What changed in this filing

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Item 1. Business

2023-02-09 compared with 2022-02-09 · 203 added, 238 removed, 168 unchanged (72% 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” 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.

Texas Capital Bancshares, Inc.

(“we,” “us,” “TCBI” or 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 (the “Bank”).

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.

Substantially all of our business activities are conducted through the Bank.

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 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.

Our national lines of business provide specialized lending products to businesses throughout the United States.

In May 2021, the Bank applied to the Texas Department of Banking to convert from a national association to a Texas state-chartered bank.

The application was approved during the third quarter and the conversion was effective at open of business on September 15, 2021.

Effective as of the date of conversion, the Texas Department of Banking is the Bank’s primary regulator, the Federal Deposit Insurance Corporation (“FDIC”) is the Bank’s primary federal regulator, and the Board of Governors of the Federal Reserve System (“Federal Reserve”) will continue to be the Company’s primary federal regulator.

In December 2021, the Company received approval from the U.S.

Securities and Exchange Commission (“SEC”) and Financial Industry Regulatory Authority (“FINRA”) for registration and FINRA membership of a broker-dealer to conduct securities transactions and business with the investing public in the United States.

In connection with this approval, TCBI Securities, Inc., (“TCBI Securities”) a wholly owned non-bank subsidiary of the Bank, was formed to provide investment banking products and services to our customers.

TCBI Securities is subject to regulation by the SEC, FINRA and state securities regulators.

Growth History

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

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 concentrations.

In 2021, we continued this strategic reduction of certain portfolios, transitioned our Mortgage Correspondent Aggregation (“MCA”) program to a third party, and embarked on an enterprise-wide transformation to support our new long-term strategic plan, as was unveiled on September 1, 2021, all of which resulted in the continued contraction of certain areas of our balance sheet.

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

(in thousands) 2021 2020 2019 2018 2017

Loans held for sale $ 8,123 $ 283,165 $ 2,577,134 $ 1,969,474 $ 1,011,004

Loans held for investment, mortgage finance 7,475,497 9,079,409 8,169,849 5,877,524 5,308,160

Loans held for investment, net 15,331,457 15,351,451 16,476,413 16,690,550 15,366,252

Total assets 34,731,738 37,726,096 32,548,069 28,257,767 25,075,645

Non-interest bearing deposits 13,390,370 12,740,947 9,438,459 7,317,161 7,812,660

Total deposits 28,109,365 30,996,589 26,478,593 20,606,113 19,123,180

Total stockholders’ equity 3,209,616 2,871,224 2,801,321 2,480,308 2,190,072

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

(in thousands) 2021 2020 2019 2018 2017

Commercial $ 9,897,561 $ 8,861,580 $ 9,133,444 $ 9,117,546 $ 8,373,398

Energy 721,373 766,217 1,425,309 1,631,371 1,130,000

Mortgage finance 7,475,497 9,079,409 8,169,849 5,877,524 5,308,160

Real estate 4,777,530 5,794,624 6,008,040 6,050,083 5,960,785

Gross loans held for investment 22,871,961 24,501,830 24,736,642 22,676,524 20,772,343

Unearned income (net of direct origination costs) (65,007) (70,970) (90,380) (108,450) (97,931)

Total loans held for investment, net $ 22,806,954 $ 24,430,860 $ 24,646,262 $ 22,568,074 $ 20,674,412

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.

We also compete with other providers of financial services, such as non-bank lenders, commercial finance and leasing companies, consumer finance companies, financial technology, or fintech, companies, securities firms, insurance companies, full-service brokerage firms and discount brokerage firms, credit unions and savings and loan associations.

We believe that many commercial businesses and successful professionals and entrepreneurs are interested in banking with a company headquartered in, and with decision-making authority based in, Texas and with established Texas bankers who have the expertise to act as trusted advisors to customers with regard to their banking needs.

Our banking centers in our target markets are served by experienced bankers with lending expertise in the specific industries found in their market areas and established community ties.

We believe our Bank can offer customers more responsive and personalized service than our competitors.

By providing effective service to these customers, we believe we will be able to establish long-term relationships and provide multiple products to our customers, thereby enhancing our profitability.

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 that offer specialized loan and deposit products to businesses and individuals regionally and throughout the nation, including mortgage finance, homebuilder finance, insurance premium finance, lender finance, asset-based lending, and Bask Bank, an online banking division that offers depositors American Airlines AAdvantage® miles instead of interest.

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.

Business Strategy

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 commercial businesses 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 employ the following strategies:

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

• growing our loan and deposit base in our existing markets by hiring additional experienced bankers in our different lines of business;

• developing lines of business that leverage our strengths and complement our existing lines of business;

• continuing our emphasis on credit policy to maintain credit quality consistent with long-term objectives;

• leveraging our existing infrastructure with improvements in technology and processes to gain efficiencies to support a larger volume of business;

• maintaining effective internal approval processes for capital and operating expenditures;

• continuing our extensive use of outsourcing to provide cost-effective and more efficient operational support and service levels consistent with large-bank operations;

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

On September 1, 2021, we announced key updates to our long-term strategy.

This new long-term strategy includes the following key steps that we are taking to build a technology-enabled operating model:

• organizing around client delivery and investing in technology;

• expanding products and services;

• enhancing accountability and maintaining financial resilience.

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

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

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

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

Substantially all business activities are conducted through the Bank.

The Company serves the needs of commercial businesses, entrepreneurs and professionals located in Texas through a custom array of financial products and services with high-quality personal service.

On September 6, 2022, the Company announced the sale of BankDirect Capital Finance, LLC (“BDCF”), its insurance premium finance subsidiary, to AFCO Credit Corporation, an indirect wholly-owned subsidiary of Truist Financial Corporation.

The sale of BDCF included its business operations and loan portfolio of approximately $3.1 billion.

The sale was an all-cash transaction for a purchase price of $3.4 billion, representing a pre-tax gain of $248.5 million.

The transaction did not meet the criteria for discontinued operations reporting, and the sale was completed on November 1, 2022.

Business Strategy and Markets

The Company was founded with an entrepreneurial culture and a mission to build a commercial banking presence across Texas.

Drawing on the business and community ties of management and its banking experience, the Company’s strategy has been to establish an independent bank that has focused primarily on commercial businesses, entrepreneurs and professionals in each of the five major metropolitan markets of Texas.

On September 1, 2021, management announced key updates to the Company’s long-term strategy, focused on building a Texas-based full-service financial services firm that can seamlessly serve the best clients in its markets through the entirety of their life cycles.

As a core tenant of TCBI’s vision to be the premier financial services firm in Texas, the Company will maintain financial resiliency for its shareholders which will also allow it to serve its clients, access markets, and support its communities through the cycle.

Last year, 2022, was a year focused on strategic alignment, including, reorganizing the Company’s operating model around client delivery emphasizing client experience;

realigning the expense base and investing in technology;

expanding coverage, products and services;

and enhancing accountability while maintaining financial resilience.

The Company is well positioned with best-in-class levels of liquidity, credit reserves and capital.

The Company’s business is concentrated in Texas which is a highly competitive market for banking services.

TCBI competes with national, regional, and local bank holding companies and commercial banks.

The largest banking organizations operating in Texas are headquartered outside of the state and are controlled by out-of-state organizations.

TCBI also competes with other providers of financial services, such as non-bank lenders, commercial finance and leasing companies, consumer finance companies, financial technology companies, securities firms, insurance companies, full-service brokerage firms and discount brokerage firms, credit unions and savings and loan associations.

As a tenant of TCBI’s strategic plan, the Company believes that commercial businesses, entrepreneurs and professionals are interested in banking with a company both headquartered and with decision-making authority based in Texas.

The Company’s banking centers in its target markets are served by experienced bankers with expertise in the specific industries found in their market areas and established community ties.

The Company believes it is positioned to offer clients more

responsive and personalized service and advice than its competitors.

By providing effective service to these customers, the Company believes it will be able to establish “first call” relationships, and provide all the banking needs of its customers, thereby enhancing its relevance and financial returns.

While the Texas market continues to be central to growth and success, the Company has built several lines of business that offer specialized products and services to businesses and individuals regionally and nationwide, including mortgage finance, homebuilder finance, investment banking and Bask Bank.

Bask Bank is an online banking division that offers depositors American Airlines AAdvantage® miles in lieu of cash interest as well as traditional interest bearing deposit products such as savings accounts and certificates of deposit (“CDs”).

The Company believes these business lines help to mitigate its geographic concentration risk in Texas.

Products and Services

We offer a variety of loan, deposit account and other financial products and services to our customers.

The Company offers a variety of loan, deposit account and other financial products and services to its customers.

Business Customers.

We offer a full range of products and services oriented to the needs of our business customers, including:

• commercial loans for general corporate purposes, including financing for working capital, organic growth, acquisitions and financing for business insurance premiums;

The Company offers a full range of products and services oriented to the needs of its business customers including commercial loans for general corporate purposes, including financing for working capital, organic growth, and acquisitions;

real estate term and construction loans;

• mortgage warehouse lending;

• equipment finance and leasing;

mortgage warehouse lending and mortgage finance services;

treasury management services, including online banking and debit and credit card services;

• investment banking services;

• letters of credit.

investment banking and advisory services;

and letters of credit.

Individual Customers.

We also provide complete banking services for our individual customers, including:

• personal wealth management and trust services;

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

The Company also provides comprehensive banking services for its individual customers including personal wealth management and trust services;

certificates of deposit;

interest bearing and non-interest bearing checking accounts;

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online and mobile banking;

• investment banking services;

• Bask Bank, an online banking division offering depositors American Airlines AAdvantage® miles instead of interest.

investment banking and advisory services;

and Bask Bank.

Lending Activities

We target our lending to commercial businesses and successful professionals and entrepreneurs that meet our credit standards.

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 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.

The Company targets its lending to commercial businesses, entrepreneurs and professionals who meet certain desired client characteristics and credit standards.

The credit standards are set by a standing Credit Policy Committee with the assistance of the Chief Credit Officer, who is charged with ensuring that all loans in the portfolio meet the credit standards.

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

The Company believes it maintains an appropriately diversified loan portfolio.

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 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 and frequently provide for a minimum floor rate.

Our use of variable rate loans is designed to protect us from risks associated with interest rate fluctuations since the rates of interest earned will automatically reflect such fluctuations.

Of note, the Company’s mortgage finance business encounters seasonal demands for credit, surges and declines in consumer demand driven by changes in interest rates and month-end upticks of residential mortgage closings.

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

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

The Company believes its credit standards are consistent with achieving its business objectives in the markets the business serves and are an important part of the Company’s risk mitigation strategy.

The Company believes that it is differentiated from its competitors by its focus on and targeted marketing to its core customers and by its ability to tailor its products to the individual needs of its customers.

The Company generally extends variable rate loans in which the interest rate fluctuates with a specified reference rate and frequently provide for a minimum floor rate.

The use of variable rate loans is designed to protect the Company from risks associated with interest rate fluctuations since the rates of interest earned will automatically reflect such fluctuations.

In 2017, the U.K.

Financial Conduct Authority announced that it would no longer compel banks to submit rates for the calculation of the London Interbank Offered Rate (“LIBOR”) after 2021.

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.

The administrator of LIBOR extended publication of the most commonly used U.S.

dollar LIBOR settings to June 30, 2023 and ceased publishing other LIBOR settings on December 31, 2021.

federal banking agencies 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.

We have significant exposure to financial instruments with attributes that are either directly or indirectly dependent on LIBOR to establish their interest rate and/or value, some of which mature after December 31, 2021.

We have established a working group, consisting of key stakeholders from

throughout the Company, to monitor developments relating to LIBOR changes and to guide the Bank’s response.

This team is continuing to work 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 determinations and internal and external stakeholders are apprised of the transition.

Based on our transition progress to date, we have ceased originating LIBOR-based products and began originating Bloomberg Short Term Yield Index based loans in December 2021.

We are prepared with other alternative benchmarks, as necessary, to support the transition from LIBOR.

Over the next 18 months, we will continue to transition all of our remaining LIBOR-based products to an alternative benchmark.

We will also continue to evaluate the transition process and align our trajectory with regulatory guidelines regarding the cessation of LIBOR as well as monitor new developments for transitioning to alternative reference rates.

Our mortgage finance business encounters seasonal demands for credit, surges in consumer demand driven by changes in interest rates and month-end “spikes” of residential mortgage closings.

Deposit Products

We offer a variety of deposit products and services to our customers with terms, including interest rates, which are competitive with other banks.

Our business deposit products include commercial checking accounts, lockbox accounts, cash concentration accounts and other treasury management services, including online banking.

Our treasury management online system offers information services, wire transfer initiation, ACH initiation, account transfer and service integration.

Our consumer deposit products include checking accounts, savings accounts, money market accounts and certificates of deposit.

We also allow our consumer deposit customers to access their accounts, transfer funds, pay bills and perform other account functions through online and mobile banking.

On March 15, 2022, President Biden signed into law the “Adjustable Interest Rate (LIBOR) Act,” as part of the Consolidated Appropriations Act, 2022, which provides for a statutory transition to a replacement rate selected by the Board of Governors of the Federal Reserve System (“Federal Reserve”) based on the Secured Overnight Financing Rate Data (“SOFR”) for contracts referencing LIBOR that contain no fallback provisions or ineffective fallback provisions, unless a replacement rate is selected by a determining person as outlined in the statute.

On December 16, 2022, the Federal Reserve adopted a final rule implementing the Adjustable Interest Rate (LIBOR) Act by identifying benchmark rates based on SOFR that will replace LIBOR in certain financial contracts after June 30, 2023.

The Company has significant but declining exposure to financial instruments with attributes that are either directly or indirectly dependent on LIBOR to establish their interest rate and/or value, some of which mature after

June 30, 2023.

The Company established a working group, consisting of key stakeholders from throughout the company, to monitor developments relating to LIBOR changes and to guide the transition.

This team has worked to successfully ensure that technology systems are prepared for the transition, loan documents that reference LIBOR-based rates have been appropriately amended to reference other methods of interest rate determinations and internal and external stakeholders have been apprised of the transition.

Based on the transition progress to date, the Company ceased originating LIBOR-based products and began originating alternative indexed products in December 2021.

The Company will continue to transition all remaining LIBOR-based products to an alternative benchmark.

The Company will also continue to evaluate the transition process and align its trajectory with regulatory guidelines regarding the cessation of LIBOR as well as monitor new developments for transitioning to alternative reference rates, if necessary and as needed.

Treasury Solutions and Deposit Products

Texas Capital Bank offers treasury solutions and deposit products to meet its customers evolving needs.

For Commercial customers, the Company offers a full suite of deposit solutions including checking, money market savings, and sweep accounts with competitive industry rates.

Treasury products offered include state of the art payment and receivables solutions ranging from instant payments, wire, ACH, commercial card, merchant, and lockbox solutions underpinned by a commercial grade digital platform supporting a broad range of payment initiation, information reporting and liquidity management solutions.

The personal banking deposit products include checking accounts, savings accounts, money market accounts and certificates of deposit.

Personal banking deposit customers have online and mobile access to fully manage their accounts leveraging features that include funds transfers, peer-to-peer payments, bill pay, wire transfer requests, remote check deposit and more.

Wealth Management and Trust

Our wealth management and trust services include wealth strategy, financial planning, investment management, personal trust and estate services, custodial services, retirement accounts and related services.

Our investment management professionals work with our clients to define objectives, goals and strategies for their investment portfolios.

We assist the customer with the selection of an investment manager and work with the client to tailor the investment program accordingly.

We also offer retirement products such as individual retirement accounts and administrative services for retirement vehicles such as pension and profit sharing plans.

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.

Texas Capital Bank Private Wealth Advisors (“PWA”) services include investment management, lending, depository products, financial planning, trust and estate services, as well as insurance services.

The PWA professionals work with clients to define objectives, goals, and strategies.

Investment managers work alongside the client to choose an individually tailored program that matches their financial goals and aspirations while managing their risk tolerance.

PWA also offers all clients a financial plan which is used to ensure that they are on track to achieve their long term objectives.

Throughout the relationship PWA also offers insurance solutions as well as trust and estate planning services that work towards a tax efficient transition of assets to family or charitable types of organizations.

Investment Banking

Texas Capital Securities (“TCS”) offers a full suite of investment banking products and services to clients.

TCS professionals leverage their knowledge of industry dynamics, transaction structure and market conditions complemented by a network of investors, buyers, lenders and other capital sources, to assist clients in completing underwritten and privately placed offerings of debt, convertible and equity securities, buy-side and sell-side mergers and acquisitions and other transactions.

Additionally, TCS offers services to manage interest rate, foreign exchange, and commodity risks, and enable market access by offering sales, trading and other institutional services

Human Capital

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 a DEI Council, co-chaired by our Chief Executive Officer and Chief Human Resources Officer and made up of colleagues from departments across our organization, that aims to steer our DEI strategies.

The DEI Council is working to develop DEI goals and metrics that will be integrated into our business strategy.

Through routine strategy sessions and planning, the DEI Council continues to explore the evolution of DEI at the Company.

Among our highest priorities in 2021 was the safety, well-being and stability of our employees during the continuation of the COVID-19 pandemic.

We focused on providing employee support to address work, life, financial and health-related matters.

This included programs and benefits to ease work-from-home challenges and address the medical and other support needs of those directly impacted by COVID-19.

We took significant measures to provide employees with a sense of safety, security, and certainty in response to the COVID-19 pandemic, by establishing social distancing and hygiene and environmental safety protocols for on-site workers at our banking centers and offices.

We also provided free COVID-19 testing for employees enrolled in our medical coverage and developed tracking and reporting solutions to monitor employee circumstances related to the COVID-19 pandemic.

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.

During 2021, we enhanced our performance management process, and implemented a more defined process for succession planning deeper into the organization.

We also enhanced parental bonding leave benefits.

We also made enhancements to our training and development program during 2021 which included the creation and launch of training targeted for people managers, packaging of current online training courses to align with career paths, the launch of an analyst program that included several months of training in preparation to transition to frontline banking positions and the creation of technical training focused on bank employees.

At December 31, 2021, we had 1,751 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.

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

The Company’s goal is to attract, develop, retain and plan for succession of key talent and executives to achieve strategic objectives.

The Company is continually investing in its workforce to further emphasize diversity and inclusion and to foster its employees' growth and career development.

Further, the Company is continually evaluating the resources available to employees to address work, life, financial and health-related matters, as the health, safety and well-being of employees and customers is of paramount importance.

As part of the Company’s commitment to address diversity, equity and inclusion (“DEI”), a DEI Council, co-chaired by the Chief Executive Officer and Chief Human Resources Officer, is made up of colleagues from departments across the organization that aims to steer DEI strategies and initiatives.

The DEI Council is working to develop DEI goals and metrics that align to the Company’s business strategy.

The Company offers a comprehensive benefits program to its employees and designs compensation programs to attract, retain and motivate employees that align with Company performance.

During 2022, the Company enhanced its performance management process, and implemented a more defined process for succession planning deeper into the organization.

The Company also continued enhancements to its training and development program during 2022, which included the creation of job profiles for roles across the Company with skills, knowledge, and abilities to empower employees to focus on targeted skill development and career ownership.

Further, the Company launched a leadership model with business-critical competencies for focused coaching and development.

At December 31, 2022, the Company had 2,198 employees, nearly all of whom are full time and of which approximately 44% were female and 44% self-identify as ethnically diverse.

Due to the Company’s significant Texas-based operations and branch-lite network, the majority of its employees are based in Texas.

None of the Company’s employees is represented by a collective bargaining agreement, and management considers relations with employees to be good.

Regulation and Supervision

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 the Bank's depositors, the Deposit Insurance Fund (“DIF”) of the FDIC and the stability of the U.S.

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

Complying with the regulations discussed below did not have and is not expected to have a material effect on our capital expenditures, earnings and competitive position.

We do not have any environmental control facilities, and we did not spend any capital expenditures on such facilities during 2021.

The following discussion summarizes certain laws, regulations and policies to which we and our Bank are subject.

It does not address all applicable laws, regulations and policies that affect us currently or might affect us in the future.

The Company is subject to extensive federal and state laws and regulations that impose specific requirements and provide regulatory oversight of virtually all aspects of its operations.

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

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

Complying with the regulations discussed below did not have and is not expected to have a material effect on capital expenditures, earnings and competitive position.

The Company does not have any environmental control facilities and did not spend any capital expenditures on such facilities during 2022.

The following discussion summarizes certain laws, regulations and policies to which the Company is subject.

It does not address all applicable laws, regulations and policies that affect the Company currently or might affect it in the future.

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 (the “BHCA”).

The Company is subject to primary regulation, supervision and examination by the Board of Governors of the Federal Reserve pursuant to the BHCA.

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

As a public company, we also file reports with 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”), we are subject to Nasdaq's rules for listed companies, including rules relating to corporate governance.

Our Bank is organized as a Texas state-chartered bank, and is subject to primary regulation, supervision and examination by the Texas Department of Banking and the FDIC.

Our Bank’s activities are also subject to regulation by the Consumer Financial Protection Bureau (the “CFPB”) and by certain other federal and state agencies.

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

Our Bank has a wholly owned non-bank subsidiary, TCBI Securities, that is a registered broker-dealer with the SEC and a member of FINRA.

TCBI Securities is subject to a number of regulatory bodies, including the SEC, FINRA, and state securities regulators.

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

It is subject to primary regulation, supervision and examination by the Federal Reserve pursuant to the BHCA.

The Company files quarterly reports and other information with the Federal Reserve.

As a public company, the Company also files reports with the U.S.

Securities and Exchange Commission (“SEC”) and is subject to its regulatory authority, including 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 the Company’s securities, financial reporting and certain governance matters.

Because TCBI’s securities are listed on the Nasdaq Global Select Market (“Nasdaq”), the Company is subject to Nasdaq's rules for listed companies, including rules relating to corporate governance.

The Bank is organized as a Texas state-chartered bank, and is subject to primary regulation, supervision and examination by the Texas Department of Banking and the FDIC.

The Bank’s activities are also subject to regulation by the Consumer Financial Protection Bureau (the “CFPB”) and by certain other federal and state agencies.

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

The Bank has a wholly owned non-bank subsidiary, TCBI Securities, Inc.

(“TCBI Securities”), doing business as Texas Capital Securities, that is a registered broker-dealer with the SEC and a member of the Financial Industry Regulatory Authority (“FINRA”).

TCBI Securities is subject to the jurisdiction of several regulatory bodies, including the SEC, FINRA, and state securities regulators.

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 BHCA limits the Company’s 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 a 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.

This authorizes us to engage in any activity that is either (i) financial in nature or incidental to such financial activity, as determined by the Federal Reserve, or (ii) complementary to a financial activity, so long as the activity does not pose a substantial risk to the safety and soundness of our Bank or the financial system generally, as determined by the Federal Reserve.

The Company has elected to register with the Federal Reserve as a financial holding company.

This authorizes it to engage in any activity that is either (i) financial in nature or incidental to such financial activity, as determined by the Federal Reserve, or (ii) complementary to a financial activity, so long as the activity does not pose a substantial risk to the safety and soundness of the Bank or the financial system generally, as determined by the Federal Reserve.

Examples of non-banking activities that are financial in nature include securities underwriting and dealing, insurance underwriting, providing investment and financial advice, leasing personal property and making merchant banking investments.

In order for us to undertake certain new activities permitted by the BHCA, we and our Bank must be considered “well capitalized” (as defined below) and well managed, our Bank must have received a rating of at least “satisfactory” in its most recent examination under the Community Reinvestment Act and we must notify the Federal Reserve within 30 days of engaging in the new activity.

Under Federal Reserve regulations, now largely authorized 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.

In order for the Company to undertake certain new activities permitted by the BHCA, the Company must be considered “well capitalized” (as defined below) and well managed, the Bank must have received a rating of at least “satisfactory” in its most recent examination under the Community Reinvestment Act, and must notify the Federal Reserve within 30 days of engaging in the new activity.

Under Federal Reserve regulations, which were codified by the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), TCBI is expected to act as a source of financial and managerial strength to the Bank and commit resources to its support.

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

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

It is the policy of the Federal Reserve that bank holding companies may maintain their existing rate of cash dividends on common stock only out of net income available over the past year and only if the prospective rate of earnings retention is consistent with the organization’s expected future capital needs, asset quality and financial condition.

quarters, net of dividends previously paid during that period, is not sufficient to fully fund the dividends, (ii) the bank holding company’s prospective rate of earnings retention is not consistent with the company’s capital needs and overall current and prospective financial condition or (iii) the bank holding company will not meet, or is in danger of not meeting, its minimum regulatory capital adequacy ratios.

Additionally, TCBI could in certain circumstances be required to guarantee the capital restoration plan of the Bank if it became undercapitalized.

consistent with the organization’s expected future capital needs, asset quality and financial condition.

As a general matter, the Federal Reserve expects a bank holding company’s board of directors to inform it and to eliminate, defer or significantly reduce the bank holding company’s dividends if (i) the bank holding company’s net income available to stockholders for the past four quarters, net of dividends previously paid during that period, is not sufficient to fully fund the dividends, (ii) the bank holding company’s prospective rate of earnings retention is not consistent with the company’s capital needs and overall current and prospective financial condition or (iii) the bank holding company will not meet, or is in danger of not meeting, its minimum regulatory capital adequacy ratios.

The policy provides that bank 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 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 an association or “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 an association or “acting in concert” from, directly or indirectly, acquiring 10% or more (5% or more if the acquirer is a bank holding company) of any class of the Company’s voting stock or obtaining the ability to control in any manner the election of a majority of the Company’s directors or otherwise direct the management or policies of the 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.

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Under such regulations, the Federal Reserve may disapprove such actions if the Federal Reserve finds that they would constitute an unsafe or unsound practice or violate any law or Federal Reserve order.

Regulation of Our Bank by the Texas Department of Banking and the FDIC.

Regulation of the Bank by the Texas Department of Banking and the FDIC.

Pursuant to applicable Texas and federal law, Texas state-chartered banks are permitted to engage in any activity permissible for national banks, including non-banking activities that are permissible for national banks.

In addition, Texas state-chartered banks may engage in financial activities or activities incidental or complementary to a financial activity with the prior approval of the Commission.

Our Bank is subject to continuous regulation, supervision and examination by the Texas Department of Banking and the FDIC.

Our regulators monitor all areas of our Bank’s operations, including security devices and procedures, adequacy of capitalization and loss reserves, accounting treatment and impact on capital determinations, loans, investments, borrowings, deposits, liquidity, mergers, issuances of securities, payment of dividends, interest rate risk management, establishment of branches, corporate reorganizations, maintenance of books and records, and adequacy of staff training to carry on safe and sound lending and deposit gathering practices.

Among other things, our Bank is required by its regulators to maintain specified capital ratios, file quarterly reports of its financial condition and results of operations and to obtain an annual audit of its financial statements.

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.

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.

In addition, Texas state-chartered banks may engage in financial activities or activities incidental or complementary to a financial activity with prior approval.

The Bank is subject to continuous regulation, supervision and examination by the Texas Department of Banking and the FDIC.

The regulators monitor all areas of the Bank’s operations, including security devices and procedures, adequacy of capitalization and loss reserves, accounting treatment and impact on capital determinations, loans, investments, borrowings, deposits, liquidity, mergers, issuances of securities, payment of dividends, interest rate risk management, establishment of branches, corporate reorganizations, maintenance of books and records, and adequacy of staff training to carry on safe and sound lending and deposit gathering practices.

Among other things, the Bank is required by its regulators to maintain specified capital ratios, file quarterly reports of its financial condition and results of operations and to obtain an annual audit of its financial statements.

Regulation of the Bank by the CFPB .

The CFPB has regulation, supervision and examination authority over the 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.

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

The CFPB has broad authority to pursue enforcement actions, including investigations, civil actions and cease and desist proceedings, and can refer civil and criminal findings to the Department of Justice for prosecution.

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In July 2013, the Federal Reserve published final rules for the adoption of the Basel III regulatory capital framework (the “Basel III Capital Rules”).

The Basel III Capital Rules became effective for us on January 1, 2015, with certain transition provisions phasing in over a period that ended on January 1, 2019.

The Basel III Capital Rules became effective for the Company on January 1, 2015, with certain transition provisions phasing in over a period that ended on January 1, 2019.

The Basel III Capital Rules, among other things, (i) establishes the capital measure called “Common Equity Tier 1” (“CET1”), (ii) specifies that Tier 1 capital consists of CET1 and “Additional Tier 1 capital” instruments meeting stated requirements, (iii) requires that most deductions/adjustments to regulatory capital measures be made to CET1 and not to the other components of capital and (iv) defines the scope of the deductions/adjustments to the capital measures.

The Basel III Capital Rules also specify a capital measure for Tier 2 capital, which includes subordinated debt and a portion of the allowance for loan and lease losses, in each case, subject to certain regulatory requirements.

Our preferred stock constitutes Additional Tier 1 capital and our subordinated notes constitute Tier 2 capital.

The Basel III Capital Rules set the Tier 1 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 Basel III Capital Rules also specify a capital measure for Tier 2 capital, which includes subordinated debt and a portion of the allowance for credit losses, in each case, subject to certain regulatory requirements.

The Company’s preferred stock constitutes Additional Tier 1 capital and subordinated notes constitute Tier 2 capital.

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.

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

Under the rules now in effect, the Company and the 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%.

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 our federal banking regulators.

As of December 31, 2021 our Bank's CET1 ratio was 11.30% and its total risk-based capital ratio was 13.42% and, as a result, it is currently classified as “well capitalized” for purposes of the FDIC’s prompt corrective action regulations, which is discussed in more detail below.

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.

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

The Company and the 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%.

The Company has met the capital adequacy requirements under the Basel III Capital Rules on a fully phased-in basis since it commenced filing of the applicable reports with its federal banking regulators, and as of December 31, 2022 the Bank's CET1 ratio and total risk-based capital ratio were in excess of the amounts required for the Bank to be classified as “well capitalized” for purposes of the FDIC’s prompt corrective action regulations, which is discussed in more detail below.

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

As a non-advanced approaches banking organization, the Company has 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 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 revised, among other things the Basel Committee’s standardized approach for credit risk and provide a new standardized approach for operational risk capital.

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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.

The impact of the Basel IV standards on the Company and the 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”).

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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.

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

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

A regulatory capital ratio or category may not constitute an accurate representation of a financial institution’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 Company’s 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 11 - Regulatory Ratios and Capital in the accompanying notes to the consolidated financial statements included elsewhere in this report.

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.

Regulators are required to take mandatory supervisory actions and are authorized to take other discretionary actions of increasing severity with respect to insured depository institutions in the three undercapitalized categories.

Regulators are required to take mandatory supervisory actions and are authorized to take other discretionary actions of increasing severity with respect

to insured depository institutions in the three undercapitalized categories.

The five capital categories for insured depository institutions under the prompt corrective action regulations consist of:

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

Compliance with the final rule did not have an impact to our classification of brokered deposits.

Compliance with the final rule did not have an impact to the Company’s classification of brokered deposits.

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%.

As of December 31, 2021, our Bank’s leverage ratio was 8.51% and is currently classified as “well capitalized” for purposes of the FDIC’s prompt corrective action regulations.

As of December 31, 2022, the Bank’s leverage ratio was in excess of the amount required for the Bank to be classified as “well capitalized” for purposes of the FDIC’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.

Banking organizations not meeting these criteria are expected to operate with capital positions in excess of the minimum ratios.

Regulators can, from time to time, change their policies or interpretations of banking practices to require changes in risk weights assigned to our Bank's assets or changes in the factors considered in order to evaluate capital adequacy, which may require our Bank to obtain additional capital to support existing asset levels or future growth or reduce asset balances in order to meet minimum acceptable capital ratios.

Regulators can, from time to time, change their policies or interpretations of banking practices to require changes in risk weights assigned to the Bank's assets or changes in the factors

considered in order to evaluate capital adequacy, which may require the Bank to obtain additional capital to support existing asset levels or future growth or reduce asset balances in order to meet minimum acceptable capital ratios.

Liquidity Requirements .

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Treasury securities and other sovereign debt as a component of assets and to increase the use of long-term debt as a funding source.

While the LCR and NSFR tests are not currently applicable to us or our Bank, other relevant measures of liquidity are monitored by management and are reported to our board of directors.

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

Regulators could also require us to make retroactive adjustments to financial statements and reported capital ratios to reflect such changes.

While the LCR and NSFR tests are not currently applicable to the Company or the Bank, other relevant measures of liquidity are monitored by management and are reported to the board of directors.

Regulators could also require the Company to make retroactive adjustments to financial statements and reported capital ratios to reflect such changes.

Stress Testing .

Pursuant to the Dodd-Frank Act and regulations published by the federal bank regulatory agencies, 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 federal bank regulatory agencies from 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”), which amended portions of the Dodd-Frank Act, was enacted in 2018 and subsequently implemented by the federal banking regulators.

The Regulatory Relief Act, terminated 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.

Pursuant to the Dodd-Frank Act and regulations published by the federal bank regulatory agencies, the Company was 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 federal bank regulatory agencies from the years 2016 to 2018.

In response to this requirement, the Company developed dedicated staffing, economic models, policies and procedures to implement stress testing on an annual basis, the results of which were furnished to regulators.

However, the Economic Growth, Regulatory Relief and Consumer Protection Act, enacted in 2018 (the “Regulatory Relief Act”) amended portions of the Dodd-Frank Act, requiring stress testing, among other things.

Specifically, the Regulatory Relief Act terminated TCBI’s stress testing requirements, however, the Company created its own stress testing framework and continues to perform certain stress tests as a matter of good governance and risk management and has incorporated the economic models and information developed through the stress testing program into the Company’s 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 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.

The financial privacy provisions of the GLB Act generally prohibit financial institutions, including the 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.

The 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.

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

In March 2022, the SEC proposed amendments to its rules to enhance and standardize disclosures regarding cybersecurity risk management, strategy, governance, and incident reporting by public companies that are subject to the reporting requirements of the Securities Exchange Act of 1934.

Specifically, the proposed amendments require current reporting about material cybersecurity incidents, periodic disclosures about a registrant’s policies and procedures to identify and manage cybersecurity risk, management’s role in implementing cybersecurity policies and procedures, and the board of directors’ cybersecurity expertise, if any, and its oversight of cybersecurity risk.

Additionally, the proposed rules would require registrants to provide updates about previously reported cybersecurity incidents in their periodic reports.

Further, the proposed rules would require the cybersecurity disclosures to be presented in Inline eXtensible Business Reporting Language (“Inline XBRL”).

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

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

In addition, other jurisdictions 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.

In addition, other

jurisdictions in which 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 the Company’s customers are located and ongoing investments in its information systems and compliance capabilities.

Community Reinvestment Act.

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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 FDIC.

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.

The Bank is subject to examination by the FDIC.

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.

The Bank's strategic focus on serving commercial customers in regional and national markets from a limited number of branches makes it more challenging for it 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 FDIC and the Office of the Comptroller of the Currency (“OCC”) issued a notice of proposed rulemaking intended to (i) clarify which activities qualify for CRA credit;

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

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

The OCC finalized its CRA rule in 2020, but, effective January 1, 2022 rescinded it and replaced it with the OCC’s prior CRA rule.

The Federal Reserve has so far only issued an Advance Notice of Proposed Rulemaking on its CRA rules.

The FDIC did not finalize these revisions to its CRA rule.

The OCC finalized its CRA rule in 2020, but rescinded it effective January 1, 2022 and replaced it with the OCC’s prior CRA rule.

On May 5, 2022 the federal banking regulators issued a joint proposed rule that would substantially revise how an insured depository institution’s CRA performance is evaluated.

If the proposed rule is finalized as proposed, it may become more challenging and/or costly for the Bank to receive a rating of at least “satisfactory” on its CRA exam.

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

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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.

Because of the significance of regulatory emphasis on these requirements, the Company has expended, and expects 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 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.

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Treasury Department’s Office of Foreign Assets Control (“OFAC”) is responsible for administering and enforcing economic and trade sanctions against specified foreign parties, including countries and regimes, foreign individuals and other foreign organizations and entities.

OFAC publishes lists of prohibited parties that are regularly consulted by our Bank in the conduct of its business in order to ensure compliance.

We are responsible for, among other things, blocking accounts of, and transactions with, prohibited parties identified by OFAC, avoiding unlicensed trade and financial transactions with such parties and reporting blocked transactions after their occurrence.

Failure to comply with OFAC requirements could have serious legal, financial and reputational consequences for our Bank.

OFAC publishes lists of prohibited parties that are regularly consulted by the Bank in the conduct of its business in order to ensure compliance.

The Company is responsible for, among other things, blocking accounts of, and transactions with, prohibited parties identified by OFAC, avoiding unlicensed trade and financial transactions with such parties and reporting blocked transactions after their occurrence.

Failure to comply with OFAC requirements could have serious legal, financial and reputational consequences for the Company.

Safe and Sound Banking Practices;

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The FDIA requires federal bank regulatory agencies to prescribe, by regulation or guideline, operational and managerial standards for all insured depository institutions that relate to, among other things:

(i) internal controls, information systems and audit systems;

(i) internal controls, information systems and

audit systems;

(ii) loan documentation;

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Failure to implement such a plan may result in an enforcement action against the bank.

Enforcement actions against us, our Bank and our officers and directors may include the issuance of a written directive, the issuance of a cease-and-desist order that can be judicially enforced, the imposition of civil money penalties, the issuance of directives to increase capital, the issuance of formal and informal agreements, the issuance of removal and prohibition orders against officers or other institution-affiliated parties, the imposition of restrictions and sanctions under prompt corrective action

regulations, the termination of deposit insurance (in the case of our Bank) and the appointment of a conservator or receiver for our Bank.

Enforcement actions against the Company, the Bank and their respective officers and directors may include the issuance of a written directive, the issuance of a cease-and-desist order that can be judicially enforced, the imposition of civil money penalties, the issuance of directives to increase capital, the issuance of formal and informal agreements, the issuance of removal and prohibition orders against officers or other institution-affiliated parties, the imposition of restrictions and sanctions under prompt corrective action regulations, the termination of deposit insurance (in the case of the Bank) and the appointment of a conservator or receiver for the Bank.

Civil money penalties can be over $2 million for each day a violation continues.

Transactions with Affiliates and Insiders.

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.

The 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 the 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 made by our Bank to third party borrowers that are collateralized by securities or obligations of the Bank’s affiliates.

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.

Section 23A also limits the amount of loans or advances made by the Bank to third party borrowers that are collateralized by securities or obligations of the Bank’s affiliates.

The 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.

The Company is 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 depository institutions as well as their subsidiaries and holding companies.

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Additional restrictions on transactions with affiliates and insiders are discussed in the Dodd-Frank Act section below.

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 preferred stock issued to us by the Bank.

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

Our Bank is subject to federal banking law requirements concerning the payment of dividends, including, under the FDICIA, our Bank may not pay any dividend if it is undercapitalized or if payment would cause it to become undercapitalized.

Restrictions on Payment of Dividends by the Bank.

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

TCBI may seek reliance upon receipt of dividends paid by the Bank to meet its financial obligations.

The Bank is subject to federal banking law requirements concerning the payment of dividends, including, under the FDICIA, the Bank may not pay any dividend if it is undercapitalized or if payment would cause it to become undercapitalized.

Limits on Compensation .

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Deposit Insurance.

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 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 the 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 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 2021, minimum and maximum assessment rates (inclusive of possible adjustments) for institutions the size of our Bank ranged from 1.5 to 40 basis points.

As a “large” institution for purposes of determining FDIC insurance assessments, our Bank was until December 31, 2018, subject to additional surcharges to rebuild the DIF to a reserve ratio (DIF balance divided by total insured deposits) equal to 1.35%.

For 2022, minimum and maximum assessment rates (inclusive of possible adjustments) for institutions the size of the Bank ranged from 1.5 to 40 basis points.

As a “large” institution for purposes of determining FDIC insurance assessments, the Bank

was until December 31, 2018, subject to additional surcharges to rebuild the DIF to a reserve ratio (DIF balance divided by total insured deposits) equal to 1.35%.

The Dodd-Frank Act.

In 2010, the Dodd-Frank Act became law and has had a broad impact on the financial services industry, imposing significant regulatory and compliance changes.

The following discussion provides a brief summary of certain provisions of the Dodd-Frank Act that may have an effect on us.

The following discussion provides a brief summary of certain provisions of the Dodd-Frank Act that may have an effect on the Company.

The Dodd-Frank Act generally enhances the restrictions on transactions with affiliates under Sections 23A and 23B of the Federal Reserve Act, including an expansion of the definition of “covered transactions” and an increase in the amount of time for which the statutorily prescribed collateral amounts must be maintained for covered credit transactions must be satisfied.

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

Restrictions on certain asset sales to and from certain insiders to an institution were also expanded to include a broader range of insiders, to

always require the transactions be on market terms and, in certain circumstances, to also require approval of the transaction by a majority of the disinterested members of the institution’s board.

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 and lender finance lines of business.

Restrictions on certain asset sales to and from certain insiders to an institution were also expanded to include a broader range of insiders, to always require the transactions be on market terms and, in certain circumstances, to also require approval of the transaction by a majority of the disinterested members of the institution’s board.

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 the Bank does in its mortgage finance 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.

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.

The Dodd-Frank Act may impact the profitability of our business activities, require changes to certain of our business practices, impose upon us more stringent compliance, capital, liquidity and leverage requirements or otherwise adversely affect our business.

These developments may also require us to invest significant management attention and resources to evaluate and make changes to our business as necessary to comply with new and changing statutory and regulatory requirements.

The Dodd-Frank Act may impact the profitability of the Company’s business activities, require changes to certain of its business practices, impose more stringent compliance requirements, capital, liquidity and leverage requirements or otherwise adversely affect the business.

These developments may also require the Company to invest significant management attention and resources to evaluate and make changes to the business as necessary to comply with new and changing statutory and regulatory requirements, including interpretations thereto.

The Volcker Rule .

The Dodd-Frank Act amended the BHCA to require the federal financial regulatory agencies to adopt rules that prohibit banks and their affiliates from engaging in proprietary trading in designated types of financial instruments and from investing in and sponsoring certain hedge funds and private equity funds.

The Volcker Rule has not had a material effect on our operations since we do not engage in the businesses prohibited by the Volcker Rule.

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.

The Volcker Rule has not had a material effect on the Company’s operations because it does not engage in the businesses prohibited by the Volcker Rule.

Unanticipated effects of the Volcker Rule’s provisions or future interpretations may have an adverse effect on business or services provided to the 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.

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 the Company and its subsidiaries may affect the business, financial condition and results of operations in adverse and unpredictable ways and increase 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

Under the Securities Exchange Act of 1934, we are required to file annual, quarterly and current reports, proxy statements and other information with the SEC.

Under the Securities Exchange Act of 1934, the Company is required to file annual, quarterly and current reports, proxy statements and other information with the SEC.

The SEC maintains a website at www.sec.gov that contains reports, proxy and information statements and other information that we file electronically with the SEC.

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 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 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.

The Company makes available, free of charge through its website, 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, the Company has adopted and posted on its website a code of business conduct that applies to the principal executive officer, principal financial officer and principal accounting officer.

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

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

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

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