What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2021-07-22 compared with 2021-04-22 · 225 added, 142 removed, 642 unchanged (36% of the section changed)

1 unchanged sentence

TEXAS CAPITAL BANCSHARES, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands except share data) March 31, 2021 December 31, 2020

CONSOLIDATED BALANCE SHEETS - UNAUDITED

(in thousands except share data) June 30, 2021 December 31, 2020

Cash and due from banks $ 202,549 $ 173,573

1 unchanged sentence

Investment securities 3,798,275 3,196,970

Loans held for sale ($ 176.3 million and $ 239.1 million at March 31, 2021 and December 31, 2020, respectively, at fair value)

Loans held for sale ($ 63.7 million and $ 239.1 million at June 30, 2021 and December 31, 2020, respectively, at fair value)

63,747 283,165

21 unchanged sentences

Authorized shares— 10,000,000

Issued shares— 6,300,000 shares issued at March 31, 2021 and 6,000,000 at December 31, 2020

Issued shares— 300,000 and 6,000,000 at June 30, 2021 and December 31, 2020, respectively

300,000 150,000

1 unchanged sentence

Authorized shares— 100,000,000

Issued shares— 50,558,184 and 50,470,867 at March 31, 2021 and December 31, 2020, respectively

Issued shares— 50,592,618 and 50,470,867 at June 30, 2021 and December 31, 2020, respectively

Additional paid-in capital 992,469 991,898

1 unchanged sentence

Treasury stock (shares at cost:

417 at March 31, 2021 and December 31, 2020)

417 at June 30, 2021 and December 31, 2020)

Accumulated other comprehensive income/(loss), net of taxes ( 26,389 ) 15,774

5 unchanged sentences

COMPREHENSIVE INCOME/(LOSS) - UNAUDITED

Three months ended March 31,

Three months ended June 30, Six months ended June 30,

(in thousands except per share data) 2021 2020 2021 2020

29 unchanged sentences

Communications and technology 14,352 42,760 30,321 56,551

FDIC insurance assessment 6,613 5,849

Federal Deposit Insurance Corporation (“FDIC”) insurance assessment 5,226 7,140 11,839 12,989

Servicing-related expenses 12,355 20,100 25,344 36,454

8 unchanged sentences

Other comprehensive loss

Change in unrealized gain/(loss) on available-for-sale debt securities arising during period, before tax $ ( 91,407 ) $ ( 5,292 )

Change in unrealized gain/(loss) on available-for-sale debt securities, before tax $ 38,037 $ ( 5,435 ) $ ( 53,370 ) $ ( 10,727 )

Income tax expense/(benefit) 7,989 ( 1,142 ) ( 11,207 ) ( 2,253 )

Other comprehensive loss, net of tax ( 72,211 ) ( 4,181 )

Comprehensive loss $ ( 273 ) $ ( 20,868 )

Other comprehensive income/(loss), net of tax 30,048 ( 4,293 ) ( 42,163 ) ( 8,474 )

Comprehensive income/(loss) $ 103,529 $ ( 38,609 ) $ 103,256 $ ( 59,477 )

Basic earnings/(loss) per common share $ 1.33 $ ( 0.73 ) $ 2.68 $ ( 1.11 )

6 unchanged sentences

(in thousands except share data) Shares Amount Shares Amount Capital Earnings Shares Amount Income/(Loss) Total

Balance at March 31, 2020 6,000,000 $ 150,000 50,408,195 $ 504 $ 979,939 $ 1,637,392 ( 417 ) $ ( 8 ) $ 4,769 $ 2,772,596

Comprehensive loss:

Net loss — — — — — ( 34,316 ) — — — ( 34,316 )

Change in unrealized gain on available-for-sale securities, net of taxes — — — — — — — — ( 4,293 ) ( 4,293 )

Total comprehensive loss ( 38,609 )

Stock-based compensation expense recognized in earnings

— — — — 3,322 — — — — 3,322

Preferred stock dividend — — — — — ( 2,437 ) — — — ( 2,437 )

Issuance of stock related to stock-based awards

— — 27,894 — ( 117 ) — — — — ( 117 )

Balance at June 30, 2020 6,000,000 $ 150,000 50,436,089 $ 504 $ 983,144 $ 1,600,639 ( 417 ) $ ( 8 ) $ 476 $ 2,734,755

Balance at March 31, 2021 6,300,000 $ 450,000 50,558,184 $ 505 $ 984,207 $ 1,781,215 ( 417 ) $ ( 8 ) $ ( 56,437 ) $ 3,159,482

Comprehensive income:

Net income — — — — — 73,481 — — — 73,481

Change in unrealized gain on available-for-sale securities, net of taxes — — — — — — — — 30,048 30,048

Total comprehensive income 103,529

Stock-based compensation expense recognized in earnings

— — — — 8,315 — — — — 8,315

Preferred stock dividend — — — — — ( 6,317 ) — — — ( 6,317 )

Issuance of stock related to stock-based awards

— — 34,434 1 ( 53 ) — — — — ( 52 )

Redemption of preferred stock ( 6,000,000 ) ( 150,000 ) — — — — — — — ( 150,000 )

Balance at June 30, 2021 300,000 $ 300,000 50,592,618 $ 506 $ 992,469 $ 1,848,379 ( 417 ) $ ( 8 ) $ ( 26,389 ) $ 3,114,957

See accompanying notes to consolidated financial statements.

TEXAS CAPITAL BANCSHARES, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY - UNAUDITED - CONTINUED

Preferred Stock Common Stock Additional Treasury Stock Accumulated

Paid-in Retained Comprehensive

(in thousands except share data) Shares Amount Shares Amount Capital Earnings Shares Amount Income/(Loss) Total

Balance at December 31, 2019 (audited) 6,000,000 $ 150,000 50,338,158 $ 503 $ 978,205 $ 1,663,671 ( 417 ) $ ( 8 ) $ 8,950 $ 2,801,321

9 unchanged sentences

— — 97,931 1 ( 1,610 ) — — — — ( 1,609 )

Balance at March 31, 2020 6,000,000 $ 150,000 50,408,195 $ 504 $ 979,939 $ 1,637,392 ( 417 ) $ ( 8 ) $ 4,769 $ 2,772,596

Balance at June 30, 2020 6,000,000 $ 150,000 50,436,089 $ 504 $ 983,144 $ 1,600,639 ( 417 ) $ ( 8 ) $ 476 $ 2,734,755

Balance at December 31, 2020 (audited) 6,000,000 $ 150,000 50,470,867 $ 504 $ 991,898 $ 1,713,056 ( 417 ) $ ( 8 ) $ 15,774 $ 2,871,224

Comprehensive loss:

Comprehensive income:

Net income — — — — — 145,419 — — — 145,419

Change in unrealized gain/(loss) on available-for-sale securities, net of taxes — — — — — — — — ( 42,163 ) ( 42,163 )

Total comprehensive loss ( 273 )

Total comprehensive income 103,256

Stock-based compensation expense recognized in earnings

4 unchanged sentences

— — 121,751 2 ( 2,928 ) — — — — ( 2,926 )

Balance at March 31, 2021 6,300,000 $ 450,000 50,558,184 $ 505 $ 984,207 $ 1,781,215 ( 417 ) $ ( 8 ) $ ( 56,437 ) $ 3,159,482

Redemption of preferred stock ( 6,000,000 ) ( 150,000 ) — — — — — — — ( 150,000 )

Balance at June 30, 2021 300,000 $ 300,000 50,592,618 $ 506 $ 992,469 $ 1,848,379 ( 417 ) $ ( 8 ) $ ( 26,389 ) $ 3,114,957

(1) Represents the impact of adopting Accounting Standard Update (“ASU”) 2016-13.

3 unchanged sentences

CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED

Three months ended March 31,

Six months ended June 30,

(in thousands) 2021 2020

Operating activities

Net income $ 71,938 $ ( 16,687 )

Adjustments to reconcile net income to net cash provided by operating activities:

Net income/(loss) $ 145,419 $ ( 51,003 )

Adjustments to reconcile net income/(loss) to net cash provided by operating activities:

Provision for credit losses ( 25,000 ) 196,000

14 unchanged sentences

Proceeds from pay-offs of mortgage finance loans 88,823,033 94,034,998

Net increase in loans held for investment, excluding mortgage finance loans ( 54,141 ) ( 438,869 )

Proceeds from sale of mortgage servicing rights 108,646 —

Net increase/(decrease) in loans held for investment, excluding mortgage finance loans 174,095 ( 207,635 )

Purchase of premises and equipment, net ( 1,516 ) ( 2,344 )

Net cash provided by/(used in) investing activities ( 327,802 ) 144,007

Net cash used in investing activities ( 74,669 ) ( 1,018,401 )

Financing activities

Net increase in deposits 2,395,381 655,670

Net increase/(decrease) in deposits ( 2,157,026 ) 3,709,102

Costs from issuance of stock related to stock-based awards and warrants ( 2,926 ) ( 1,609 )

Net proceeds from issuance of preferred stock 289,723 —

Redemption of preferred stock ( 150,000 ) —

Preferred dividends paid ( 10,096 ) ( 4,875 )

Net increase/(decrease) in other borrowings ( 1,000,000 ) 300,000

Net increase in federal funds purchased and repurchase agreements 3,836 153,501

Net increase/(decrease) in federal funds purchased and repurchase agreements ( 97,270 ) 54,024

Net proceeds from issuance of long-term debt 639,440 —

Net cash provided by financing activities 2,351,102 3,305,241

Net increase in cash and cash equivalents 2,221,731 5,234,992

Redemption of long-term debt ( 111,000 ) —

Net cash provided by/(used in) financing activities ( 2,599,155 ) 4,056,642

Net increase/(decrease) in cash and cash equivalents ( 2,235,181 ) 5,291,001

Cash and cash equivalents at beginning of period 9,206,380 4,425,583

4 unchanged sentences

See accompanying notes to consolidated financial statements.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED

(1) Operations and Summary of Significant Accounting Policies

1 unchanged sentence

Texas Capital Bancshares, Inc.

(the "Company” or "TCBI"), a Delaware corporation, was incorporated in November 1996 and commenced banking operations in December 1998.

The consolidated financial statements of the Company include the accounts of Texas Capital Bancshares, Inc.

and its wholly owned subsidiary, Texas Capital Bank, National Association (the "Bank”).

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.

(the “Company”), a Delaware corporation, was incorporated in November 1996 and commenced banking operations in December 1998.

The consolidated financial statements of the Company include the accounts of the Company and its wholly owned subsidiary, Texas Capital Bank, National Association (the “Bank”).

We serve the needs of commercial businesses and professionals and entrepreneurs located in Texas as well as operate several lines of business serving 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.

3 unchanged sentences

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 footnote disclosures presented in accordance with GAAP have been condensed or omitted.

The consolidated interim financial statements are unaudited and certain information and disclosures in the notes to consolidated 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 are adequate to make the interim financial information not misleading.

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 Securities and Exchange Commission (“SEC”).

Accordingly, the financial statements do not include all of the information and footnotes required by GAAP for complete financial statements and should be read in conjunction with our consolidated financial statements, and notes thereto, for the year ended December 31, 2020, included in our Annual Report on Form 10-K for the year ended December 31, 2020 (the "2020 Form 10-K").

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 do not include all of the information and notes to the consolidated financial statements required by GAAP for complete annual financial statements and should be read in conjunction with our consolidated financial statements, and notes thereto, for the year ended December 31, 2020, included in our Annual Report on Form 10-K for the year ended December 31, 2020 (the “2020 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.

Subsequent Event

On April 20, 2021, we entered into an agreement to sell our portfolio of mortgage servicing rights to a third party.

The third party has also, in a separate letter of intent, agreed to extend employment opportunities to many of the Company’s Mortgage Correspondent Aggregation (“MCA”) employees and the Company has agreed to make best efforts to cooperate in transitioning its MCA client base to the third party, resulting in the wind-down of the Company’s MCA program.

The sale and transition of employees and clients is expected to be completed in the second quarter of 2021, subject to customary closing conditions, and will result in the Company recording an expected gain on sale of mortgage servicing rights ("MSRs") and severance costs in the second quarter of 2021, both of which are not expected to be material.

Use of Estimates

4 unchanged sentences

The following table presents the computation of basic and diluted earnings per share:

Three months ended March 31,

Three months ended June 30, Six months ended June 30,

(in thousands except share and per share data) 2021 2020 2021 2020

8 unchanged sentences

Diluted earnings/(loss) per common share $ 1.31 $ ( 0.73 ) $ 2.65 $ ( 1.11 )

(1) SARs and RSUs outstanding of 80,263 at March 31, 2021 and 428,007 at March 31, 2020 have not been included in diluted earnings/(loss) per share because to do so would have been antidilutive for the periods presented.

(1) SARs and RSUs outstanding of 98,079 at June 30, 2021 and 510,095 at June 30, 2020 have not been included in diluted earnings/(loss) per common share because to do so would have been antidilutive for the periods presented.

(3) Investment Securities

4 unchanged sentences

Losses Estimated

March 31, 2021

June 30, 2021

Available-for-sale debt securities:

2 unchanged sentences

Tax-exempt asset-backed securities 173,427 12,527 — 185,954

Credit risk transfer securities 14,713 — ( 3,248 ) 11,465

Credit risk transfer (“CRT”) securities 14,713 — ( 3,000 ) 11,713

Total $ 3,790,631 $ 13,298 $ ( 46,701 ) $ 3,757,228

6 unchanged sentences

$ 3,143,171 $ 25,803 $ ( 5,836 ) $ 3,163,138

(1) Excludes accrued interest receivable of $ 6.3 million and $ 6.0 million at March 31, 2021 and December 31, 2020, respectively, that is recorded in accrued interest receivable and other assets on the consolidated balance sheets.

(1) Excludes accrued interest receivable of $ 6.9 million and $ 6.0 million at June 30, 2021 and December 31, 2020, respectively, that is recorded in accrued interest receivable and other assets on the consolidated balance sheets.

The amortized cost and estimated fair value, excluding accrued interest receivable, and weighted average yield of available-for-sale debt securities are presented below by contractual maturity:

3 unchanged sentences

Ten Years After Ten

March 31, 2021

June 30, 2021

Available-for-sale:

45 unchanged sentences

(in thousands) Fair Value Unrealized Loss Fair Value Unrealized Loss Fair Value Unrealized Loss

March 31, 2021

June 30, 2021

government agency securities $ 122,415 $ ( 2,585 ) $ — $ — $ 122,415 $ ( 2,585 )

7 unchanged sentences

Total $ 452,975 $ ( 2,540 ) $ 11,417 $ ( 3,296 ) $ 464,392 $ ( 5,836 )

At March 31, 2021, we had 108 securities in an unrealized loss position, comprised of 5 U.S.

government agency securities, 2 CRT securities and 101 residential mortgage-backed securities.

Based upon our March 31, 2021 review of securities with unrealized losses we have determined that all losses resulted from factors not deemed credit-related.

At June 30, 2021, we had 114 securities in an unrealized loss position, comprised of five U.S.

government agency securities, two CRT securities and 107 residential mortgage-backed securities.

Based upon our June 30, 2021 review of securities with unrealized losses we have determined that all losses resulted from factors not deemed credit-related.

We have evaluated the near-term prospects of each securities portfolio in relation to the severity of the unrealized losses and adverse conditions related to the securities among other factors.

Based on that evaluation management has determined that we have the ability and intent to hold the securities until recovery of fair value and have recorded the unrealized losses in accumulated other comprehensive income (“AOCI”).

Available-for-sale debt securities with carrying values of approximately $ 28.1 million and $ 1.6 million were pledged to secure certain customer repurchase agreements and deposits, respectively, at March 31, 2021.

Available-for-sale debt securities with carrying values of approximately $ 26.3 million and $ 1.3 million were pledged to secure certain customer repurchase agreements and deposits, respectively, at June 30, 2021.

The comparative amounts at December 31, 2020 were $ 31.7 million and $ 1.9 million, respectively.

Equity Securities

Equity securities consist of Community Reinvestment Act funds and investments related to our non-qualified deferred compensation plan.

At March 31, 2021 and December 31, 2020, we had $ 34.4 million and $ 33.8 million, respectively, in equity securities recorded at fair value.

Equity securities consist of investments that qualify for consideration under the regulations implementing the Community Reinvestment Act and investments related to our non-qualified deferred compensation plan.

At June 30, 2021 and December 31, 2020, we had $ 41.0 million and $ 33.8 million, respectively, in equity securities recorded at fair value.

The following is a summary of unrealized and realized gains/(losses) recognized on equity securities included in other non-interest income in the consolidated statements of income and other comprehensive income:

Three months ended March 31,

Three months ended June 30, Six months ended June 30,

(in thousands) 2021 2020 2021 2020

1 unchanged sentence

Realized net gains/(losses) recognized during the period on equity securities sold

351 ( 226 ) 749 ( 245 )

Unrealized net gains/(losses) recognized during the period on equity securities still held

2 unchanged sentences

Loans held for investment are summarized by portfolio segment as follows:

(in thousands) March 31, 2021 December 31, 2020

(in thousands) June 30, 2021 December 31, 2020

Commercial $ 9,054,764 $ 8,861,580

6 unchanged sentences

Total loans held for investment, net(2) $ 23,719,853 $ 24,176,245

(1) Balances at March 31, 2021 and December 31, 2020 are stated net of $ 1.0 billion and $ 1.2 billion of participations sold, respectively.

(2) Excludes accrued interest receivable of $ 55.9 million and $ 56.5 million at March 31, 2021 and December 31, 2020, respectively, that is recorded in accrued interest receivable and other assets on the consolidated balance sheets.

The following table summarizes our gross loans held for investment by year of origination and internally assigned credit grades:

(1) Balances at June 30, 2021 and December 31, 2020 are stated net of $ 617.9 million and $ 1.2 billion of participations sold, respectively.

(2) Excludes accrued interest receivable of $ 53.8 million and $ 56.5 million at June 30, 2021 and December 31, 2020, respectively, that is recorded in accrued interest receivable and other assets on the consolidated balance sheets.

The following tables summarize our gross loans held for investment by year of origination and internally assigned credit grades:

(in thousands) 2021 2020 2019 2018 2017 2016 and prior Revolving lines of credit Revolving lines of credit converted to term loans Total

March 31, 2021

June 30, 2021

(1-7) Pass $ 637,105 $ 3,394,502 $ 602,181 $ 441,326 $ 209,229 $ 297,669 $ 3,082,499 $ 59,164 $ 8,723,675

33 unchanged sentences

Total loans held for investment $ 1,144,886 $ 5,069,151 $ 2,705,494 $ 2,203,080 $ 1,359,119 $ 7,000,054 $ 4,367,310 $ 161,463 $ 24,010,557

(in thousands) 2020 2019 2018 2017 2016 2015 and prior Revolving lines of credit Revolving lines of credit converted to term loans Total

December 31, 2020

(1-7) Pass $ 1,259,949 $ 2,816,425 $ 543,438 $ 374,455 $ 192,060 $ 213,212 $ 3,020,353 $ 40,253 $ 8,460,145

(8) Special mention 2,664 115,015 38,751 26,423 1,983 290 19,971 22,797 227,894

(9) Substandard - accruing 15,773 15,854 18,068 32,241 15,297 19,639 22,932 1,641 141,445

(9+) Non-accrual 1,820 8,360 377 1,292 802 15,157 3,836 452 32,096

Total commercial $ 1,280,206 $ 2,955,654 $ 600,634 $ 434,411 $ 210,142 $ 248,298 $ 3,067,092 $ 65,143 $ 8,861,580

(1-7) Pass $ — $ 12,020 $ 7,598 $ 26,931 $ — $ 23,750 $ 553,970 $ — $ 624,269

(8) Special mention — — — — — 13,358 76,866 — 90,224

(9) Substandard - accruing — — — — — — — — —

(9+) Non-accrual — — — 5,705 1,972 8,009 36,038 — 51,724

Total energy $ — $ 12,020 $ 7,598 $ 32,636 $ 1,972 $ 45,117 $ 666,874 $ — $ 766,217

Mortgage finance

(1-7) Pass $ 755,309 $ 1,063,641 $ 821,122 $ 483,436 $ 106,013 $ 5,849,888 $ — $ — $ 9,079,409

(8) Special mention — — — — — — — — —

(9) Substandard - accruing — — — — — — — — —

(9+) Non-accrual — — — — — — — — —

Total mortgage finance $ 755,309 $ 1,063,641 $ 821,122 $ 483,436 $ 106,013 $ 5,849,888 $ — $ — $ 9,079,409

(1-7) Pass $ 352,688 $ 892,831 $ 923,762 $ 444,587 $ 208,426 $ 451,283 $ 62,336 $ 61,133 $ 3,397,046

(8) Special mention 3,475 11,170 6,485 88,633 11,153 17,623 — 1,247 139,786

(9) Substandard - accruing — 327 47,708 11,601 32,645 30,766 — 15,940 138,987

(9+) Non-accrual — — — — 5,749 4,852 — — 10,601

(1-7) Pass 162,397 60,077 65,271 3,727 5,888 8,483 551,703 — 857,546

(8) Special mention — 353 — — — — — — 353

(9) Substandard - accruing — — — — — — — — —

(9+) Non-accrual — — — — — — — — —

(1-7) Pass 190,995 150,787 119,696 120,817 82,465 113,105 16,630 39,129 833,624

(8) Special mention — 6,700 2,240 — 1,843 7,195 — 1,018 18,996

(9) Substandard - accruing — — 2,567 14,452 3,301 14,453 — — 34,773

(9+) Non-accrual — — — 927 5,524 6,403 — 14,496 27,350

Secured by 1-4 family

(1-7) Pass 58,515 63,031 46,623 54,096 72,527 31,880 4,697 — 331,369

(8) Special mention 646 — — 635 — 1,768 — — 3,049

(9) Substandard - accruing — — — 817 — 109 — — 926

(9+) Non-accrual — — — — — 218 — — 218

Total real estate $ 768,716 $ 1,185,276 $ 1,214,352 $ 740,292 $ 429,521 $ 688,138 $ 635,366 $ 132,963 $ 5,794,624

Total loans held for investment $ 2,804,231 $ 5,216,591 $ 2,643,706 $ 1,690,775 $ 747,648 $ 6,831,441 $ 4,369,332 $ 198,106 $ 24,501,830

The following table details activity in the allowance for credit losses on loans.

1 unchanged sentence

(in thousands) Commercial Energy Mortgage

Three months ended March 31, 2021

Six months ended June 30, 2021

Allowance for credit losses on loans:

5 unchanged sentences

Ending balance $ 82,591 $ 55,202 $ 5,051 $ 78,667 $ 221,511

Three months ended March 31, 2020

Six months ended June 30, 2020

Allowance for credit losses on loans:

6 unchanged sentences

Ending balance $ 83,194 $ 102,695 $ 4,595 $ 74,238 $ 264,722

We recorded a $ 6.0 million negative provision for credit losses for the first quarter of 2021, compared to a provision of $ 96.0 million for the first quarter of 2020.

The decreased provision for credit losses in the first quarter of 2021 as compared to the first quarter of 2020 resulted primarily from a decrease in charge-offs and improvement in the economic outlook as the economy begins to recover from the impacts of the COVID-19 pandemic.

We recorded $ 6.4 million in net charge-offs during the first quarter of 2021, compared to $ 57.7 million during the first quarter of 2020.

Criticized loans totaled $ 945.1 million at March 31, 2021, compared to $ 675.9 million at March 31, 2020.

Criticized loan levels remain elevated when compared to pre-pandemic levels due to the downgrade of loans to borrowers that have been impacted by the COVID-19 pandemic.

We recorded a $ 25.0 million negative provision for credit losses for the six months ended June 30, 2021, compared to a provision of $ 196.0 million for the same period in 2020.

The decreased provision resulted primarily from decreases in charge-offs and non-accrual loans, as well as improvement in the economic outlook as the economy continues to recover from the impacts of the COVID-19 pandemic.

We recorded $ 8.8 million in net charge-offs during the six months ended June 30, 2021, compared to $ 131.8 million during the same period in 2020.

Criticized loans totaled $ 891.6 million at June 30, 2021, compared to $ 1.0 billion at June 30, 2020.

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.

1 unchanged sentence

Collateral Type

(in thousands) Real Property Rolling Stock Total

March 31, 2021

Commercial $ — $ 774 $ 774

CRE 4,619 — 4,619

(in thousands) Real Property Total

June 30, 2021

Other $ 908 $ 908

Total collateral-dependent loans held for investment

$ 10,603 $ 774 $ 11,377

The table below provides an age analysis of our loans held for investment:

2 unchanged sentences

Past Due 90 Days or More Past Due(1) Total Past

Due Non-accrual loans as of March 31, 2021 (2) Current Total Non-accrual With No Allowance

March 31, 2021

Due Non-Accrual Loans(2) Current Total Non-Accrual With No Allowance

June 30, 2021

Commercial $ 16,215 $ 1,555 $ 7,607 $ 25,377 $ 35,356 $ 8,994,031 $ 9,054,764 $ 12,451

12 unchanged sentences

The receipt of the refund of premiums from the insurance carriers can take 180 days or longer from the cancellation date.

(2) As of March 31, 2021 and December 31, 2020, none of our non-accrual loans were earning interest income on a cash basis.

Additionally, no interest income was recognized on non-accrual loans for the three months ended March 31, 2021.

Accrued interest of $ 339,000 was reversed during the three months ended March 31, 2021.

As of March 31, 2021 and December 31, 2020, we did not have any loans considered restructured that were not on non-accrual.

Of the non-accrual loans at March 31, 2021 and December 31, 2020, $ 33.7 million and $ 45.4 million, respectively, met the criteria for restructured.

(2) As of June 30, 2021 and December 31, 2020, none of our non-accrual loans were earning interest income on a cash basis.

Additionally, no interest income was recognized on non-accrual loans for the six months ended June 30, 2021.

Accrued interest of $ 468,000 was reversed during the six months ended June 30, 2021.

As of June 30, 2021 and December 31, 2020, we did not have any loans considered restructured that were not on non-accrual.

Of the non-accrual loans at June 30, 2021 and December 31, 2020, $ 24.4 million and $ 45.4 million, respectively, met the criteria for restructured.

These loans had no unfunded commitments at their respective balance sheet dates.

We did not have any loans that were restructured during the three months ended March 31, 2021 or 2020.

As of March 31, 2021 and 2020, we did not have any loans that were restructured within the last 12 months that subsequently defaulted.

We did not have any loans that were restructured during the six months ended June 30, 2021 or 2020.

As of June 30, 2021 and 2020, we did not have any loans that were restructured within the last 12 months that subsequently defaulted.

(5) Certain Transfers of Financial Assets

On April 20, 2021, we entered into an agreement to sell our portfolio of mortgage servicing rights (“MSRs”) and to transition the Mortgage Correspondent Aggregation (“MCA”) program to a third-party.

The sale of MSRs was completed on June 1, 2021, and the transfer of servicing on the underlying mortgage loans is expected to occur on August 1, 2021.

Transition activities began immediately following the execution of the agreement and are expected to be significantly complete by September 30, 2021.

The table below presents a reconciliation of the changes in loans held for sale:

Three Months Ended March 31,

Six Months Ended June 30,

(in thousands) 2021 2020

10 unchanged sentences

(1) Includes $ 44.1 million of loans held for sale that are carried at lower of cost or market as of December 31, 2020, as well as $ 5.8 million as of December 31, 2019.

No loans held for sale were on non-accrual as of March 31, 2021.

No loans held for sale were on non-accrual as of June 30, 2021.

At December 31, 2020 we had $ 7.0 million in non-accrual loans held for sale, comprised of one loan previously reported in loans held for investment that was transferred to loans held for sale as of December 31, 2020 and subsequently sold at carrying value.

At March 31, 2021 and December 31, 2020, we had $ 16.4 million and $ 16.7 million, respectively, of loans held for sale that were 90 days or more past due.

The $ 16.4 million in loans held for sale that were 90 days or more past due at March 31, 2021 included $ 3.3 million of loans guaranteed by U.S.

government agencies that were purchased out of Ginnie Mae securities and recorded as loans held for sale, at fair value, on the balance sheet.

At June 30, 2021 and December 31, 2020, we had $ 2.7 million and $ 16.7 million, respectively, of loans held for sale that were 90 days or more past due.

The $ 2.7 million in loans held for sale that were 90 days or more past due at June 30, 2021 was comprised of loans guaranteed by U.S.

government agencies

that were purchased out of Ginnie Mae securities and recorded as loans held for sale, at fair value, on the balance sheet.

Interest on these past due loans accrues at the debenture rate guaranteed by the U.S.

Also included in the $ 16.4 million were $ 12.9 million in loans that, pursuant to Ginnie Mae servicing guidelines, we have the unilateral right, but not the obligation, to repurchase if defined delinquent loan criteria are met, and therefore must record as held for sale on our balance sheet regardless of whether the repurchase option has been exercised.

At December 31, 2020, $ 3.3 million of the $ 16.7

million in loans held for sale that were 90 days or more past due were loans guaranteed by U.S.

government agencies that were purchased out of Ginnie Mae securities and recorded as loans held for sale, at fair value, on the balance sheet and $ 13.4 million were loans that we have the unilateral right, but not the obligation, to repurchase if defined delinquent loan criteria are met.

From time to time we retain the right to service the loans sold through our MCA program, creating MSRs which are recorded as assets on our consolidated balance sheets.

At December 31, 2020, $ 3.3 million of the $ 16.7 million in loans held for sale that were 90 days or more past due were loans guaranteed by U.S.

government agencies that were purchased out of Ginnie Mae securities and recorded as loans held for sale, at fair value, on the balance sheet and $ 13.4 million were loans that, pursuant to Ginnie Mae servicing guidelines, we have the unilateral right, but not the obligation, to repurchase if defined delinquent loan criteria are met, and therefore must record as held for sale on our balance sheet regardless of whether the repurchase option has been exercised.

From time to time we retain the right to service the loans sold through the MCA program, creating MSRs which are recorded as assets on our consolidated balance sheets.

A summary of MSR activity is as follows:

Three months ended March 31,

Six months ended June 30,

(in thousands) 2021 2020

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Amortization ( 18,629 ) ( 14,032 )

Sales ( 127,281 ) —

Balance, end of period $ 1,316 $ 102,072

5 unchanged sentences

MSRs, fair value $ 1,326 $ 75,451

At March 31, 2021 and December 31, 2020, our servicing portfolio of residential mortgage loans had outstanding principal balances of $ 13.6 billion and $ 13.8 billion, respectively.

In connection with the servicing of these loans, we hold deposits in the name of investors representing escrow funds for taxes and insurance, as well as collections in transit to the investors.

At June 30, 2021 and December 31, 2020, our portfolio of MSRs was comprised of residential mortgage loans with outstanding principal balances of $ 129.3 million and $ 13.8 billion, respectively.

In connection with the servicing of these loans, we hold deposits in the name of investors representing escrow funds for taxes and insurance, as well as collections in transit to such investors.

These escrow funds are segregated and held in separate non-interest-bearing deposit accounts at the Bank.

These deposits, included in total non-interest-bearing deposits on the consolidated balance sheets, were $ 153.8 million at March 31, 2021 and $ 152.6 million at December 31, 2020.

At March 31, 2021, the estimated fair value of MSRs were positively impacted by decreased prepayment speeds as compared to December 31, 2020, which resulted in a $ 16.4 million release of impairment being recorded for the three months ended March 31, 2021, compared to a $ 10.0 million impairment charge for the first three months of 2020.

To mitigate exposure to potential impairment charges from adverse changes in the fair value of our residential MSR portfolio, we enter into certain derivative contracts, as is further discussed in Note 11 - Derivative Financial Instruments.

These deposits, included in total non-interest-bearing deposits on the consolidated balance sheets, were insignificant at June 30, 2021 and $ 152.6 million at December 31, 2020.

To mitigate exposure to potential impairment charges from adverse changes in the fair value of our MSR portfolio, we enter into certain derivative contracts, as is further discussed in Note 11 - Derivative Financial Instruments.

The following summarizes the assumptions used by management to determine the fair value of MSRs:

March 31, 2021 December 31, 2020

June 30, 2021 December 31, 2020

Average discount rates 9.00 % 9.09 %

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A sensitivity analysis of changes in the fair value of our MSR portfolio resulting from certain key assumptions is presented in the following table:

(in thousands) March 31, 2021 December 31, 2020

(in thousands) June 30, 2021 December 31, 2020

50 bp adverse change in prepayment speed $ ( 162 ) $ ( 12,203 )

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In conjunction with the sale and securitization of loans held for sale, we may be exposed to liability resulting from repurchase, indemnification and make-whole agreements.

Our estimated exposure related to those agreements totaled $ 648,000 and $ 621,000 at March 31, 2021 and December 31, 2020, respectively, and is recorded in other liabilities on the consolidated balance sheets.

$ 30,000 in make-whole obligation payments were made during the three months ended March 31, 2021 compared to $ 2.1 million during the three months ended March 31, 2020.

Our estimated exposure related to those agreements totaled $ 648,000 and $ 621,000 at June 30, 2021 and December 31, 2020, respectively, and is recorded in other liabilities on the consolidated balance sheets.

$ 47,000 in make-whole obligation payments were made during the six months ended June 30, 2021 compared to $ 4.5 million during the six months ended June 30, 2020.

(6) Long-term Debt

From November 2002 to September 2006 various Texas Capital Statutory Trusts were created and subsequently issued floating rate trust preferred securities in various private offerings totaling $ 113.4 million.

For the three months ended March 31, 2021, the combined weighted-average interest rate on the trust preferred subordinated debentures was 2.19 % compared to 3.80 % for the same period in 2020.

As of December 31, 2020, the details of the trust preferred subordinated debentures are summarized below:

For the three and six months ended June 30, 2021, the combined weighted-average interest rate on the trust preferred subordinated debentures was 2.14 % and 2.17 %, respectively, compared to 3.02 % and 3.41 %, respectively, for the same periods in 2020.

The details of the trust preferred subordinated debentures as of June 30, 2021 are summarized below:

(dollar amounts in thousands) Texas Capital

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The indenture governing the notes contains customary covenants and restrictions.

These notes were redeemed on June 21, 2021.

On January 31, 2014, the Bank issued $ 175.0 million of subordinated notes in an offering to institutional investors exempt from registration under Section 3(a)(2) of the Securities Act of 1933 and 12 C.F.R.

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The notes mature on September 30, 2024, and accrue interest at a rate equal to the higher of LIBOR plus 4.50 % or 4.25 %, payable quarterly on each of March 31, June 30, September 30 and December 31.

For the three months ended March 31, 2021, the weighted-average interest rate on the notes was 5.54 %.

For the three and six months ended June 30, 2021, the weighted-average interest rate on the notes was 5.62 % and 5.60 %, respectively.

The notes effectively transfer the risk of first losses on a $ 2.2 billion reference pool of the Bank’s mortgage warehouse loans to the purchasers of the notes in an amount up to $ 275.0 million.

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Because the notes are variable rate debt, the fair value approximates carrying value.

On May 6, 2021, the Company issued and sold $ 375.0 million of subordinated notes.

The notes mature in May 2031 and bear interest at a fixed rate of 4.00 % per annum, payable semi-annually.

Net proceeds from the transaction were $ 370.7 million providing additional capital to be used for general corporate purposes.

A portion of the proceeds were also used to redeem the Company’s 6.50 % fixed rate subordinated notes, as is described above.

The indenture governing the notes contains customary covenants and restrictions.

(7) Financial Instruments with Off-Balance Sheet Risk

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This allowance is recorded in other liabilities on the consolidated balance sheets.

Three months ended March 31,

Three months ended June 30, Six months ended June 30,

(in thousands) 2021 2020 2021 2020

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Provision for off-balance sheet credit losses

( 400 ) 2,094 ( 687 ) 3,065

Ending balance of allowance for off-balance sheet credit losses

$ 16,747 $ 12,268 $ 16,747 $ 12,268

(in thousands) March 31, 2021 December 31, 2020

(in thousands) June 30, 2021 December 31, 2020

Commitments to extend credit - period end balance $ 8,228,992 $ 8,530,453

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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).

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

In March 2020, the federal bank regulatory agencies issued an interim final rule that maintains the three-year CECL 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 CECL transition option).

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

Quantitative measures established by regulation to ensure capital adequacy require the Company and the Bank to maintain minimum amounts and ratios of CET1, Tier 1 and total capital to risk-weighted assets and of Tier 1 capital to average assets, each as defined in the regulations.

Management believes, as of March 31, 2021, that the Company and the Bank meet all capital adequacy requirements to which they are subject.

Management believes, as of June 30, 2021, that the Company and the Bank meet all capital adequacy requirements to which they are subject.

Financial institutions are categorized as well capitalized or adequately capitalized, based on minimum total risk-based, Tier 1 risk-based, CET1 and Tier 1 leverage ratios.

As shown in the table below, the Company’s capital ratios exceeded the regulatory definition of adequately capitalized as of March 31, 2021 and December 31, 2020.

As shown in the table below, the Company’s capital ratios exceeded the regulatory definition of adequately capitalized as of June 30, 2021 and December 31, 2020.

Based upon the information in its most recently filed call report, the Bank met the capital ratios necessary to be well capitalized.

The regulatory authorities can apply changes in classification of assets and such changes may retroactively subject the Company to changes in capital ratios.

Any such change could reduce one or more capital ratios below well-capitalized status.

In addition, a change may result in

imposition of additional assessments by the FDIC or could result in regulatory actions that could have a material effect on our condition and results of operations.

such change could reduce one or more capital ratios below well-capitalized status.

In addition, a change may result in imposition of additional assessments by the FDIC or could result in regulatory actions that could have a material effect on our condition and results of operations.

Because our Bank had less than $ 15.0 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.

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The ratios presented below include the effects of our election to utilize the five-year CECL transition described above.

Actual Minimum Capital Required - Basel III Fully Phased-In Required to be Considered Well Capitalized

Actual Minimum Capital Required Capital Required to be Well Capitalized

(dollars in thousands) Capital Amount Ratio Capital Amount Ratio Capital Amount Ratio

March 31, 2021

June 30, 2021

Company $ 2,835,896 10.53 % $ 1,885,230 7.00 % N/A N/A

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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.

Our mortgage finance loan volumes can increase significantly at month-end, causing a meaningful difference between ending balance and average balance for any period.

As CET1, Tier 1 and total capital ratios are calculated using quarter-end risk-weighted assets and our mortgage finance loans are 100% risk-weighted (excluding MCA mortgage loans held for sale, which receive lower risk weights), the period-end fluctuation in these balances can significantly impact our reported ratios.

Our mortgage finance loan volumes can increase significantly at month-end, causing a meaningful difference between ending and average balances for any period.

As CET1, Tier 1 and total capital ratios are calculated using quarter-end risk-weighted assets and our mortgage finance loans are 100% risk-weighted (excluding MCA loans held for sale, which receive lower risk weights), the period-end fluctuation in these balances can significantly impact our reported ratios.

Due to the actual risk profile and liquidity of this asset class, we do not believe that the period-end balance is representative of risk characteristics that would justify higher allocations, and while we manage capital allocated to mortgage finance loans based on changing trends in average balances, we do monitor our capital allocation to confirm that all capital levels remain above well-capitalized levels.

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The Basel III Capital Rules further limit the amount of dividends that may be paid by our Bank.

No dividends were declared or paid on our common stock during the three months ended March 31, 2021, or 2020.

No dividends were declared or paid on our common stock during the six months ended June 30, 2021, or during the year ended December 31, 2020.

(9) Stock-based Compensation

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The table below summarizes our stock-based compensation expense:

Three months ended March 31,

Three months ended June 30, Six months ended June 30,

(in thousands) 2021 2020 2021 2020

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Total $ 8,436 $ 3,660 $ 14,804 $ 7,029

(in thousands except period data) March 31, 2021

(in thousands except period data) June 30, 2021

Unrecognized compensation expense related to unvested stock-settled awards $ 45,429

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(in thousands) Level 1 Level 2 Level 3

March 31, 2021

June 30, 2021

Available-for-sale debt securities:(1)

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(1) Securities are measured at fair value on a recurring basis, generally monthly, except for tax-exempt asset-backed securities and CRT securities which are measured quarterly.

(2) Equity securities consist of Community Reinvestment Act funds and investments related to our non-qualified deferred compensation plan.

(3) Loans held for sale purchased through our MCA program 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 related to our non-qualified deferred compensation plan.

(3) Loans held for sale purchased through the MCA program 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.

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(in thousands) Balance at Beginning of Period Purchases / Additions Sales / Reductions Realized Unrealized Balance at End of Period

Three months ended March 31, 2021

Three months ended June 30, 2021

Available-for-sale debt securities:(1)

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Loans held for sale(2) 7,275 1,148 ( 246 ) — 50 8,227

Three months ended March 31, 2020

Three months ended June 30, 2020

Available-for-sale debt securities:(1)

2 unchanged sentences

Loans held for sale(2) 6,694 107 ( 780 ) 88 50 6,159

Six months ended June 30, 2021

Available-for-sale debt securities:(1)

Tax-exempt asset-backed securities $ 199,176 $ — $ ( 11,513 ) $ — $ ( 1,709 ) $ 185,954

CRT securities 11,417 — — — 296 11,713

Loans held for sale(2) 6,933 1,685 ( 525 ) 5 129 8,227

Six months ended June 30, 2020

Available-for-sale debt securities:(1)

Tax-exempt asset-backed securities $ 197,027 $ 8,470 $ ( 4,485 ) $ — $ ( 9,595 ) $ 191,417

CRT securities 11,964 — — — ( 1,011 ) 10,953

Loans held for sale(2) 7,043 320 ( 1,464 ) 116 144 6,159

(1) Unrealized gains/(losses) on available-for-sale debt securities are recorded in AOCI and relate to assets that remain outstanding at period end.

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Tax-exempt asset-backed securities

The fair value of tax-exempt asset-backed securities is based on a discounted cash flow model, which utilizes Level 3, or unobservable, inputs, the most significant of which were a discount rate and weighted-average life.

At March 31, 2021, the discount rates utilized ranged from 2.95 % to 3.03 % and the weighted-average life ranged from 5.28 years to 5.30 years.

On a combined amortized cost weighted-average basis a discount rate of 2.99 % and weighted-average life of 5.29 years were utilized to determine the fair value of these securities at March 31, 2021.

At June 30, 2021, the discount rates utilized ranged from 2.29 % to 2.37 % and the weighted-average life ranged from 5.0 to 5.1 years.

On a combined amortized cost weighted-average basis a discount rate of 2.33 % and weighted-average life of 5.0 years were utilized to determine the fair value of these securities at June 30, 2021.

At December 31, 2020, the combined weighted-average discount rate and weighted-average life utilized were 2.49 % and 5.5 years, respectively.

CRT securities

The fair value of CRT securities is based on a discounted cash flow model, which utilizes Level 3, or unobservable, inputs, the most significant of which were a discount rate and weighted-average life.

At March 31, 2021, the discount rates utilized ranged from 3.32 % to 8.27 % and the weighted-average life ranged from 6.4 years to 10.3 years.

On a combined amortized cost weighted-average basis a discount rate of 4.97 % and a weighted-average life of 7.7 years were utilized to determine the fair value of these securities at March 31, 2021.

The fair value of CRT securities is based on a discounted cash flow model, which utilizes Level 3, or unobservable, inputs, the most significant of which were a discount rate and a weighted-average life.

At June 30, 2021, the discount rates utilized ranged from 3.09 % to 7.97 % and the weighted-average life ranged from 5.4 years to 10.0 years.

On a combined amortized cost

weighted-average basis a discount rate of 4.72 % and a weighted-average life of 6.9 years were utilized to determine the fair value of these securities at June 30, 2021.

At December 31, 2020, the combined weighted-average discount rate and combined weighted-average life utilized were 4.36 % and 7.5 years, respectively.

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The fair value of such loans is generally based upon quoted prices of comparable loans with a liquidity discount applied.

At March 31, 2021, the fair value of these loans was calculated using a weighted-average discounted price of 98.4 %, compared to 97.2 % at December 31, 2020.

At June 30, 2021, the fair value of these loans was calculated using a weighted-average discounted price of 99.2 %, compared to 97.2 % at December 31, 2020.

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 $ 9.1 million fair value of loans held for investment at March 31, 2021 reported above

includes loans held for investment with a carrying value of $ 11.4 million that were reduced by specific allowance allocations totaling $ 2.3 million based on collateral valuations utilizing Level 3 inputs.

The $ 908,000 fair value of loans held for investment at June 30, 2021 reported above includes loans with carrying values that, based on collateral valuations utilizing Level 3 inputs, equate to their fair value.

The $ 21.2 million fair value of loans held for investment at December 31, 2020 reported above includes loans with a carrying value of $ 25.3 million that were reduced by specific allowance allocations totaling $ 4.1 million based on collateral valuations utilizing Level 3 inputs.

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A summary of the carrying amounts and estimated fair values of financial instruments is as follows:

March 31, 2021 December 31, 2020

June 30, 2021 December 31, 2020

(in thousands) Carrying

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The notional amounts and estimated fair values of derivative positions outstanding are presented in the following table:

March 31, 2021 December 31, 2020

June 30, 2021 December 31, 2020

Estimated Fair Value Estimated Fair Value

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The weighted-average received and paid interest rates for interest rate swaps outstanding were as follows:

March 31, 2021

June 30, 2021

Weighted-Average Interest Rate December 31, 2020 Weighted-Average Interest Rate

1 unchanged sentence

Non-hedging interest rate swaps 2.83 % 1.20 % 3.14 % 1.38 %

The weighted-average strike rate for outstanding interest rate caps was 3.07 % at March 31, 2021 and 3.41 % at December 31, 2020.

The weighted-average strike rate for outstanding interest rate caps was 2.68 % at June 30, 2021 and 3.41 % at December 31, 2020.

Our 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.

Our credit exposure associated with these instruments, net of any collateral pledged, was approximately $ 70.4 million at March 31, 2021, and approximately $ 102.7 million at December 31, 2020.

Our credit exposure associated with these instruments, net of any collateral pledged, was approximately $ 64.3 million at June 30, 2021, and approximately $ 102.7 million at December 31, 2020.

Collateral levels are monitored and adjusted on a regular basis for changes in interest rate swap and cap values, as well as for changes in the value of forward sale commitments.

At March 31, 2021, we had $ 74.5 million in cash collateral pledged for these derivatives, of which $ 73.5 million was included in interest-bearing deposits in other banks and $ 1.0 million was included in accrued interest receivable and other assets.

At June 30, 2021, we had $ 72.4 million in cash collateral pledged for these derivatives, of which $ 70.2 million was included in interest-bearing deposits in other banks and $ 2.2 million was included in accrued interest receivable and other assets.

At December 31, 2020, we had $ 108.3 million in cash collateral pledged for these derivatives, of which $ 104.4 million was included in interest-bearing deposits in other banks and $ 3.9 million was included in accrued interest receivable and other assets.

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The risk participation agreements entered into by us 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.

We are party to 9 risk participation agreements where we are a participant bank with a notional amount of $ 119.0 million at March 31, 2021, compared to 9 risk participation agreements having a notional amount of $ 119.5 million at December 31, 2020.

The maximum estimated exposure to these agreements, assuming 100% default by all obligors, was approximately $ 4.9 million at March 31, 2021 and $ 6.0 million at December 31, 2020.

The fair value of these exposures was insignificant to the consolidated financial statements at both March 31, 2021 and December 31, 2020.

We are party to nine risk participation agreements where we are a participant bank with a notional amount of $ 118.1 million at June 30, 2021, compared to nine risk participation agreements having a notional amount of $ 119.5 million at December 31, 2020.

The maximum estimated exposure to these agreements, assuming 100% default by all obligors, was approximately $ 4.3 million at June 30, 2021 and $ 6.0 million at December 31, 2020.

The fair value of these exposures was insignificant to the consolidated financial statements at both June 30, 2021 and December 31, 2020.

Risk participation agreements entered into by us as the lead bank provide credit protection to us should the borrower fail to perform on its interest rate derivative contract with us.

We are party to 15 risk participation agreements where

we are the lead bank having a notional amount of $ 160.6 million at March 31, 2021, compared to 16 agreements having a notional amount of $ 165.9 million at December 31, 2020.

We are party to 15 risk participation agreements where we are the lead

bank having a notional amount of $ 160.1 million at June 30, 2021, compared to 16 agreements having a notional amount of $ 165.9 million at December 31, 2020.

(12) Material Transactions Affecting Stockholders' Equity

3 unchanged sentences

Holders of preferred stock will not have voting rights, except with respect to certain changes in the terms of the preferred stock, certain dividend non-payments and as otherwise required by applicable law.

Net proceeds from the sale totaled $ 289.7 million.

The additional equity is being used for general corporate purposes, including funding regulatory capital infusions into the Bank, and may be used to redeem, in whole or in part and subject to receipt of all applicable regulatory approvals, our 6.5 % non-cumulative perpetual preferred stock Series A, par value $ 0.01 per share, in accordance with its terms.

Net proceeds from the sale totaled $ 289.7 million, providing additional capital to be used for general corporate purposes.

A portion of the proceeds were also used to redeem, in whole, our 6.50 % non-cumulative perpetual preferred stock Series A, par value $ 0.01 per share, in accordance with its terms.

On June 15, 2021 we redeemed all 6,000,000 outstanding shares of our 6.50 % non-cumulative perpetual preferred stock, Series A.

(13) New Accounting Standards

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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-Q

Item 1. Financial Statements