What changed in this filing

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Item 1. Business

2021-02-09 compared with 2020-02-12 · 177 added, 117 removed, 253 unchanged (54% of the section changed)

The disclosures set forth in this item are qualified by Item 1A.

Risk Factors and the section captioned “Forward-Looking Statements,” “Additional Information about the Merger and Where to Find It” and “Participants in the Solicitation” in Item 7.

Risk Factors and the section captioned “Forward-Looking Statements” in Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations of this report and other cautionary statements set forth elsewhere in this report.

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(“we,” “us,” “TCBI” or the “Company”), a Delaware corporation organized in 1996, is the parent of Texas Capital Bank, National Association (the “Bank”).

The Company is a registered bank holding company and a financial holding company.

The Company is a registered bank holding company and has elected to be a financial holding company.

The Bank is headquartered in Dallas, with primary banking offices in Austin, Dallas, Fort Worth, Houston and San Antonio, the five largest metropolitan areas of Texas.

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We have focused on organic growth, maintenance of credit quality and recruiting and retaining experienced bankers with strong personal and professional relationships in their communities.

We serve the needs of commercial businesses and successful professionals and entrepreneurs located in Texas as well as operate several lines of business serving a regional or national clientele of commercial borrowers.

We serve the needs of commercial businesses and successful professionals and entrepreneurs located in Texas as well as operate several lines of business that serve a regional or national clientele of commercial borrowers.

We are primarily a secured lender, with the majority of our loans held for investment, excluding mortgage finance loans and other national lines of business, being made to businesses headquartered or with operations in Texas.

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We have benefitted from the success of our business model since inception, producing strong loan and deposit growth and favorable loss experience amidst a challenging environment for banking nationally.

Merger with Independent Bank Group, Inc.

On December 9, 2019, the Company entered into an Agreement and Plan of Merger, which we refer to as the merger agreement, with Independent Bank Group, Inc.

("IBTX") under which the companies will combine in an all-stock merger of equals, with IBTX as the surviving entity, which we refer to as the merger.

Immediately following the merger, the Bank will merge with and into IBTX’s wholly owned subsidiary, Independent Bank, with Independent Bank as the surviving bank.

The name of the surviving entity will be Independent Bank Group, Inc.

and the name of the surviving bank will be Texas Capital Bank.

The surviving bank will be operated under the name Independent Financial in Colorado and under the name Texas Capital Bank in Texas.

The surviving entity will trade under the Independent Bank Group ticker symbol "IBTX" on the Nasdaq Global Select Market.

The merger agreement was unanimously approved by each company's board of directors.

The merger is expected to close in mid-2020, subject to satisfaction of customary closing conditions, including receipt of customary regulatory approvals and approval of the merger agreement by the stockholders of TCBI and IBTX, respectively.

Under the terms of the merger agreement, at the effective time of the merger, each share of common stock, par value $0.01 per share, of TCBI outstanding immediately prior to the effective time, other than certain shares held by TCBI or IBTX, will be converted into the right to receive the merger consideration of 1.0311 shares of common stock, par value $0.01 per share, of IBTX.

Holders of TCBI common stock will receive cash in lieu of fractional shares.

At the effective time of the merger, (i) each outstanding share of 6.50% Non-Cumulative Perpetual Preferred Stock, Series A, par value $0.01 per share, of TCBI, which we refer to as TCBI preferred stock, will be automatically converted into the right to receive one share of a newly issued series of IBTX preferred stock having substantially the same terms as such share of TCBI preferred stock, which we refer to as IBTX Series B preferred stock (taking into account that TCBI will not be the surviving entity in the merger and any adjustment to the right of optional redemption by IBTX that is reasonably necessary to obtain Tier 1 Capital treatment of the IBTX Series B preferred stock from the Board of Governors of the Federal Reserve System, which we refer to as the Federal Reserve, for such preferred stock), and (ii) unless otherwise agreed between TCBI and IBTX, each outstanding TCBI equity award under TCBI’s equity compensation plans outstanding at the time the merger agreement was signed will vest and be converted into the right to receive the merger consideration (or, in the case of cash-settled TCBI equity awards, an amount in cash determined based on the value of the merger consideration) in respect of each share of TCBI common stock underlying such TCBI equity award (and in the case of TCBI stock appreciation rights, less the applicable exercise price).

Any performance goals applicable to such TCBI equity awards will be deemed satisfied at the effective time of the merger based on the greater of target and actual performance.

The merger agreement also provides, among other things, that as of the effective time, David R.

Brooks, the current IBTX Chairman, President and Chief Executive Officer, will be the Chairman, President and Chief Executive Officer of the surviving entity and surviving bank and that Larry L.

Helm, the current TCBI Chairman, will serve as the lead independent director of the surviving entity.

The merger agreement also provides that, as of the effective time, Keith Cargill, the President and Chief

Executive Officer, will serve as Special Advisor to the Chairman, President and Chief Executive Officer of the surviving entity and surviving bank.

The board of directors of IBTX following the merger will be comprised of 13 directors, of which seven will be former members of the board of directors of TCBI and six will be former members of the board of directors of IBTX.

The merger agreement contains customary representations and warranties from both TCBI and IBTX, and each party has agreed to customary covenants, including, among others, covenants relating to (1) the conduct of its business during the interim period between the execution of the merger agreement and the effective time of the merger, (2) its obligation to call a meeting of its stockholders to adopt the merger agreement, and, subject to certain exceptions, to recommend that its stockholders adopt the merger agreement, and (3) its non-solicitation obligations related to alternative acquisition proposals.

The completion of the merger is subject to customary conditions, including (1) adoption of the merger agreement by TCBI's stockholders and by IBTX’s shareholders, (2) authorization for listing on the Nasdaq Global Select Market of the shares of IBTX common stock and IBTX Series B preferred stock to be issued in the merger, subject to official notice of issuance, (3) the receipt of required regulatory approvals, including the approval of the Federal Reserve, the Federal Deposit Insurance Corporation (“FDIC”), the Texas Commissioner of Banks and the Texas Department of Banking, (4) effectiveness of the registration statement on Form S-4 for the IBTX common stock and IBTX Series B preferred stock to be issued in the merger, and (5) the absence of any order, injunction, decree or other legal restraint preventing the completion of the merger or making the completion of the merger illegal.

Each party’s obligation to complete the merger is also subject to certain additional customary conditions, including (a) subject to certain exceptions, the accuracy of the representations and warranties of the other party, (b) performance in all material respects by the other party of its obligations under the merger agreement and (c) receipt by such party of an opinion from its counsel to the effect that the merger will qualify as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended.

The merger agreement provides certain termination rights for both TCBI and IBTX and further provides that a termination fee of $115.0 million may be payable by the party, terminating, or causing the termination of, the merger agreement under certain circumstances.

The foregoing description of the merger agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the merger agreement, which is attached as Exhibit 2.1 to the Form 8-K filed by the Company on December 13, 2019.

The merger agreement should not be read alone, but should instead be read in conjunction with the other information regarding TCBI, IBTX, their respective affiliates and their respective businesses, the merger agreement and the merger contained in, or incorporated by reference into, the Registration Statement on Form S-4 filed by IBTX with the Securities and Exchange Commission, which we refer to as the SEC, that includes a joint proxy statement of IBTX and TCBI and a prospectus of IBTX, as well as in the Annual Reports on Forms 10-K, the Quarterly Reports on Forms 10-Q and other filings that each of IBTX and TCBI has made with the SEC.

Please refer to Item 1A, “Risk Factors-Merger-Related Risks,” for a discussion of certain risks related to the proposed Merger.

On December 9, 2019, the Company and Independent Bank Group, Inc.

("IBTX") entered into an Agreement and Plan of Merger (the "Merger Agreement"), pursuant to which, on the terms and subject to the conditions therein, the Company would be merged with and into IBTX.

On May 22, 2020, the Company and IBTX entered into an agreement pursuant to which the parties mutually agreed to terminate the Merger Agreement.

Neither party paid a termination fee in connection with the termination of the Merger Agreement.

On January 25, 2021, Robert C.

Holmes began his tenure as President and Chief Executive Officer ("CEO") of the Company.

Larry Helm, who served as Executive Chairman of the board of directors and President and CEO of the Company from May 25, 2020, through January 24, 2021, will continue as Executive Chair of the board of directors for up to 90 days after the start of Mr.

Holmes' tenure to facilitate a smooth transition of responsibilities, after which he will return to his previous role as Non-Executive Chair of the board of directors.

Growth History

We have grown substantially in both size and profitability since our formation.

The table below sets forth data regarding the growth of key areas of our business for the past five years:

In 2020, we continued to experience growth in most of our key areas of business, however we did experience a decline in certain loan portfolios as we strategically reduced certain portfolios.

The table below sets forth data regarding our key areas of business for the past five years.

(in thousands) 2020 2019 2018 2017 2016

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Loans held for investment, net 15,351,451 16,476,413 16,690,550 15,366,252 13,001,011

Assets 37,726,096 32,548,069 28,257,767 25,075,645 21,697,134

Demand deposits 12,740,947 9,438,459 7,317,161 7,812,660 7,994,201

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Stockholders’ equity 2,871,224 2,801,321 2,480,308 2,190,072 1,997,890

The following table provides information about the growth of our loans held for investment ("LHI") portfolio by type of loan for the past five years:

The following table provides information about our loans held for investment ("LHI") portfolio by type of loan for the past five years:

(in thousands) 2020 2019 2018 2017 2016

Total real estate

Real estate term

Commercial $ 8,861,580 $ 9,133,444 $ 9,117,546 $ 8,373,398 $ 6,622,078

Energy 766,217 1,425,309 1,631,371 1,130,000 889,583

Mortgage finance 9,079,409 8,169,849 5,877,524 5,308,160 4,497,338

Equipment leases

Real estate 5,794,624 6,008,040 6,050,083 5,960,785 5,560,909

The Texas Market

Our business is concentrated in Texas.

The Texas market for banking services is highly competitive.

We compete with national, regional and local bank holding companies and commercial banks.

Texas’ largest banking organizations are headquartered outside of Texas and are controlled by out-of-state organizations.

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National Lines of Business

While the Texas market continues to be central to the growth and success of our company, we have developed several lines of business, including mortgage finance, mortgage correspondent aggregation ("MCA"), homebuilder finance, insurance premium finance, lender finance, asset-based lending and escrow services, that offer specialized loan and deposit products to businesses regionally and throughout the nation.

We believe this helps us mitigate our geographic concentration risk in Texas.

While the Texas market continues to be central to the growth and success of our company, we have developed several lines of business that offer specialized loan and deposit products to businesses regionally and throughout the nation, including mortgage finance, mortgage correspondent aggregation, homebuilder finance, insurance premium finance, lender finance, asset-based lending and escrow services.

We believe these business lines help us mitigate our geographic concentration risk in Texas.

We continue to seek opportunities to develop additional lines of business that leverage our capabilities and are consistent with our business strategy.

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Drawing on the business and community ties of our management and their banking experience, our strategy has been to grow an independent bank that has focused primarily on middle market business customers and successful professionals and entrepreneurs in each of the five major metropolitan markets of Texas as well as our national lines of business.

To achieve this, we have employed the following strategies:

To achieve this, we employ the following strategies:

• offering a premier and differentiated banking experience to middle market businesses and successful professionals and entrepreneurs who value a broad relationship with our Bank;

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• extending our reach within our target markets and lines of business through service innovation and service excellence.

The merger with IBTX is intended to augment our strategy by delivering:

enhanced scale to drive growth and improve profitability, creating the largest Texas-headquartered bank by Texas deposits, with a significant presence in Colorado, and providing a strong foundation to better manage risk and serve clients across business lines through further investment in technology;

a more diversified mix of business supported by a full-service financial institution with extensive strategic and client coverage, including enhancing the revenue mix by diversifying each company’s client base, business lines and loan and funding concentrations;

a strengthened core deposits franchise, allowing for a more stable source of funds and increased optionality to compete in a dynamic market environment;

presence in attractive, fast growing Texas markets that constitute five of the top 10 fastest growing MSAs in the United States;

an experienced combined management team having a strong track record of organic growth and high performance, including significant experience successfully executing and integrating transformative transactions;

strong cultures of collaboration and entrepreneurial spirit supporting the delivery of premier and differentiated client experiences;

commitment to our important community relationships built over decades, continuing our investments in local programs and communities.

Products and Services

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• personal wealth management and trust services;

certificates of deposit and IRAs;

• certificates of deposit ("CDs") and individual retirement accounts ("IRAs");

• interest-bearing and non-interest-bearing checking accounts;

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The credit standards are set by our standing Credit Policy Committee with the assistance of our Bank’s Chief Credit Officer, who is charged with ensuring that credit standards are met by loans in our portfolio.

Our Credit Policy Committee is comprised of senior Bank officers including our Bank’s Texas President/Vice Chairman, our Bank's Chief Risk Officer and our Bank’s Chief Credit Officer, and is subject to oversight by the Risk Committee of the Company's board of directors.

Our Credit Policy Committee is comprised of senior Bank officers including our Bank's Chief Risk Officer, our Bank’s Chief Credit Officer and other Bank officers as deemed appropriate, and is subject to oversight by the Risk Committee of the Company's board of directors.

We believe we maintain an appropriately diversified loan portfolio.

Credit policies and underwriting guidelines are tailored to address the unique risks associated with each industry represented in the portfolio.

Our credit standards for commercial borrowers reference numerous criteria with respect to the borrower, including historical and projected financial information, strength of management, acceptable collateral and associated advance rates, and market conditions and trends in the borrower’s industry.

In addition, prospective loans are also analyzed based on current industry concentrations in our loan portfolio to prevent an unacceptable concentration of loans in any particular industry.

We believe our credit standards are consistent with achieving our business objectives in the markets we serve and are an important part of our risk mitigation.

We believe that our Bank is differentiated from its competitors by its focus on and targeted marketing to our core customers and by its ability to fit its products to the individual needs of our customers.

Our credit standards for commercial borrowers are based on numerous criteria with respect to the borrower, including historical and projected financial information, strength of management, acceptable collateral and associated advance rates, and market conditions and trends in the borrower’s industry.

In addition, prospective loans are analyzed based on current industry concentrations in our loan portfolio to prevent an unacceptable concentration of loans in any particular industry.

We believe our credit standards are consistent with achieving our business objectives in the markets we serve and are an important part of our risk mitigation strategy.

We believe that our Bank is differentiated from its competitors by its focus on and targeted marketing to our core customers and by its ability to tailor its products to the individual needs of our customers.

We generally extend variable rate loans in which the interest rate fluctuates with a specified reference rate such as the United States prime rate or the London Interbank Offered Rate ("LIBOR") and frequently provide for a minimum floor rate.

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Financial Conduct Authority announced that it would no longer compel banks to submit rates for the calculation of LIBOR after 2021.

The impact of alternatives to LIBOR on the valuations, pricing and operation of our financial instruments is not yet known.

We have established a working group, consisting of key stakeholders from throughout our Bank, to monitor developments relating to LIBOR uncertainty and changes and to guide our Bank's response.

The administrator of LIBOR has proposed to extend publication of the most commonly used U.S.

Dollar LIBOR settings to June 30, 2023, and to cease publishing other LIBOR settings on December 31, 2021.

federal banking agencies have issued guidance strongly encouraging banking organizations to cease using U.S.

dollar LIBOR as a reference rate in new contracts as soon as practicable and in any event by December 31, 2021.

It is not possible to know whether LIBOR will continue to be viewed as an acceptable market benchmark, what rate or rates may become accepted alternatives to LIBOR or what the effect of any such changes in views or alternatives may have on the financial markets for LIBOR-linked financial instruments.

The full impact of alternatives to LIBOR on the valuations, pricing and operation of our financial instruments is not yet known;

however, the primary instruments that may be impacted include loans, securities, borrowings and derivatives indexed to LIBOR that mature after December 31, 2021.

We have established a working group, consisting of key stakeholders from throughout the Bank, to monitor developments relating to LIBOR uncertainty and changes and to guide our Bank's response.

This team is currently working to ensure that our technology systems are prepared for the transition, our loan documents that reference LIBOR-based rates have been

appropriately amended to reference other methods of interest rate determination and internal and external stakeholders are apprised of the transition.

Deposit Products

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Our wealth management and trust services are primarily focused on serving the needs of our banking clients and depend on close cooperation and support between our banking relationship managers and our investment management professionals.

As of December 31, 2019 , we had 1,738 full-time employees.

Impact of the COVID-19 Pandemic

In March 2020, the outbreak of the novel Coronavirus Disease 2019 (“COVID-19”) was recognized as a pandemic by the World Health Organization.

The spread of COVID-19 has created a global public health crisis that has resulted in unprecedented uncertainty, volatility and disruption in financial markets and in governmental, commercial and consumer activity in the United States and globally, including the markets that we serve.

Governmental responses to the pandemic have included orders to close businesses not deemed essential and directing individuals to restrict their movements, observe social distancing and shelter in place.

These actions, together with responses to the pandemic by businesses and individuals, have resulted in rapid decreases in commercial and consumer activity, temporary, and some permanent, closures of many businesses that have led to a loss of revenues and a rapid increase in unemployment, material decreases in oil and gas prices and in business valuations, disrupted global supply chains, market downturns and volatility, changes in consumer behavior related to pandemic fears, related emergency response legislation and an expectation that Federal Reserve policy will maintain a low interest rate environment for the foreseeable future.

Although financial markets have rebounded from significant declines that occurred earlier in the pandemic and global economic conditions showed signs of improvement beginning during the second quarter of 2020, many of the effects that arose or became more pronounced after the onset of the COVID-19 pandemic have persisted through the end of the year.

These changes have had and are likely to continue to have a significant adverse effect on the markets in which we conduct our business and the demand for our products and services.

See “Risk Factors—Other Risks Affecting our Business—The COVID-19 pandemic is adversely affecting us and our customers, employees and third-party service providers, and the adverse impacts on our business, financial position, operations and prospects have been and are expected to continue to be significant.”

Legislative Developments .

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act was signed into law.

It contained substantial tax and spending provisions intended to address the impact of the COVID-19 pandemic.

The CARES Act included the Paycheck Protection Program (“PPP”), a nearly $350 billion program designed to aid small- and medium-sized businesses through federally guaranteed loans distributed through banks.

These loans were intended to guarantee eight weeks of payroll and other costs to help those businesses remain viable and allow their workers to pay their bills.

The initial $350 billion program was supplemented in late April 2020 with $310 billion in additional funding.

On June 5, 2020, the Paycheck Protection Program Flexibility Act (the “new Act”) was signed into law, and made significant changes to the PPP to provide additional relief for small businesses.

The new Act increased flexibility for small businesses that have been unable to rehire employees due to lack of employee availability, or have been unable to operate as normal due to COVID-19 related restrictions, extended the period that businesses have to use PPP funds to qualify for loan forgiveness to 24 weeks, up from 8 weeks under the original rules, and relaxed the requirements that loan recipients must adhere to in order to qualify for loan forgiveness.

In addition, the new Act extended the payment deferral period for PPP loans until the date when the amount of loan forgiveness is determined and remitted to the lender.

For PPP recipients who do not apply for forgiveness, the loan deferral period is 10 months after the applicable forgiveness period ends.

On July 4, 2020, Congress enacted a new law to extend the deadline for applying for a PPP loan to August 8, 2020.

The program was re-opened on January 11, 2021 with updated guidance outlining program changes to enhance its effectiveness and accessibility.

This round of the PPP will serve

new borrowers, as well as allow certain existing PPP borrowers to apply for a second draw PPP Loan and make a request to modify their first draw PPP loan.

We have partnered with a web-based commercial and SBA lending software provider to manage the origination, processing, closing and monitoring of SBA loans and have set up the Texas Capital Bank SBA PPP Loan Portal to provide borrowers the ability to apply and qualify for PPP loans.

As of December 31, 2020, we had funded $717.5 million in PPP loans.

Those loans have an outstanding balance of $617.5 million as of December 31, 2020.

We also implemented a short-term loan modification program in late March 2020 to provide temporary payment relief to borrowers who meet the program’s qualifications.

This program allows for a deferral of payments for 90 days, which we may extend for an additional 90 days, for a maximum of 180 days on a cumulative basis.

The deferred payments along with interest accrued during the deferral period are due and payable on the maturity date of the existing loan.

Through December 31, 2020, we granted temporary modifications on 483 loans with a total outstanding loan balance of $1.3 billion, resulting in the deferral of $7.7 million in interest payments.

As of December 31, 2020, 48 loans with a total outstanding balance of $90.2 million remain on deferral, of which $50.7 million have been granted a second deferral.

See Management's Discussion and Analysis of Financial Condition and Results of Operations for additional information on the impact of the COVID-19 pandemic to our financial statements and results of operations, as well as our business operations.

Human Capital

Our goal is to attract, develop, retain and plan for succession of key talent and executives to achieve strategic objectives.

We are continually investing in our workforce to further emphasize diversity and inclusion and to foster our employees' growth and career development.

As part of our commitment to address diversity, equity and inclusion ("DEI") we have launched a DEI Council, chaired by our CEO.

At December 31, 2020, we had 1,619 employees, nearly all of whom are full-time and of which approximately 50% were female and 40% were minorities.

Due to our significant Texas-based operations and branch-lite network, the majority of our employees are based in Texas.

We offer a comprehensive benefits program to our employees and design our compensation programs to attract, retain and motivate employees, as well as to align with Company performance.

None of our employees is represented by a collective bargaining agreement and we consider our relations with our employees to be good.

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We and our Bank are subject to extensive federal and state laws and regulations that impose specific requirements on us and provide regulatory oversight of virtually all aspects of our operations.

These laws and regulations generally are intended for the protection of depositors, the deposit insurance fund ("DIF") of the FDIC and the stability of the U.S.

These laws and regulations generally are intended for the protection of the Bank's depositors, the Deposit Insurance Fund ("DIF") of the Federal Deposit Insurance Corporation (the "FDIC") and the stability of the U.S.

banking system as a whole, rather than for the protection of our stockholders and creditors.

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This discussion is qualified in its entirety by reference to the full texts of the laws, regulations and policies described.

The Company’s activities are governed by the Bank Holding Company Act of 1956, as amended (“BHCA”).

We are subject to regulation, supervision and examination by the Federal Reserve pursuant to the BHCA.

The Company’s activities are governed by the Bank Holding Company Act of 1956, as amended (the “BHCA”).

We are subject to regulation, supervision and examination by the Board of Governors of the Federal Reserve System (the "Federal Reserve") pursuant to the BHCA.

We file quarterly reports and other information with the Federal Reserve.

We file reports with the SEC and are subject to its regulation with respect to our securities, financial reporting and certain governance matters.

Our securities are listed on the Nasdaq Global Select Market, and we are subject to Nasdaq rules for listed companies.

Our Bank is organized as a national banking association under the National Bank Act, and is subject to regulation, supervision and examination by the Office of the Comptroller of the Currency (the “OCC”), the FDIC and the Consumer Financial Protection Bureau (“CFPB”) as well as being subject to regulation by certain other federal and state agencies.

The OCC has primary supervisory responsibility for our Bank and performs a continuous program of examinations concerning safety and

soundness, the quality of management and oversight by our board of directors, information technology and compliance with applicable laws and regulations.

Our Bank files quarterly reports of condition and income with the FDIC, which provides insurance for certain of our Bank’s deposits.

As a public company, we also file reports with the U.S.

Securities and Exchange Commission (the "SEC") and are subject to its regulatory authority, as well as the disclosure and regulatory requirements of the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended, with respect to our securities, financial reporting and certain governance matters.

Because our securities are listed on the Nasdaq Global Select Market ("Nasdaq"), and we are subject to Nasdaq's rules for listed companies, including rules relating to corporate governance.

Our Bank is organized as a national banking association under the National Bank Act, and is subject to regulation, supervision and examination by the Office of the Comptroller of the Currency (the “OCC”), the FDIC and the Consumer Financial Protection Bureau (the “CFPB”) as well as being subject to regulation by certain other federal and state agencies.

The OCC has primary supervisory responsibility for our Bank and performs a continuous program of examinations concerning safety and soundness, the quality of management and oversight by our board of directors, information technology and compliance with applicable laws and regulations.

Our Bank also files quarterly reports of condition and income with the FDIC, which provides insurance for certain of our Bank’s deposits.

Bank Holding Company Regulation .

The BHCA limits our business to banking, managing or controlling banks and other activities that the Federal Reserve has determined to be closely related to banking.

The Gramm-Leach-Bliley Act of 1999, as amended (the "GLB Act"), allows bank holding companies meeting certain management, capital and Community Reinvestment Act standards to elect to be treated as financial holding company that may offer customers a more comprehensive array of financial products and services.

We have elected to register with the Federal Reserve as a financial holding company.

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Under Federal Reserve policy, now codified by the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act"), we are expected to act as a source of financial and managerial strength to our Bank and commit resources to its support.

Such support may be required at times when, absent this Federal Reserve policy, a holding company may not be inclined to provide it.

Such support may be required even at times when, absent this Federal Reserve policy, a holding company may not be in a financial position, or otherwise inclined, to provide such resources.

We could in certain circumstances be required to guarantee the capital plan of our Bank if it became undercapitalized.

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The policy provides that financial holding companies may not pay cash dividends in an amount that would undermine the holding company’s ability to serve as a source of strength to its banking subsidiary.

With certain limited exceptions, the BHCA and the Change in Bank Control Act, together with regulations promulgated thereunder, prohibit a person or company or a group of persons deemed to be “acting in concert” from, directly or indirectly, acquiring more than 10% (5% if the acquirer is a bank holding company) of any class of our voting stock or obtaining the ability to control in any manner the election of a majority of our directors or otherwise direct the management or policies of our company without prior notice or application to and the approval of the Federal Reserve.

With certain limited exceptions, the BHCA and the Change in Bank Control Act of 1978, as amended (the "CIBC Act"), together with regulations promulgated thereunder, prohibit a person or company or a group of persons deemed to be “acting in concert” from, directly or indirectly, acquiring more than 10% (5% if the acquirer is a bank holding company) of any class of our voting stock or obtaining the ability to control in any manner the election of a majority of our directors or otherwise direct the management or policies of our company without prior notice or application to and the approval of the Federal Reserve.

If, in the opinion of the applicable federal bank regulatory authorities, a depository institution or holding company is engaged in or is about to engage in an unsafe or unsound practice (which could include the payment of dividends or repurchase or redemptions of securities), such authority may require, generally after notice and hearing, that such institution or holding company cease and desist such practice.

The federal banking agencies have indicated that paying dividends that deplete a depository institution’s or holding company’s capital base to an inadequate level would be such an unsafe or unsound banking practice.

Federal Reserve regulations require that the Company provide prior notice to or obtain the prior approval of the Federal Reserve for redemptions or repurchases of its equity securities, and prohibit such actions if they would deplete the Company's capital or impair its ability to serve as a source of strength for our Bank.

Moreover, the Federal Reserve and the FDIC have issued policy statements providing that financial holding companies and insured depository institutions generally should only pay dividends out of current operating earnings and only if the prospective rate of earnings retention appears consistent with the entity's current and expected future capital needs, asset quality and overall financial condition.

Federal Reserve regulations require that the Company provide prior notice to or obtain the prior approval of the Federal Reserve for declaring or paying dividends that exceed its earnings for the relevant period and redemptions or repurchases of its equity securities, and prohibit such actions if they would deplete the Company's capital or impair its ability to serve as a source of strength for our Bank.

Regulation of Our Bank by the OCC.

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Regulation of Our Bank by the CFPB .

The CFPB has regulation, supervision and examination authority over our Bank with respect to substantially all federal statutes and regulations protecting the interests of consumers of financial services, including but not limited to the Equal Credit Opportunity Act, the Fair Credit Reporting Act, the Truth in Lending Act, the Home Mortgage Disclosure Act, the Real Estate Settlement Procedures Act, the Fair Debt Collection Practices Act, the Truth in

Savings Act, the Right to Financial Privacy Act and the Electronic Funds Transfer Act and their respective related regulations.

Mortgage Disclosure Act, the Real Estate Settlement Procedures Act, the Fair Debt Collection Practices Act, the Truth in Savings Act, the Right to Financial Privacy Act and the Electronic Funds Transfer Act and their respective related regulations.

Penalties for violating these laws and regulations could subject our Bank to lawsuits and administrative penalties, including civil monetary penalties, payments to affected consumers and orders to halt or materially change our consumer banking activities.

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Capital Adequacy Requirements.

Federal banking regulators have adopted a system using risk-based capital guidelines to evaluate the capital adequacy of banks and bank holding companies that is based upon the 1988 capital accord of the Bank for International Settlements’ Basel Committee on Banking Supervision (the “Basel Committee”), a committee of central banks and bank regulators from the major industrialized countries that coordinates international standards for bank regulation.

Federal banking regulators have adopted a system using certain risk-based capital guidelines to evaluate the capital adequacy of banks and bank holding companies that is based upon the 1988 capital accord of the Bank for International Settlements’ Basel Committee on Banking Supervision (the “Basel Committee”), a committee of central banks and bank regulators from the major industrialized countries that coordinates international standards for bank regulation.

Under the guidelines, specific categories of assets and off-balance-sheet activities such as letters of credit are assigned risk weights, based generally on the perceived credit or other risks associated with the asset.

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Our Series A 6.5% Non-Cumulative Perpetual Preferred Stock constitutes Additional Tier 1 capital and our subordinated notes constitute Tier 2 capital.

The Basel III Capital Rules set the risk-based capital requirement and the total risk-based capital requirement to a minimum of 6.0% and 8.0%, respectively, plus a capital conservation buffer of 2.5% producing targeted ratios of 8.5% and 10.5%, respectively, which were fully phased-in as of January 1, 2019 and for subsequent years.

The leverage ratio requirement under the Basel III Capital Rules is 4.0%.

The Basel III Capital Rules set the risk-based capital requirement and the total risk-based capital requirement to a minimum of 6.0% and 8.0%, respectively, each plus a 2.5% capital conservation buffer composed entirely of CET1, producing targeted ratios of 8.5% and 10.5%, respectively, which were fully phased-in as of January 1, 2019 and for subsequent years.

The leverage ratio requirement under the Basel III Capital Rules, calculated as the ratio of Tier 1 capital to average assets, is 4.0%.

In order to be well capitalized under the rules now in effect, our Bank must maintain CET1, Tier 1 and total capital ratios that are equal to or greater than 7.0%, 8.5% and 10.5%, respectively, and a leverage ratio equal to or greater than 5.0%.

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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.

We have met the capital adequacy requirements under the Basel III Capital Rules on a fully phased-in basis since we commenced filing applicable reports with the FDIC and OCC.

At December 31, 2019 our Bank's CET1 ratio was 8.96% and its total risk-based capital ratio was 10.92% and, as a result, it is currently classified as "well capitalized" for purposes of the OCC's prompt corrective action regulations.

We have met the capital adequacy requirements under the Basel III Capital Rules on a fully phased-in basis since we commenced filing of the applicable reports with the FDIC and OCC.

As of December 31, 2020 our Bank's CET1 ratio was 9.48% and its total risk-based capital ratio was 11.67% and, as a result, it is currently classified as "well capitalized" for purposes of the OCC's prompt corrective action regulations.

Because we had less than $15 billion in total consolidated assets as of December 31, 2009, we are allowed to continue to classify our trust preferred securities, all of which were issued prior to May 19, 2010, as Tier 1 capital.

We have elected to exclude the effects of accumulated other comprehensive income items included in stockholders’ equity from the determination of capital ratios under the Basel III Capital Rules.

As a non-advanced approaches banking organization, we have elected to exclude the effects of certain accumulated other comprehensive income ("AOCI") items included in stockholders’ equity for the determination of regulatory capital and capital ratios under the Basel III Capital Rules.

In November 2017, the federal banking regulators issued a final rule to extend certain transition periods related to the regulatory capital treatment under the capital rules for certain items (including certain deferred tax assets, mortgage servicing rights, investments in non-consolidated financial entities and minority interest limitations) until January 1, 2020 when final rules to simplify the regulatory treatment of those items took effect.

The relief provided under the final rule applies to banking organizations that are not subject to the advanced approaches framework, such as the Company and the Bank.

In December 2017, the Basel Committee published the last version of the Basel III regulatory reforms, which are commonly referred to as “Basel IV.” The Basel IV standards, which will be generally effective on January 1, 2022, revise, among other things the Basel Committee’s standardized approach for credit risk and provide a new standardized approach for operational risk capital.

Under the current U.S.

capital rules, operational risk capital requirements and a capital floor apply only to banking organizations that are subject to the advanced approaches framework.

The impact of the Basel IV standards on us and our Bank will depend on the manner in which it is implemented by the federal banking regulators.

In February 2019, the federal bank regulatory agencies issued a final rule (the “2019 CECL Rule”) that revised certain capital regulations to account for changes to credit loss accounting under accounting principles generally accepted in the United States ("GAAP").

The 2019 CECL Rule included a transition option that allows banking organizations to phase in, over a three-year period, the day-one adverse effects of adopting the new accounting standard related to the measurement of current expected credit losses (“CECL”) on their regulatory capital ratios (three-year transition option).

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).

We adopted CECL on January 1, 2020 and have elected to utilize the five-year transition option.

Regulators may change capital and liquidity requirements, including previous interpretations of practices related to risk weights, which could require an increase to the allocation of capital to assets held by our Bank.

Regulators could also require us to make retroactive adjustments to financial statements to reflect such changes.

A regulatory capital ratio or category may not

constitute an accurate representation of the Bank’s overall financial condition or prospects.

A regulatory capital ratio or category may not constitute an accurate representation of the Bank’s overall financial condition or prospects.

Our regulatory capital status is addressed in more detail under the heading “ Liquidity and Capital Resources ” within Management’s Discussion and Analysis of Financial Condition and Results of Operations and in Note 13 - Regulatory Restrictions in the accompanying notes to the consolidated financial statements included elsewhere in this report.

The Federal Deposit Insurance Corporation Improvement Act of 1991 (“FDICIA”) established a system of prompt corrective action regulations and policies to resolve the problems of undercapitalized insured depository institutions.

The Federal Deposit Insurance Corporation Improvement Act of 1991 (the “FDICIA”) established a system of prompt corrective action regulations and policies to resolve the problems of undercapitalized insured depository institutions.

Under this system, insured depository institutions are ranked in one of five capital categories as described below.

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FDICIA imposes an increasingly stringent array of restrictions, requirements and prohibitions as an organization’s capital levels deteriorate.

A bank rated "adequately capitalized" or below may not accept, renew or roll over brokered deposits.

A bank rated "adequately capitalized" or below may not accept, renew or roll over brokered deposits unless it receives a waiver from the FCIC.

A "significantly undercapitalized" institution is subject to mandated capital raising activities, restrictions on interest rates paid and transactions with affiliates, removal of management and other restrictions.

The OCC has only very limited discretion in dealing with a "critically undercapitalized" institution and generally must appoint a receiver or conservator (the FDIC) if the capital deficiency is not corrected promptly.

Under the Federal Deposit Insurance Act (“FDIA”), “critically undercapitalized” banks may not, beginning 60 days after becoming critically undercapitalized, make any payment of principal or interest on their subordinated debt (subject to certain limited exceptions).

The OCC has only very limited discretion in dealing with a

"critically undercapitalized" institution and generally must appoint a receiver or conservator (the FDIC) if the capital deficiency is not corrected promptly.

Under the Federal Deposit Insurance Act, as amended (the “FDIA”), “critically undercapitalized” banks may not, beginning 60 days after becoming critically undercapitalized, make any payment of principal or interest on their subordinated debt (subject to certain limited exceptions).

In addition, under Section 18(i) of the FDIA, banks are required to obtain the advance consent of the FDIC to retire any part of their subordinated notes.

Under the FDIA, a bank may not pay interest on its subordinated notes if such interest is required to be paid only out of net profits, or distribute any of its capital assets, while it remains in default on any assessment due to the FDIC.

In December 2020, the FDIC issued a final rule that is designed to bring the brokered deposits regulations in line with modern deposit taking methods and generally reduces the amount of deposits that would be classified as brokered, which most directly affects banks rated as “adequately capitalized” or “undercapitalized”.

The final rule will become effective on April 1, 2021, with an extended compliance date of January 1, 2022.

Federal bank regulators may set capital requirements for a particular banking organization that are higher than the minimum ratios when circumstances warrant.

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In order to be considered well capitalized the leverage ratio must be at least 5.0%.

Our Bank’s leverage ratio was 8.2% at December 31, 2019 and, as a result, it is currently classified as “well capitalized” for purposes of the OCC’s prompt corrective action regulations.

As of December 31, 2020, our Bank’s leverage ratio was 7.36% and, as a result, it is currently classified as “well capitalized” for purposes of the OCC’s prompt corrective action regulations.

The risk-based and leverage capital ratios established by federal banking regulators are minimum supervisory ratios generally applicable to banking organizations that meet specified criteria, assuming that they otherwise have received the highest regulatory ratings in their most recent examinations.

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Pursuant to the Dodd-Frank Act and regulations published by the Federal Reserve and OCC, we were required to conduct an annual “stress test” of capital and consolidated earnings and losses under a base case and two severely adverse stress scenarios provided by bank regulatory agencies during the years 2016 to 2018.

In response to this requirement we developed dedicated staffing, economic models, policies and procedures to implement stress testing on an annual basis, the results of which were furnished to regulators and published on our website, as well as conducting stress tests for internal use based upon economic scenarios we developed.

The Economic Growth, Regulatory Relief and Consumer Protection Act (the “Regulatory Relief Act”) enacted in 2018, which amended portions of the Dodd-Frank Act, and subsequently adopted enabling regulations terminated our stress testing requirements.

We continue to perform certain stress tests internally and have incorporated the economic models and information developed through our stress testing program into our risk management and business, capital and liquidity planning activities, which are subject to continuing regulatory oversight.

Gramm-Leach-Bliley Financial Modernization Act of 1999 ("Gramm-Leach-Bliley Act").

The Gramm-Leach-Bliley Act:

allows bank holding companies meeting management, capital and Community Reinvestment Act standards to engage in a substantially broader range of non-banking activities than was permissible prior to enactment, including insurance underwriting and making merchant banking investments in commercial and financial companies;

allows insurers and other financial services companies to acquire banks;

removes various restrictions that applied to bank holding company ownership of securities firms and mutual fund advisory companies;

establishes the overall regulatory structure applicable to bank holding companies that also engage in insurance and securities operations;

directs bank regulators to prescribe standards for the security of consumer information.

The Gramm-Leach-Bliley Act also modifies other current financial laws, including laws related to financial privacy.

In response to this requirement we

developed dedicated staffing, economic models, policies and procedures to implement stress testing on an annual basis, the results of which were furnished to regulators and published on our website, as well as conducting stress tests for internal use based upon economic scenarios we developed.

The Economic Growth, Regulatory Relief and Consumer Protection Act (the “Regulatory Relief Act”), which amended portions of the Dodd-Frank Act, was enacted in 2018 and subsequently adopted, terminating our stress testing requirements.

However, we have continued to perform certain stress tests internally and have incorporated the economic models and information developed through our stress testing program into our risk management and business, capital and liquidity planning activities, which are subject to continuing regulatory oversight.

Privacy and Data Security.

The financial privacy provisions of the Gramm-Leach-Bliley Act generally prohibit financial institutions, including our Bank, from disclosing non-public personal financial information to non-affiliated third parties unless customers have the opportunity to “opt out” of the disclosure and have not elected to do so.

Our Bank is required to comply with state laws regarding consumer privacy if they are more protective than the Gramm-Leach-Bliley Act.

The financial privacy provisions of the GLB Act generally prohibit financial institutions, including our Bank, from disclosing non-public personal financial information about customers to non-affiliated third parties unless customers have the opportunity to “opt out” of the disclosure and have not elected to do so.

Our Bank is required to comply with state laws regarding consumer privacy if they are more protective than the GLB Act.

In October 2016, the federal banking regulators jointly issued an advance notice of proposed rulemaking on enhanced cyber risk management standards that are intended to increase the operational resilience of large and interconnected entities under their supervision.

If established, the enhanced cyber risk management standards would be designed to help reduce the potential impact of a cyber-attack or other cyber-related failure on the financial system.

The advance notice of proposed rulemaking addresses five categories of cyber standards:

(1) cyber risk governance;

(2) cyber risk management;

(3) internal dependency management;

(4) external dependency management;

and (5) incident response, cyber resilience and situational awareness.

In May 2019,the Federal Reserve announced that it would revisit the Advance Notice of Proposed Rulemaking in the future.

In December 2020, the federal banking agencies issued a Notice of Proposed Rulemaking that would require banking organizations to notify their primary federal regulator within 36 hours of becoming aware of a "computer-security incident" or a "notification incident." The Notice of Proposed Rulemaking also would require specific and immediate notifications by bank service providers that become aware of similar incidents.

In February 2018, the SEC published interpretive guidance to assist public companies in preparing disclosures about cybersecurity risks and incidents.

These SEC guidelines, and any other regulatory guidance, are in addition to notification and disclosure requirements under state and federal banking law and regulations.

Privacy and data security areas are expected to receive increased attention at the federal level.

An increasing number of state laws and regulations have been enacted in recent years to implement privacy and cybersecurity standards and regulations, including data breach notification and data privacy requirements.

Other nations in which our customers do business, such as the European Union, have adopted similar requirements.

This trend of state-level and international activity is expected to continue to expand, requiring continual monitoring of developments in the states and nations in which our customers are located and ongoing investments in our information systems and compliance capabilities.

Recently, several states have adopted regulations requiring certain financial institutions to implement cybersecurity programs that meet specified requirements.

In addition, other nations in which our customers do business, such as the European Union, have adopted similar requirements.

This trend of activity is expected to continue to expand, requiring continual monitoring of developments in the states and nations in which our customers are located and ongoing investments in our information systems and compliance capabilities.

Community Reinvestment Act.

The Community Reinvestment Act of 1977 (“CRA”) requires depository institutions to assist in meeting the credit needs of their market areas consistent with safe and sound banking practice.

The Community Reinvestment Act of 1977 (the “CRA”) requires depository institutions to assist in meeting the credit needs of their market areas consistent with safe and sound banking practice.

Under the CRA, each depository institution is required to help meet the credit needs of its market areas by, among other things, providing credit, making investments and providing community development services to low- and moderate-income individuals and communities.

Depository institutions are periodically examined for compliance with the CRA and are assigned ratings.

Depository institutions are periodically examined for compliance with the CRA and are assigned one of four ratings.

Our Bank is subject to examination by the OCC.

In order for a financial holding company to commence new activity permitted by the BHCA, each insured depository institution subsidiary of the financial holding company must have received a rating of at least “satisfactory” in its most recent examination under the CRA.

Our Bank's strategic focus on serving commercial customers in regional and national markets from a limited number of branches makes it more challenging for us to satisfy CRA requirements as compared to banks of comparable size that focus on providing retail banking services in markets where they maintain a network of full-service branches.

In December 2019, the OCC and the FDIC issued a notice of proposed rulemaking intended to (i) clarify which activities qualify for CRA credit;

(ii) update where activities count for CRA credit;

(iii) create a more transparent and objective method for measuring CRA performance;

and (iv) provide for more transparent, consistent, and timely CRA-related data collection, recordkeeping, and reporting.

In May 2020, the OCC issued its final CRA rule, effective October 1, 2020.

The FDIC has not finalized the revisions to its CRA rule.

The USA Patriot Act, the International Money Laundering Abatement and Financial Anti-Terrorism Act and the Bank Secrecy Act.

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government in this area.

Regulations issued under these laws impose obligations on financial institutions to maintain appropriate policies, procedures and controls to detect, prevent and report money laundering and terrorist financing and other suspicious activity and to verify the identity of their customers and apply additional scrutiny to customers considered to present greater than normal risk.

to present greater than normal risk.

Failure of a financial institution to maintain and implement adequate programs to combat money laundering and terrorist financing, or to comply with relevant laws or regulations, could have serious legal, reputational and financial consequences for the institution.

Because of the significance of regulatory emphasis on these requirements, we have expended, and expect to continue to expend, significant staffing, technology and financial resources to maintain programs designed to ensure compliance with applicable laws and regulations and an effective audit function for testing our compliance with the Bank Secrecy Act on an ongoing basis.

The Anti-Money Laundering Act of 2020 (“AMLA”), which amends the Bank Secrecy Act of 1970 (“BSA”), was enacted in January 2021.

The AMLA is intended to be a comprehensive reform and modernization to U.S.

bank secrecy and anti-money laundering laws.

Among other things, it codifies a risk-based approach to anti-money laundering compliance for financial institutions;

requires the development of standards for evaluating technology and internal processes for BSA compliance;

expands enforcement- and investigation-related authority, including increasing available sanctions for certain BSA violations and instituting BSA whistleblower incentives and protections.

Office of Foreign Assets Control .

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Transactions with Affiliates and Insiders.

Our Bank is subject to Section 23A of the Federal Reserve Act which places limits on, among other covered transactions, the amount of loans or extensions of credit to affiliates that may be made by our Bank.

Our Bank is subject to Section 23A of the Federal Reserve Act, as amended (the "FRA") which places limits on, among other covered transactions, the amount of loans or extensions of credit to affiliates that may be made by our Bank.

Extensions of credit to affiliates must be adequately collateralized by specified amounts and types of collateral.

Section 23A also limits the amount of loans or advances by our Bank to third party borrowers which are collateralized by our securities or obligations or those of our subsidiaries.

Our Bank also is subject to Section 23B of the Federal Reserve Act, which, among

other things, prohibits an institution from engaging in transactions with affiliates unless the transactions are on terms substantially the same, or at least as favorable to such institution or its subsidiaries, as those prevailing at the time for comparable transactions with non-affiliates.

We are subject to restrictions on extensions of credit to executive officers, directors, principal stockholders and their related interests.

These restrictions are contained in the Federal Reserve Act and Federal Reserve Regulation O and apply to all insured institutions as well as their subsidiaries and holding companies.

These restrictions include limits on loans to one borrower and conditions that must be met before such loans can be made.

Section 23A also limits the amount of loans or advances made by our Bank to third party borrowers that are collateralized by our or our subsidiaries' respective securities or obligations.

Our Bank is also subject to Section 23B of the FRA, which, among other things, prohibits an institution from engaging in transactions with affiliates unless the transactions are on terms substantially the same, or at least as favorable to such institution or its subsidiaries, as those prevailing at the time for comparable transactions with non-affiliates.

We are subject to restrictions on extensions of credit to insiders (namely executive officers, directors, and 10% stockholders) and their related interests.

These restrictions are contained in the FRA and Federal Reserve Regulation O and apply to all insured institutions as well as their subsidiaries and holding companies.

These restrictions include limits on loans to any individual insider and such insider's related interests and certain conditions that must be met before such loans can be made.

There is also an aggregate limitation on all loans to insiders and their related interests, which cannot exceed the institution’s total unimpaired capital and surplus, unless the FDIC determines that a lesser amount is appropriate.

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Restrictions on Payment of Dividends by Our Bank.

The sole source of funding of our parent company financial obligations has consisted of proceeds of capital markets transactions and cash payments from our Bank for debt service and dividend payments with respect to our Bank's preferred stock issued to the Company.

We may in the future seek to rely upon receipt of dividends paid by our Bank to meet our financial obligations.

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The objective of the guidance is to assure that incentive compensation arrangements (i) provide incentives that do not encourage excessive risk-taking, (ii) are compatible with effective internal controls and risk management and (iii) are supported by strong corporate governance, including oversight by the board of directors.

In 2016, the Federal Reserve and the FDIC proposed rules that would, depending upon the assets of the institution, directly regulate incentive compensation arrangements and would require enhanced oversight and recordkeeping.

In 2016, as required by the Dodd-Frank Act, the Federal Reserve, the FDIC and the SEC proposed rules that would, depending upon the assets of the institution, directly regulate incentive compensation arrangements and would require enhanced oversight and recordkeeping.

As of December 31, 2020, these rules have not been implemented.

Deposit Insurance.

Our Bank’s deposits are insured by the FDIC up to limits established by applicable law, currently $250,000 per depositor.

Our Bank’s deposits are insured through the DIF, which is administered by the FDIC, up to limits established by applicable law, currently $250,000 per depositor.

The FDIC determines quarterly deposit insurance assessments consisting of a percentage of an assessment base equal to our Bank’s average consolidated total assets less average tangible equity capital and the assignment of one of four risk categories based on supervisory evaluations, regulatory capital levels and certain other factors.

The FDIC has the discretion to adjust an institution’s risk rating.

The FDIC has the discretion to adjust an institution’s risk rating and may terminate its insurance of deposits upon a finding that the institution engaged or is engaging in unsafe and unsound practices, is in an unsafe or unsound condition to continue operations, or violated any applicable law, regulation, rule, order or condition imposed by the FDIC or written agreement entered into with the FDIC.

The FDIC may also prohibit any FDIC-insured institution from engaging in any activity it determines to pose a serious risk to the DIF.

For 2020, minimum and maximum assessment rates (inclusive of possible adjustments) for institutions the size of our Bank ranged from 1.5 to 40 basis points.

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Insider transaction limitations are expanded through the strengthening of restrictions on loans to insiders and the expansion of the types of transactions subject to the various limits, including derivatives transactions, repurchase agreements, reverse repurchase agreements and securities lending or borrowing transactions.

Restrictions are also placed on certain asset sales to and from an insider to an institution,

including requirements that such sales be on market terms and, in certain circumstances, approved by the institution’s board of directors.

Restrictions are also placed on certain asset sales to and from an insider to an institution, including requirements that such sales be on market terms and, in certain circumstances, approved by the institution’s board of directors.

The Dodd-Frank Act increases the risk of “secondary actor liability” for lenders that provide financing or other services to customers offering financial products or services to consumers, as our Bank does in our mortgage finance, mortgage correspondent aggregation and lender finance lines of business.

The Dodd-Frank Act can impose liability on a service provider for knowingly or recklessly providing substantial assistance to a customer found to have engaged in unfair, deceptive or abusive practices that injure a consumer.

The Dodd-Frank Act can impose liability on a service provider for knowingly or recklessly providing substantial assistance to a customer found to have engaged in unfair, deceptive or abusive

practices that injure a consumer.

This exposure contributes to increased compliance and other costs in connection with the administration of credit extended to entities engaged in providing financial products and services to consumers.

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Unanticipated effects of the Volcker Rule’s provisions or future interpretations may have an adverse effect on our business or services provided to our Bank by other financial institutions.

Future Legislation and Regulation .

Laws, regulations and policies are continually under review by Congress and state legislatures and federal and state regulatory agencies.

In addition to the specific legislation and regulations described above, future legislation and regulations or changes to existing statutes, regulations or regulatory policies applicable to us and our subsidiaries may affect our business, financial condition and results of operations in adverse and unpredictable ways and increase our reporting requirements and compliance costs.

The substance or impact of pending or future legislation or regulation, or the application thereof, cannot be predicted.

Available Information

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We make available, free of charge through our website, our reports on Forms 10-K, 10-Q and 8-K, and amendments to those reports, as soon as reasonably practicable after such reports are filed with or furnished to the SEC.

Additionally, we have adopted and posted on our website a code of ethics that applies to our principal executive officer, principal financial officer and principal accounting officer.

Additionally, we have adopted and posted on our website a code of business conduct that applies to our principal executive officer, principal financial officer and principal accounting officer.

The address for our website is www.texascapitalbank.com.

Any amendments to, or waivers from, our code of ethics applicable to our executive officers will be posted on our website within four days of such amendment or waiver.

Any amendments to, or waivers from, our code of business conduct applicable to our executive officers will be posted on our website within four days of such amendment or waiver.

We will provide a printed copy of any of the aforementioned documents to any requesting stockholder.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business