( 489 ) 5,594 48,531
Total other comprehensive income/(loss) ( 22,675 ) ( 93,007 ) 5,594 ( 110,088 )
Income tax expense/(benefit) ( 4,761 ) ( 19,532 ) 1,174 ( 23,119 )
Total other comprehensive income/(loss), net of tax ( 17,914 ) ( 73,475 ) 4,420 ( 86,969 )
Ending balance $ ( 84,308 ) $ ( 377,784 ) $ ( 43,820 ) $ ( 505,912 )
22
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of the Company’s financial condition and results of operations for the nine months ended September 30, 2024 and 2023 should be read in conjunction with its audited consolidated financial statements and the related notes to the consolidated financial statements included in 2023 Form 10-K. Operating results for the three and nine months ended September 30, 2024 are not necessarily indicative of the results for the year ending December 31, 2024 or any future period.
Forward-Looking Statements
This report contains “forward-looking statements” within the meaning of and pursuant to the Private Securities Litigation Reform Act of 1995 regarding, among other things, the Company’s financial condition, results of operations, business plans and future performance. These statements are not historical in nature and may often be identified by the use of words such as “believes,” “projects,” “expects,” “may,” “estimates,” “should,” “plans,” “targets,” “intends” “could,” “would,” “anticipates,” “potential,” “confident,” “optimistic” or the negative thereof, or other variations thereon, or comparable terminology, or by discussions of strategy, objectives, estimates, trends, guidance, expectations and future plans.
Because forward-looking statements relate to future results and occurrences, they are subject to inherent and various uncertainties, risks, and changes in circumstances that are difficult to predict, may change over time, are based on management’s expectations and assumptions at the time the statements are made and are not guarantees of future results. Numerous risks and other factors, many of which are beyond management’s control, could cause actual results to differ materially from future results expressed or implied by such forward-looking statements. While there can be no assurance that any list of risks is complete, important risks and other factors that could cause actual results to differ materially from those contemplated by forward-looking statements include, but are not limited to, economic or business conditions in Texas, the United States, or globally that impact TCBI or its customers; negative credit quality developments arising from the foregoing or other factors; TCBI’s ability to effectively manage its liquidity and maintain adequate regulatory capital to support its businesses; TCBI’s ability to pursue and execute upon growth plans, whether as a function of capital, liquidity, or other limitations; TCBI’s ability to successfully execute its business strategy, including its strategic plan and developing and executing new lines of business and new products and services; the extensive regulations to which TCBI is subject and its ability to comply with applicable governmental regulations, including legislative and regulatory changes; TCBI’s ability to effectively manage information technology systems, including third party vendors, cyber or data privacy incidents, or other failures, disruptions or security breaches; elevated or further changes in interest rates, including the impact of interest rates on TCBI’s securities portfolio and funding costs, as well as related balance sheet implications stemming from the fair value of our assets and liabilities; the effectiveness of TCBI’s risk management processes, strategies and monitoring; fluctuations in commercial and residential real estate values, especially as they relate to the value of collateral supporting TCBI’s loans; the failure to identify, attract, and retain key personnel and other employees; increased or expanded competition from banks and other financial service providers in TCBI’s markets; adverse developments in the banking industry and the potential impact of such developments on customer confidence, liquidity and regulatory responses to these developments, including in the context of regulatory examinations and related findings and actions; negative press and social media attention with respect to the banking industry or TCBI, in particular; claims, litigation or regulatory investigations and actions that TCBI may become subject to; severe weather, natural disasters, climate change, acts of war, terrorism, global conflict (including those already reported by the media, as well as others that may arise), or other external events, as well as related legislative and regulatory initiatives; and the risks and factors more fully described in TCBI’s most recent Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, and other documents and filings with the SEC. The information contained in this communication speaks only as of its date. Except to the extent required by applicable law or regulation, we disclaim any obligation to update such factors or to publicly announce the results of any revisions to any of the forward-looking statements included herein to reflect future events or developments.
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Results of Operations
Selected income statement data and key performance indicators are presented in the table below:
Three Months Ended September 30, Nine Months Ended September 30,
(dollars in thousands except per share data) 2024 2023 2024 2023
Net interest income $ 240,102 $ 232,071 $ 671,693 $ 699,406
Provision for credit losses 10,000 18,000 49,000 53,000
Non-interest income (114,771) 46,872 (23,028) 130,286
Non-interest expense 195,324 179,891 586,126 555,562
Income/(loss) before income taxes (79,993) 81,052 13,539 221,130
Income tax expense/(benefit) (18,674) 19,373 7,054 52,139
Net income/(loss) (61,319) 61,679 6,485 168,991
Preferred stock dividends 4,313 4,313 12,938 12,938
Net income/(loss) available to common stockholders $ (65,632) $ 57,366 $ (6,453) $ 156,053
Basic earnings/(loss) per common share $ (1.42) $ 1.19 $ (0.14) $ 3.24
Diluted earnings/(loss) per common share $ (1.41) $ 1.18 $ (0.14) $ 3.20
Net interest margin 3.16 % 3.13 % 3.07 % 3.25 %
Return on average assets (“ROA”) (0.78) % 0.81 % 0.03 % 0.77 %
Return on average common equity (“ROE”) (8.87) % 8.08 % (0.30) % 7.46 %
Efficiency ratio(1) 155.8 % 64.5 % 90.4 % 67.0 %
Non-interest income to average earning assets (1.52) % 0.64 % (0.11) % 0.61 %
Non-interest expense to average earning assets 2.59 % 2.46 % 2.71 % 2.61 %
(1)    Non-interest expense divided by the sum of net interest income and non-interest income.
Three months ended September 30, 2024 compared to three months ended September 30, 2023
The Company reported net loss of $61.3 million and net loss available to common stockholders of $65.6 million for the third quarter of 2024, compared to net income of $61.7 million and net income available to common stockholders of $57.4 million for the third quarter of 2023. On a fully diluted basis, earnings/(loss) per common share was $(1.41) for the third quarter of 2024, compared to $1.18 for the same period in 2023. ROE was (8.87)% and ROA was (0.78)% for the third quarter of 2024, compared to 8.08% and 0.81%, respectively, for the same period in 2023. The decrease in net income for the third quarter of 2024 compared to the third quarter of 2023 resulted primarily from a decrease in non-interest income, resulting primarily from the $179.6 million loss on sale of available-for-sale debt securities during the third quarter of 2024.
Nine months ended September 30, 2024 compared to nine months ended September 30, 2023
The Company reported net income of $6.5 million and net loss available to common stockholders of $6.5 million for the nine months ended September 30, 2024, compared to net income of $169.0 million and net income available to common stockholders of $156.1 million for the same period in 2023. On a fully diluted basis, earnings/(loss) per common share was $(0.14) for the nine months ended September 30, 2024, compared to $3.20 for the same period in 2023. ROE was (0.30)% and ROA was 0.03% for the nine months ended September 30, 2024, compared to 7.46% and 0.77%, respectively, for the same period in 2023. The decrease in net income for the nine months ended September 30, 2024 compared to the same period in 2023 resulted primarily from a decrease in non-interest income, also primarily as a result of the loss on sale of available-for-sale debt securities described above.
Details of the changes in the various components of net income are discussed below.

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Taxable Equivalent Net Interest Income Analysis - Quarterly(1)

Three Months Ended September 30, 2024 Three Months Ended September 30, 2023
(in thousands except percentages) Average
Balance 		Income/
Expense 		Yield/
Rate 		Average
Balance 		Income/
Expense 		Yield/
Rate
Assets
Investment securities(2) $ 4,314,834 $ 38,389 3.34 % $ 4,204,749 $ 27,070 2.33 %
Interest bearing cash and cash equivalents
3,958,843 52,737 5.30 % 3,965,045 53,561 5.36 %
Loans held for sale 23,793 565 9.44 % 31,878 647 8.06 %
Loans held for investment, mortgage finance(4) 5,152,317 54,371 4.20 % 4,697,702 50,813 4.29 %
Loans held for investment(3)(4) 16,792,446 306,541 7.26 % 16,317,324 293,750 7.14 %
Less: Allowance for credit losses on loans 266,915 — — 238,883 — —
Loans held for investment, net 21,677,848 360,912 6.62 % 20,776,143 344,563 6.58 %
Total earning assets 29,975,318 452,603 5.96 % 28,977,815 425,841 5.75 %
Cash and other assets 1,239,855 1,106,031
Total assets $ 31,215,173 $ 30,083,846
Liabilities and Stockholders’ Equity
Transaction deposits $ 1,988,688 $ 15,972 3.20 % $ 1,755,451 $ 13,627 3.08 %
Savings deposits 12,240,616 147,770 4.80 % 10,858,306 127,323 4.65 %
Time deposits 2,070,537 26,513 5.09 % 1,610,235 19,167 4.72 %
Total interest bearing deposits 16,299,841 190,255 4.64 % 14,223,992 160,117 4.47 %
Short-term borrowings 1,012,608 13,784 5.42 % 1,393,478 19,576 5.57 %
Long-term debt 660,098 8,392 5.06 % 858,167 14,005 6.47 %
Total interest bearing liabilities 17,972,547 212,431 4.70 % 16,475,637 193,698 4.66 %
Non-interest bearing deposits 9,439,020 10,016,579
Other liabilities 558,368 474,869
Stockholders’ equity 3,245,238 3,116,761
Total liabilities and stockholders’ equity $ 31,215,173 $ 30,083,846
Net interest income $ 240,172 $ 232,143
Net interest margin 3.16 % 3.13 %
(1) Taxable equivalent rates used where applicable.
(2) Yields on investment securities are calculated using available-for-sale securities at amortized cost.
(3) Average balances included non-accrual loans.
(4) In the first quarter of 2024, enhancements were made to our methodology for applying relationship pricing credits to mortgage client loans. 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.
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Taxable Equivalent Net Interest Income Analysis - Year to Date(1)
Nine Months Ended September 30, 2024 Nine Months Ended September 30, 2023
(dollars in thousands) Average
Balance 		Revenue /
Expense 		Yield /
Rate 		Average
Balance 		Revenue /
Expense 		Yield /
Rate
Assets
Investment securities(2) $ 4,346,957 $ 104,117 2.97 % $ 4,191,224 $ 79,840 2.33 %
Interest bearing cash and cash equivalents 3,761,901 150,325 5.34 % 4,258,385 157,568 4.95 %
Loans held for sale 34,536 2,432 9.41 % 34,546 2,184 8.45 %
Loans held for investment, mortgage finance(4)
4,345,393 128,548 3.95 % 4,125,415 137,657 4.46 %
Loans held for investment(3)(4)
16,688,820 906,757 7.26 % 16,047,129 835,946 6.96 %
Less: Allowance for credit losses on loans 260,024 — — 250,828 — —
Loans held for investment, net
20,774,189 1,035,305 6.66 % 19,921,716 973,603 6.53 %
Total earning assets 28,917,583 1,292,179 5.90 % 28,405,871 1,213,195 5.63 %
Cash and other assets 1,158,758 1,065,875
Total assets $ 30,076,341 $ 29,471,746
Liabilities and Stockholders’ Equity
Transaction deposits $ 2,018,824 $ 49,812 3.30 % $ 1,296,150 $ 26,948 2.78 %
Savings deposits 11,878,646 427,733 4.81 % 10,880,187 347,305 4.27 %
Time deposits 1,817,182 69,590 5.12 % 1,524,929 43,349 3.80 %
Total interest bearing deposits 15,714,652 547,135 4.65 % 13,701,266 417,602 4.08 %
Short-term borrowings 950,876 39,316 5.52 % 1,345,089 52,573 5.23 %
Long-term debt 765,616 33,835 5.90 % 891,008 43,270 6.49 %
Total interest bearing liabilities 17,431,144 620,286 4.75 % 15,937,363 513,445 4.31 %
Non-interest bearing deposits 8,910,067 10,005,603
Other liabilities 535,221 433,689
Stockholders’ equity 3,199,909 3,095,091
Total liabilities and stockholders’ equity $ 30,076,341 $ 29,471,746
Net interest income $ 671,893 $ 699,750
Net interest margin 3.07 % 3.25 %
(1) Taxable equivalent rates used where applicable.
(2) Yields on investment securities are calculated using available-for-sale securities at amortized cost.
(3) Average balances included non-accrual loans.
(4) In the first quarter of 2024, enhancements were made to our methodology for applying relationship pricing credits to mortgage client loans. 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.
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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.
Three Months Ended September 30, 2024/2023
Nine Months Ended September 30, 2024/2023
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 $ 11,319 $ 647 $ 10,672 $ 24,277 $ 2,730 $ 21,547
Interest bearing cash and cash equivalents (824) (84) (740) (7,243) (17,222) 9,979
Loans held for sale (82) (164) 82 248 11 237
Loans held for investment, mortgage finance 3,558 4,916 (1,358) (9,109) 7,362 (16,471)
Loans held for investment 12,791 8,551 4,240 70,811 33,375 37,436
Total interest income 26,762 13,866 12,896 78,984 26,256 52,728
Interest expense
Transaction deposits 2,345 1,811 534 22,864 13,008 9,856
Savings deposits 20,447 16,201 4,246 80,428 33,265 47,163
Time deposits 7,346 5,476 1,870 26,241 8,758 17,483
Short-term borrowings (5,792) (5,347) (445) (13,257) (15,454) 2,197
Long-term debt (5,613) (3,230) (2,383) (9,435) (6,109) (3,326)
Total interest expense 18,733 14,911 3,822 106,841 33,468 73,373
Net interest income $ 8,029 $ (1,045) $ 9,074 $ (27,857) $ (7,212) $ (20,645)
(1) Yield/rate and volume variances are allocated to yield/rate.
(2) Taxable equivalent rates used where applicable.

Net Interest Income
Net interest income was $240.1 million for the three months ended September 30, 2024, compared to $232.1 million for the same period in 2023. The increase was primarily due to increases in average total LHI and yields on average earning assets, partially offset by an increase in average interest bearing liabilities.
Average earning assets for the three months ended September 30, 2024 increased $997.5 million compared to the same period in 2023, which included increases of $901.7 million in average total loans held for investment and $110.1 million in average investment securities, partially offset by a $6.2 million decrease in average interest bearing cash and cash equivalents. Average interest bearing liabilities increased $1.5 billion for the three months ended September 30, 2024 compared to the same period in 2023, primarily due to a $2.1 billion increase in average interest bearing deposits, partially offset by decreases of $380.9 million in average short-term borrowings and $198.1 million in average long-term debt. Average non-interest bearing deposits for the three months ended September 30, 2024 decreased to $9.4 billion from $10.0 billion for the same period in 2023.
Net interest margin for the three months ended September 30, 2024 was 3.16%, compared to 3.13% for the same period in 2023. The increase in net interest margin was primarily due to an increase in yields on investment securities, partially offset by an increase in the cost of interest bearing deposits. The increases in yields on earnings assets and cost of funds are attributed to the impact of rising interest rates.
The yield on total loans held for investment increased to 6.62% for the three months ended September 30, 2024, compared to 6.58% for the same period in 2023, and the yield on earning assets increased to 5.96% for the three months ended September 30, 2024, compared to 5.75% for the same period in 2023. Total cost of deposits increased to 2.94% for the three months ended September 30, 2024 from 2.62% for the same period in 2023, and total funding costs, including non-interest bearing deposits and stockholders' equity, increased to 2.76% for the three months ended September 30, 2024, compared to 2.60% for the same period in 2023.
Net interest income was $671.7 million for the nine months ended September 30, 2024, compared to $699.4 million for the same period in 2023. The decrease was primarily due to increases in the cost of interest bearing deposits and average interest bearing deposits, partially offset by an increase in yields on average earnings assets and an increase in average total loans held for investment.
Average earning assets increased $511.7 million for the nine months ended September 30, 2024, compared to the same period in 2023, which included increases of $852.5 million in average total loans held for investment and $155.7 million in average
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investment securities, partially offset by a decrease of $496.5 million in average interest bearing cash and cash equivalents. Average interest bearing liabilities increased $1.5 billion for the nine months ended September 30, 2024, compared to the same period in 2023, primarily due to an increase of $2.0 billion in average interest bearing deposits, partially offset by a $394.2 million decrease in average short-term borrowings and $125.4 million decrease in average long-term debt. Average non-interest bearing deposits for the nine months ended September 30, 2024 decreased to $8.9 billion from $10.0 billion for the same period in 2023.
Net interest margin for the nine months ended September 30, 2024 was 3.07%, compared to 3.25% for the same period of 2023. The decrease was primarily due to the effect of rising interest rates on the cost of interest bearing deposits, partially offset by higher earning asset yields, also as a result of rising interest rates, compared to the same period in 2023.
The yield on total loans held for investment increased to 6.66% for the nine months ended September 30, 2024, compared to 6.53% for the same period in 2023, and the yield on earning assets increased to 5.90% for the nine months ended September 30, 2024, compared to 5.63% for the same period in 2023. Total cost of deposits increased to 2.97% for the nine months ended September 30, 2024 from 2.36% for the same period in 2023 and total funding costs, including non-interest bearing deposits and stockholders' equity, increased to 2.80% for the nine months ended September 30, 2024, compared to 2.36% for the same period in 2023.
Non-interest Income
Three Months Ended September 30, Nine Months Ended September 30,
(in thousands) 2024 2023 2024 2023
Service charges on deposit accounts $ 6,307 $ 5,297 $ 18,557 $ 15,477
Wealth management and trust fee income 4,040 3,509 11,306 10,653
Brokered loan fees 2,400 2,532 6,442 6,842
Investment banking and advisory fees 34,753 23,099 78,225 56,764
Trading income 5,786 6,092 16,148 18,693
Available-for-sale debt securities gains/(losses), net
(179,581) — (179,581) 489
Other 11,524 6,343 25,875 21,368
Total non-interest income $ (114,771) $ 46,872 $ (23,028) $ 130,286
Non-interest income decreased $161.6 million during the three months ended September 30, 2024, compared to the same period in 2023. The decrease was 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 increases in investment banking and advisory fees and other non-interest income.
Non-interest income decreased $153.3 million during the nine months ended September 30, 2024, compared to $130.3 million for 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.
Non-interest Expense
Three Months Ended September 30, Nine Months Ended September 30,
(in thousands) 2024 2023 2024 2023
Salaries and benefits $ 121,138 $ 110,010 $ 368,705 $ 351,730
Occupancy expense 12,937 9,910 33,340 29,011
Marketing 5,863 4,757 17,895 20,168
Legal and professional 11,135 17,614 38,603 47,797
Communications and technology 25,951 19,607 69,078 57,655
Federal Deposit Insurance Corporation (“FDIC”) insurance assessment 4,906 5,769 18,897 11,632
Other 13,394 12,224 39,608 37,569
Total non-interest expense $ 195,324 $ 179,891 $ 586,126 $ 555,562
Non-interest expense increased $15.4 million during the three months ended September 30, 2024, compared to the same period in 2023. The increase was primarily due to increases in salaries and benefits, occupancy expense and communications and technology expense, partially offset by a decrease in legal and professional expense. The third quarter of 2024 included restructuring expenses of $2.4 million recorded in salaries and benefits, $476,000 recorded in occupancy expense and $3.1 million recorded in communications and technology expense. The third quarter of 2024 also included a $651,000 release of FDIC special assessment accrual.
Non-interest expense for the nine months ended September 30, 2024 increased $30.6 million, compared to the same period in 2023, primarily due to increases in salaries and benefits, communications and technology expense and FDIC insurance
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assessment, partially offset by a decrease in legal and professional expense. Non-interest expense for the nine months ended September 30, 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, as well as $2.8 million in FDIC special assessment expense. The decrease in legal and professional expense for the nine months ended September 30, 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.
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 2023 Form 10-K for details of these portfolio segments.
(in thousands) September 30, 2024 December 31, 2023
Commercial $ 10,967,807 $ 10,410,766
Mortgage finance 5,529,659 3,978,328
Commercial real estate 5,314,814 5,500,774
Consumer
568,962 530,948
Gross loans held for investment
22,381,242 20,420,816
Unearned income (net of direct origination costs)
(87,071) (80,258)
Total loans held for investment $ 22,294,171 $ 20,340,558
Total loans held for investment were $22.3 billion at September 30, 2024, an increase of $2.0 billion from December 31, 2023. The Company experienced loan growth in all loan categories, except for commercial real estate, 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 quarter of 2024. 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 25% and 19% of gross loans held for investment at September 30, 2024 and December 31, 2023, respectively. Volumes fluctuate based on the level of market demand for the product and the number of days between purchase and sale of the loans, which can be affected by changes in overall market interest rates, and tend to peak at the end of each month.
The Company originates a substantial majority of all loans held for investment. The Company also participates in shared national credits, both as a participant and as an agent. As of September 30, 2024, the Company had $5.3 billion in shared national credits, $1.0 billion of which the Company administered as agent. 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 September 30, 2024, approximately $16.5 million of the Company’s shared national credits were on non-accrual.
Portfolio Concentrations
Although more than 50% of the Company’s total loan exposure is outside of Texas and more than 50% of deposits are sourced outside of Texas, Texas concentration remains significant. As of September 30, 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. The risks created by this concentration have been considered by management in the determination of the appropriateness of the allowance for credit losses.
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Non-performing Assets
Non-performing assets include non-accrual loans and leases, and repossessed assets. The table below summarizes non-accrual loans by portfolio segment and by type of property securing the credit.
(dollars in thousands) September 30, 2024 December 31, 2023
Non-accrual loans held for investment
Commercial:
Business assets $ 72,977 $ 63,094
Oil and gas properties 908 2,543
Accounts receivable and inventory 6,751 —
Machinery and equipment
2,948 3,332
Unsecured 8 79
Highly liquid assets 1,483 —
Other 738 —
Total commercial 85,813 69,048
Commercial real estate:
Hotel/motel — 12,350
Commercial property 2,183 —
Total commercial real estate 2,183 12,350
Consumer:
Single family residences 964 —
Total consumer 964 —
Total non-accrual loans held for investment 88,960 81,398
Non-accrual loans held for sale — —
Other real estate owned (“OREO”) — —
Total non-performing assets $ 88,960 $ 81,398
Non-accrual loans held for investment to total loans held for investment 0.40 % 0.40 %
Total non-performing assets to total assets 0.28 % 0.29 %
Allowance for credit losses on loans to non-accrual loans held for investment 3.1x 3.1x
Loans held for investment past due 90 days and accruing $ 5,281 $ 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 of $49.0 million for the nine months ended September 30, 2024, compared to a provision of $53.0 million for the nine months ended September 30, 2023. The provision for credit losses for the nine months ended September 30, 2024 reflects growth in loans held for investment and $28.8 million in net charge-offs recorded during the nine months ended September 30, 2024. The Company recorded $28.8 million in net charge-offs during the nine months ended September 30, 2024, compared to $37.1 million in net charge-offs during the same period in 2023. Criticized loans totaled $897.7 million at September 30, 2024, compared to $738.2 million at December 31, 2023.
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The table below presents key metrics related to the Company’s credit loss experience:
September 30, 2024 September 30, 2023
Allowance for credit losses on loans to total loans held for investment 1.23 % 1.19 %
Allowance for credit losses on loans to average total loans held for investment(1) 1.30 % 1.21 %
Total allowance for credit losses to total loans held for investment 1.43 % 1.41 %
Total provision for credit losses to average total loans held for investment(1)(2) 0.31 % 0.35 %
(1) Ratios are calculated using average balance for the nine months ended September 30, 2024 and 2023, respectively.
(2) Ratios are annualized utilizing provision for credit losses for the nine months ended September 30, 2024 and 2023, respectively.
The table below details net charge-offs/(recoveries) as a percentage of average total loans by portfolio segment:
Nine Months Ended September 30,
2024 2023
(dollars in thousands) Net
Charge-offs 		Net Charge-offs
to Average
Loans(1) 		Net
Charge-offs 		Net Charge-offs
to Average
Loans(1)
Commercial $ 23,074 0.29 % $ 37,054 0.48 %
Mortgage finance — — % — — %
Commercial real estate 5,698 0.13 % — — %
Consumer 30 0.01 % 36 0.01 %
Total $ 28,802 0.18 % $ 37,090 0.25 %
(1) Ratios are calculated using net charge-offs for the nine months ended September 30, 2024 and 2023, respectively.
Liquidity and Capital Resources
Liquidity
In general terms, liquidity is a measurement of the Company’s ability to meet its cash needs. The Company’s objectives in managing its liquidity are to maintain the ability to meet loan commitments, repurchase investment securities and repay deposits and other liabilities in accordance with their terms, without an adverse impact on current or future earnings. The Company’s liquidity strategy is guided by policies, formulated and monitored by senior management and the Asset and Liability Management Committee (“ALCO”), which take into account the demonstrated marketability of the Company’s assets, the sources and stability of its funding and the level of unfunded commitments. 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 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 following table summarizes the Company’s interest bearing cash and cash equivalents:
(dollars in thousands) September 30, 2024 December 31, 2023
Interest bearing cash and cash equivalents $ 3,894,537 $ 3,042,357
Interest bearing cash and cash equivalents as a percent of:
Total loans held for investment 17.5 % 15.0 %
Total earning assets 12.8 % 11.1 %
Total deposits 15.1 % 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 principally through development of long-term customer relationships, with a significant focus on treasury management products. In addition, the Company also has access to deposits through brokered channels. The following table summarizes period-end total deposits:
September 30, 2024 December 31, 2023
(dollars in thousands) Balance % of Total Balance % of Total
Customer deposits $ 25,346,842 98.0 % $ 21,454,568 95.9 %
Brokered deposits 518,413 2.0 % 917,271 4.1 %
Total deposits $ 25,865,255 100.0 % $ 22,371,839 100.0 %
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Estimated uninsured assessable deposits, including accrued interest, were 40% of total deposits at September 30, 2024, compared to 43% of total deposits at December 31, 2023. 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. These borrowing sources include federal funds purchased from downstream correspondent bank relationships (which consist of banks that are smaller than the Bank) and from upstream correspondent bank relationships (which consist of banks that are larger than the Bank), customer repurchase agreements and advances from the FHLB and the Federal Reserve. The following table summarizes short-term borrowings, all of which mature within one year:
(in thousands) September 30, 2024 December 31, 2023
Repurchase agreements $ — $ —
FHLB borrowings 1,035,000 1,500,000
Total short-term and other borrowings $ 1,035,000 $ 1,500,000
The following table summarizes the Company’s short-term borrowing capacities net of balances outstanding:
(in thousands) September 30, 2024 December 31, 2023
FHLB borrowing capacity relating to loans and pledged securities $ 4,544,368 $ 2,602,092
FHLB borrowing capacity relating to unencumbered securities 4,233,977 3,737,615
Total FHLB borrowing capacity(1) $ 8,778,345 $ 6,339,707
Unused federal funds lines available from commercial banks $ 1,203,000 $ 1,188,000
Unused Federal Reserve borrowings capacity $ 4,561,828 $ 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 assets and certain pledged securities.
(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 nine months ended September 30, 2024 or 2023.
The Company has long-term debt outstanding of $660.2 million as of September 30, 2024, comprised of trust preferred securities and subordinated notes with maturity dates ranging from January 2026 to December 2036. See Note 5 - 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 may consider raising additional capital, if needed, in public or private offerings of debt or equity securities to supplement deposits and meet its long-term funding needs.
As the Company is a holding company and is a separate operating entity from the Bank, the Company’s primary sources of liquidity are dividends received from the Bank and borrowings from outside sources. Banking regulations may limit the amount of dividends that may be paid by the Bank. See Note 7 - 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 2023 Form 10-K.
Periodically, based on market conditions and other factors, and subject to compliance with applicable laws and regulations and the terms of its existing indebtedness, the Company may repay, repurchase, exchange or redeem outstanding indebtedness, or otherwise enter into transactions regarding debt or capital structure. For example, the Company periodically evaluates and may engage in liability management transactions, including repurchases or redemptions of outstanding subordinated notes, which may be funded by the issuance of, or exchanges of, newly issued unsecured borrowings to actively manage the debt maturity profile and interest cost.
Capital Resources
The Company’s equity capital averaged $3.2 billion for the nine months ended September 30, 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.
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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. Remaining repurchase authorization under the January 18, 2023 share repurchase program was terminated upon authorization of this new program. 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. 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 share repurchase program is set to expire on January 31, 2025, and the program may be suspended or discontinued at any time. During the nine months ended September 30, 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.
Critical Accounting Estimates
SEC guidance requires disclosure of “critical accounting estimates.” The SEC defines “critical accounting estimates” as those estimates made in accordance with generally accepted accounting principles that involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on the financial condition or results of operations of the registrant.
The Company follows financial accounting and reporting policies that are in accordance with accounting principles generally accepted in the United States. The more significant of these policies are summarized in Note 1 - Operations and Summary of Significant Accounting Policies in the notes to the consolidated financial statements included in the Company’s 2023 Form 10-K. 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. The total allowance for credit losses includes activity related to allowances calculated in accordance with Accounting Standards Codification 326, Credit Losses . The allowance for credit losses is established through a provision for credit losses charged to current earnings. The amount maintained in the allowance reflects management’s continuing evaluation of the credit losses expected to be recognized over the life of the loans in the Company’s portfolio. The allowance for credit losses on loans is a valuation account that is deducted from the loans' amortized cost basis to present the net amount expected to be collected on the loans. The allowance for credit losses on off-balance sheet financial instruments is recorded in other liabilities on the consolidated balance sheets. For purposes of determining the allowance for credit losses, the loan portfolio is segregated into pools first by portfolio segment and then by past due status or credit grade. Each pool is assigned a loss estimate, reflecting historical loss rates that incorporate probability of default and severity of losses over the estimated remaining life of the loans. Loans that do not share risk characteristics are evaluated on an individual basis and are not included in the collective (pool) evaluation. Management estimates the allowance balance using relevant available information from internal and external sources relating to past events, current conditions and reasonable and supportable forecasts. Modifications to loss estimates are made to incorporate a reasonable and supportable forecast of future losses at the pool level, as well as any necessary qualitative adjustments using a Portfolio Level Qualitative Factor (“PLQF”) and/or a Portfolio Segment Level Qualitative Factor (“SLQF”). A similar process is employed to calculate a reserve assigned to off-balance sheet financial instruments, specifically unfunded loan commitments and letters of credit. Modified loss estimates are assigned based on the balance of the commitments estimated to be outstanding at the time of default. The PLQF and SLQF are utilized to address factors that are not present in historical loss rates and are otherwise unaccounted for in the quantitative process. A reserve is recorded upon origination or purchase of a loan. See “Summary of Credit Loss Experience” above 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 further discussion of the risk factors considered by management in establishing the allowance for credit losses.
Management considers a range of macroeconomic scenarios in connection with the allowance estimation process. Within the various economic scenarios considered as of September 30, 2024, the quantitative estimate of the allowance for credit loss would increase by approximately $108.3 million under sole consideration of the most severe downside scenario. 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.
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ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Market risk represents the potential economic loss on trading and non-trading portfolios and financial instruments due to adverse price movements in markets including interest rates, foreign exchange rates, credit spreads, commodity prices and equity and related implied volatility levels. The Company is subject to market risk primarily through the effect of changes in interest rates on its portfolio of assets held for purposes other than trading and interest rate derivative instruments that are used for managing interest rate risk.
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. VaR is a statistical risk measure estimating potential loss at the 95th percentile based on a one-year history of market risk factors associated with the trading portfolio. VaR provides a consistent cross-asset measure for risk profiles and allows for diversification benefit based on historical correlations across market moves. As of September 30, 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. Larger economic losses are possible, particularly during stressed macroeconomic and market conditions.
The responsibility for managing market risk rests with the ALCO, which operates under policy guidelines established by the Company’s board of directors. 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 September 30, 2024 is illustrated in the following table. The table reflects rate-sensitive positions as of September 30, 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. The balances of interest rate sensitive assets and liabilities are presented in the periods in which they next reprice to market rates or mature and are aggregated to show the interest rate sensitivity gap. The mismatch between repricings or maturities within a time period is commonly referred to as the “gap” for that period. A positive gap (asset sensitive), where interest rate-sensitive assets exceed interest rate sensitive liabilities, generally will result in the net interest margin increasing in a rising rate environment and decreasing in a falling rate environment. A negative gap (liability sensitive) will generally have the opposite results on the net interest margin. Certain variable rate loans have embedded floors which limit the decline in yield on those loans at times when market interest rates are extraordinarily low. The degree of asset sensitivity, spreads on loans and net interest margin may be reduced until rates increase by an amount sufficient to eliminate the effects of floors. The adverse effect of floors as market rates increase may also be offset by the positive gap, the extent to which rates on deposits and other funding sources lag increasing market rates for loans and changes in composition of funding.
(in thousands) 0-3 months 4-12 months 1-3 years 3+ years Total
Assets
Interest bearing cash and cash equivalents $ 3,894,537 $ — $ — $ — $ 3,894,537
Investment securities(1) 87,278 58,599 542,459 3,717,184 4,405,520
Variable loans 20,511,000 450,650 111,860 204,374 21,277,884
Fixed loans 24,049 96,444 202,847 789,040 1,112,380
Total loans(2) 20,535,049 547,094 314,707 993,414 22,390,264
Total interest sensitive assets $ 24,516,864 $ 605,693 $ 857,166 $ 4,710,598 $ 30,690,321
Liabilities
Interest bearing customer deposits $ 14,419,986 $ — $ — $ — $ 14,419,986
CDs 540,176 1,664,309 169,225 755 2,374,465
Total interest bearing deposits 14,960,162 1,664,309 169,225 755 16,794,451
Short-term borrowings 1,035,000 — — — 1,035,000
Long-term debt 113,406 — 174,652 372,114 660,172
Total borrowings 1,148,406 — 174,652 372,114 1,695,172
Total interest sensitive liabilities $ 16,108,568 $ 1,664,309 $ 343,877 $ 372,869 $ 18,489,623
GAP $ 8,408,296 $ (1,058,616) $ 513,289 $ 4,337,729 $ —
Cumulative GAP $ 8,408,296 $ 7,349,680 $ 7,862,969 $ 12,200,698 $ 12,200,698
Non-interest bearing deposits 9,070,804
Stockholders’ equity 3,354,044
Total $ 12,424,848
(1) Available-for-sale debt securities and equity securities based on fair market value.
(2) Total loans include gross loans held for investment and loans held for sale.
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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. Earnings are also affected by the effects of changing interest rates on the value of funding derived from non-interest bearing deposits and stockholders’ equity. Management performs a sensitivity analysis to identify interest rate risk exposure on net interest income. 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.
These scenarios are based on interest rates as of the last day of a reporting period published by independent sources and incorporate relevant spreads of instruments that are actively traded in the open market. The Federal Reserve’s federal funds target affects short-term borrowing; the prime lending rate, SOFR, Bloomberg Short Term Yield Index and other alternative indexes are the basis for most of the variable-rate loan pricing. The 10-year treasury rate is also monitored because of its effect on prepayment speeds for mortgage-backed securities. These are the Company’s primary interest rate exposures. Interest rate derivative contracts may be used to manage exposure to adverse fluctuations in these primary interest rate exposures as is discussed in more detail under the heading Use of Derivatives to Manage Interest Rate and Other Risks below.
For modeling purposes, the “shock test” scenarios as of September 30, 2024 and September 30, 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. The Company will continue to evaluate these scenarios as interest rates 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. These 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. 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
September 30, 2024 September 30, 2023
+ 200 basis points 6.1 % 6.0 %
+ 100 basis points 3.1 % 3.0 %
- 100 basis points (6.5) % (4.3) %
- 200 basis points (13.5) % (8.6) %
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. These assumptions are inherently uncertain and, as a result, the model cannot precisely estimate net interest income or precisely predict the impact of higher or lower interest rates on net interest income. Actual results will differ from simulated results due to timing, magnitude and frequency of interest rate changes as well as changes in market conditions, customer behavior and management strategies, among other factors.
Use of Derivatives to Manage Interest Rate and Other Risks
In the ordinary course of business, the Company enters into derivative transactions to manage various risks and to accommodate the business requirements of its customers.
On the date the Company enters into a derivative contract, the derivative is designated as either a fair value hedge, cash flow hedge, net investment hedge, or a designation is not made as it is a customer-related transaction, an economic hedge for asset/liability risk management purposes or another stand-alone derivative created through the Company’s operations.
To manage the sensitivity of earnings and capital to interest rate, prepayment, credit, price and foreign currency fluctuations (asset and liability management positions), the Company may enter into derivative transactions. In addition, the Company enters into interest rate and foreign exchange derivative contracts to support the business requirements of its customers (customer-related positions).
For additional information regarding derivatives, see Note 10 - Derivative Financial Instruments in the accompanying notes to the consolidated financial statements included elsewhere in this report.
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ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
The Company’s management, with the supervision and participation of its Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. Based upon that evaluation, the Company has concluded that, as of the end of such period, its disclosure controls and procedures were effective in recording, processing, summarizing and reporting, on a timely basis, information required to be disclosed in the reports that the Company files or submits under the Exchange Act and were effective in ensuring that information required to be disclosed in the reports filed or submitted under the Exchange Act is accumulated and communicated to the Company's management, including its Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
There were no changes in the Company’s internal control over financial reporting (as defined in Rules 13a-15(e) and 15d-15(f) under the Exchange Act) during the period covered by this report that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is subject to various claims and legal actions that may arise in the ordinary course of conducting its business. Management does not expect the disposition of any of these matters to have a material adverse impact on the Company’s financial statements or results of operations.
ITEM 1A. RISK FACTORS
There have been no material changes in the risk factors previously disclosed in the 2023 Form 10-K.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
The Company repurchased shares of its common stock in the open market during the nine months ended September 30, 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(2)
Plans or Programs(1)(2)
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
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.
(2)    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, excluding the effect of excise tax expense incurred on net stock repurchases. Remaining repurchase authorization under the January 18, 2023 share repurchase program was terminated upon authorization of this new program. 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. 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 share repurchase program is set to expire on January 31, 2025, and the program may be suspended or discontinued at any time.
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ITEM 6. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
(a) Exhibits

10.1
31.1
31.2
32.1
32.2
101.INS XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCH XBRL Taxonomy Extension Schema Document*
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document*
101.DEF XBRL Taxonomy Extension Definition Linkbase Document*
101.LAB XBRL Taxonomy Extension Label Linkbase Document*
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document*
104 Cover Page Interactive Data File (embedded within the Inline XBRL document)
*    Filed herewith
**    Furnished herewith
+    Management contract or compensatory plan arrangement


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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
TEXAS CAPITAL BANCSHARES, INC.
Date: October 17, 2024
/s/ J. Matthew Scurlock
J. Matthew Scurlock
Chief Financial Officer
(Duly authorized officer and principal financial officer)
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TABLE OF CONTENTS