What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2024-02-13 compared with 2023-02-09 · 287 added, 303 removed, 1095 unchanged (35% of the section changed)

11 unchanged sentences

We have audited the accompanying consolidated balance sheets of Texas Capital Bancshares, Inc.

(the Company) as of December 31, 2022, and 2021, the related consolidated statements of income and other comprehensive income , stockholders' equity and cash flows for each of the three years in the period ended December 31, 2022, and the related notes (collectively referred to as the “consolidated financial statements”).

(the Company) as of December 31, 2023 and 2022, the related consolidated statements of income and other comprehensive income/(loss) , stockholders' equity and cash flows for each of the three years in the period ended December 31, 2023, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with U.S.

20 unchanged sentences

The ACL is estimated using relevant available information relating to past events, current conditions, and reasonable and supportable forecasts, as well as qualitative adjustments using a Portfolio Level Qualitative Factor and/or Portfolio Segment Level Qualitative Factor (collectively the “qualitative factors”).

In the second quarter of 2023, changes were made to certain estimates used in the Company’s current expected credit loss model, the most significant of which are more granular estimates of historical loss rates to incorporate probability of default and loss severities and allocations of expected losses to outstanding loan balances and off-balance sheet financial instruments.

The qualitative factors are used to bring the ACL to the level management believes is appropriate based on factors that are otherwise unaccounted for in the quantitative process.

4 unchanged sentences

We obtained an understanding of the Company’s process for establishing the ACL, including determination and usage of the qualitative factors and determination of a single or blend of multiple forecast scenarios used to calculate the reasonable and supportable forecast.

We evaluated the design and tested the operating effectiveness of the controls associated with the ACL process, including controls around the reliability and accuracy of data used in the model, management’s review and approval of the selected qualitative factors, the single or blend of multiple forecast scenarios used to calculate the reasonable and supportable forecast, the governance of the credit loss methodology, and management’s review and approval of the ACL.

We evaluated the design and tested the operating effectiveness of the controls associated with the ACL process, including controls around 1) the reliability and accuracy of data used in the model;

2) management’s review and approval of the selected qualitative factors;

3) the single or blend of multiple forecast scenarios used to calculate the reasonable and supportable forecast;

4) the governance of the credit loss methodology including model validation;

and 5) management’s review and approval of the ACL.

We performed specific substantive tests of the models utilized, qualitative factors and the single or blend of forecast scenarios used to calculate the reasonable and supportable forecast.

8 unchanged sentences

CONSOLIDATED BALANCE SHEETS

(in thousands except share data) 2022 2021

(in thousands except share data) December 31, 2023 December 31, 2022

Cash and due from banks $ 200,493 $ 233,637

11 unchanged sentences

Accrued interest receivable and other assets 801,670 719,162

Goodwill and intangible assets, net 1,496 17,262

Goodwill and intangibles, net 1,496 1,496

Total assets $ 28,356,266 $ 28,414,642

18 unchanged sentences

Retained earnings 2,435,393 2,263,502

Treasury stock shares at cost:

2,083,535 and 417 at December 31, 2022 and 2021, respectively

Treasury stock - 3,905,067 and 2,083,535 shares at cost at December 31, 2023 and 2022, respectively

( 220,334 ) ( 115,310 )

5 unchanged sentences

CONSOLIDATED STATEMENTS OF INCOME AND OTHER

COMPREHENSIVE INCOME

COMPREHENSIVE INCOME/(LOSS)

Year ended December 31,

17 unchanged sentences

Brokered loan fees 8,918 14,159 27,954

Servicing income 857 15,513 27,029

Investment banking and trading income 86,182 35,054 24,441

Net gain/(loss) on sale of loans held for sale ( 990 ) 1,317 58,026

Gain on disposal of subsidiary — 248,526 —

9 unchanged sentences

Servicing-related expenses — — 27,765

Merger-related expenses — — 17,756

Other 49,938 56,561 40,448

21 unchanged sentences

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

Impact of adoption of new accounting standards(1) — — — — — ( 7,154 ) — — — ( 7,154 )

Comprehensive income/(loss):

3 unchanged sentences

Stock-based compensation expense recognized in earnings — — — — 30,061 — — — — 30,061

Issuance of preferred stock 300,000 300,000 — — ( 10,277 ) — — — — 289,723

Preferred stock dividend — — — — — ( 18,721 ) — — — ( 18,721 )

Issuance of stock related to stock-based awards — — 148,044 2 ( 3,123 ) — — — — ( 3,121 )

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

Balance at December 31, 2021 300,000 $ 300,000 50,618,911 $ 506 $ 1,008,559 $ 1,948,274 ( 417 ) $ ( 8 ) $ ( 47,715 ) $ 3,209,616

2 unchanged sentences

Change in other comprehensive income/(loss), net of taxes — — — — — — — — ( 371,228 ) ( 371,228 )

Total comprehensive income 190,450

Total comprehensive loss

Stock-based compensation expense recognized in earnings — — — — 21,246 — — — — 21,246

Issuance of preferred stock 300,000 300,000 — — ( 10,277 ) — — — — 289,723

Preferred stock dividend — — — — — ( 17,250 ) — — — ( 17,250 )

Issuance of stock related to stock-based awards — — 248,387 3 ( 4,212 ) — — — — ( 4,209 )

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

Repurchase of common stock — — — — — — ( 2,083,118 ) ( 115,302 ) — ( 115,302 )

Balance at December 31, 2022 300,000 $ 300,000 50,867,298 $ 509 $ 1,025,593 $ 2,263,502 ( 2,083,535 ) $ ( 115,310 ) $ ( 418,943 ) $ 3,055,351

2 unchanged sentences

Change in other comprehensive income/(loss), net of taxes — — — — — — — — 56,939 56,939

Total comprehensive loss ( 38,750 )

Total comprehensive income

Stock-based compensation expense recognized in earnings — — — — 24,200 — — — — 24,200

3 unchanged sentences

Balance at December 31, 2023 300,000 $ 300,000 51,142,979 $ 511 $ 1,045,576 $ 2,435,393 ( 3,905,067 ) $ ( 220,334 ) $ ( 362,004 ) $ 3,199,142

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

See Note 1 - Operations and Summary of Significant Accounting Policies to the consolidated financial statements for more information.

See accompanying notes to consolidated financial statements.

8 unchanged sentences

Deferred tax expense/(benefit) ( 17,784 ) ( 17,395 ) ( 20,253 )

Depreciation and amortization expense 45,284 93,406 74,925

Depreciation and amortization 40,473 45,284 93,406

Net (gain)/loss on sale of loans held for sale — 990 ( 1,317 )

Increase/(decrease) in valuation allowance on mortgage servicing rights — ( 16,448 ) 20,164

Net gain recognized on investment securities ( 4,060 ) — —

Decrease in valuation allowance on mortgage servicing rights — — ( 16,448 )

Stock-based compensation expense 24,200 21,432 31,326

8 unchanged sentences

Purchases of available-for-sale debt securities ( 849,391 ) ( 920,217 ) ( 1,059,897 )

Proceeds from sales of available-for-sale debt securities 56,923 — —

Proceeds from maturities, redemptions and pay-downs of available-for-sale debt securities 225,034 432,175 569,931

Proceeds from maturities, redemptions and pay-downs of held-to-maturity debt securities 73,770 87,945 —

Net decrease in equity securities 11,651 — —

Sales/(purchases) of equity securities, net ( 14,298 ) 11,651 —

Originations of loans held for investment, mortgage finance ( 75,671,642 ) ( 102,438,943 ) ( 167,084,439 )

5 unchanged sentences

Net cash provided by/(used in) investing activities

( 1,755,478 ) 3,308,567 1,232,786

Financing activities

5 unchanged sentences

Repurchase of common stock ( 105,024 ) ( 115,302 ) —

Net increase/(decrease) in short-term borrowings 298,858 ( 1,001,690 ) ( 908,919 )

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

Redemption of long-term debt ( 75,000 ) — ( 111,000 )

Net increase/(decrease) in short-term borrowings ( 1,001,690 ) ( 908,919 ) 569,985

Net cash provided by/(used in) financing activities ( 6,390,936 ) ( 3,149,822 ) 5,076,245

Net increase/(decrease) in cash and cash equivalents ( 2,934,399 ) ( 1,259,721 ) 4,780,797

Net cash used in financing activities

( 387,672 ) ( 6,390,936 ) ( 3,149,822 )

Net decrease in cash and cash equivalents ( 1,769,410 ) ( 2,934,399 ) ( 1,259,721 )

Cash and cash equivalents at beginning of period 5,012,260 7,946,659 9,206,380

3 unchanged sentences

Cash paid during the period for income taxes 71,941 128,435 101,101

Transfers of loans from held for investment to held for sale 126,990 — —

Transfers of debt securities from available-for-sale to held-to-maturity — 1,019,365 —

3 unchanged sentences

Texas Capital Bancshares, Inc.

(“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”).

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.

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

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

The consolidated financial statements include the accounts of TCBI and its wholly owned subsidiary, Texas Capital Bank (the “Bank”), a full-service financial services firm that delivers customized solutions to businesses, entrepreneurs and individual customers.

The Company is headquartered in Dallas, with primary banking offices in Austin, Dallas, Fort Worth, Houston and San Antonio, and has built a network of clients across the country.

Basis of Presentation

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The allowance for credit losses, the fair value of financial instruments and the status of contingencies are particularly susceptible to significant change.

As a result of these changes, corresponding adjustments were also made to the Company’s portfolio segments to appropriately pool loans with similar risk characteristics and to the speed at which the Company reverts to historical loss rates for periods beyond which management is able to develop reasonable and supportable forecasts.

See the Allowance for Credit Losses accounting policy below for additional details of these changes.

Basic and Diluted Earnings Per Common Share

52 unchanged sentences

Residential mortgage loans held for sale are subject to both credit and interest rate risk.

Credit risk is managed through underwriting policies and procedures, including collateral requirements, which are generally accepted by the secondary loan markets.

Credit risk is managed through underwriting policies and procedures, including collateral

requirements, which are generally accepted by the secondary loan markets.

Exposure to interest rate fluctuations is partially managed through forward sales contracts, which set the price for loans that will be delivered in the next 60 to 90 days.

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Loan origination fees, net of direct loan origination costs, and commitment fees are deferred and amortized as an adjustment to yield over the life of the loan, or over the commitment period, as applicable.

Restructured loans are loans on which, due to the borrower’s financial difficulties, the Company has granted a concession that it would not otherwise consider for borrowers of similar credit quality.

This may include a transfer of real estate or other assets from the borrower, a modification of loan terms, or a combination of the two.

Modifications of terms that could potentially qualify as a restructuring include reduction of contractual interest rate, extension of the maturity date at a contractual interest rate lower than the current rate for new debt with similar risk, an adjustment to payment terms, a reduction of the face amount of debt or forgiveness of either principal or accrued interest.

A loan continues to qualify as restructured until a consistent payment history or change in the borrower’s financial condition has been evidenced, generally for no less than twelve months.

If the restructuring agreement specifies an interest rate at the time of the restructuring that is greater than or equal to the rate that the Company is willing to accept for a new extension of credit with comparable risk, then the loan is no longer considered a restructuring if it is in compliance with the modified terms in calendar years after the year of the restructure.

A loan is considered past due when a contractually due payment has not been received by the contractual due date.

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Allowance for Credit Losses

On January 1, 2020, the Company adopted ASU 2016-13 "Financial Instruments - Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments" ("ASU 2016-13"), which uses the current expected credit loss ("CECL") model to determine the allowance for credit losses.

The Company’s allowance for credit losses is determined using a current expected credit loss (“CECL”) model.

The measurement of expected credit losses under the CECL methodology is applicable to financial assets measured at amortized cost, including loan receivables and held-to-maturity debt securities.

It also applies to off-balance sheet credit exposures not accounted for as insurance (loan commitments, standby letters of credit, financial guarantees, and other similar instruments) and net investments in leases recognized by a lessor in accordance with ASU 2016-02 "Leases (Topic 842)" .

The following is discussion of the allowance for credit losses on loans held for investment.

The following is a discussion of the allowance for credit losses on loans held for investment and off-balance sheet credit exposures.

See “ Investment Securities - Debt Securities ” above for discussion of the allowance for credit losses on available-for-sale and held-to maturity debt securities.

The CECL methodology recognizes lifetime expected credit losses immediately when a financial asset is originated or purchased.

The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of loans to present the net amount expected to be collected on the loans.

Loans, or portions thereof, are charged off against the allowance

when they are deemed uncollectible.

The allowance for credit losses on loans is a valuation account that is deducted from the amortized cost basis of loans to present the net amount expected to be collected on the loans.

Loans, or portions thereof, are charged off against the allowance when they are deemed uncollectible.

Expected recoveries do not exceed the aggregate of amounts previously charged-off and expected to be charged-off.

The allowance for credit losses on off-balance sheet financial instruments is recorded in other liabilities on the consolidated balance sheets.

Management estimates the allowance balance using relevant available information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts.

Historical credit loss experience provides the basis for the estimation of expected credit losses.

Adjustments to historical loss information are made for differences in current loan-specific risk characteristics such as differences in underwriting standards, portfolio mix, credit quality, or term, as well as for changes in macroeconomic conditions, such as changes in unemployment rates, crude oil prices, property values or other relevant factors.

The allowance for credit losses is comprised of reserves measured on a collective (pool) basis based on a lifetime loss-rate model when similar risk characteristics exist.

Reserves on loans that do not share risk characteristics are evaluated on an individual basis.

In order to determine the allowance for credit losses, all loans are assigned a credit grade.

Loans graded substandard or worse and greater than $500,000 are specifically reviewed for loss potential and when deemed appropriate are assigned a reserve based on an individual evaluation.

For purposes of determining the pool-basis reserve, the remainder of the portfolio, representing all loans not assigned an individual reserve, is segregated first by portfolio segment, then by product type, to recognize differing risk profiles within portfolio segments, and finally by credit grade.

Each credit grade within each product type is assigned a historical loss rate.

These historical loss rates are then modified to incorporate a reasonable and supportable forecast of future losses at the portfolio segment level, as well as any necessary qualitative adjustments using a Portfolio Level Qualitative Factor (“PLQF”) and/or a Portfolio Segment Level Qualitative Factor (“SLQF”).

These modified historical loss rates are multiplied by the outstanding principal balance of each loan to calculate a required reserve.

A similar process is employed to calculate a reserve assigned to off-balance sheet commitments, specifically unfunded loan commitments and letters of credit, and any needed reserve is recorded in other liabilities on the consolidated balance sheets.

changes in macroeconomic conditions, such as changes in unemployment rates, gross domestic product, property values, or other relevant factors.

The allowance for credit losses is comprised of reserves measured on a collective (pool) basis when similar risk characteristics exist.

Loans that do not share risk characteristics are assigned a reserve based on an individual evaluation and are not included in the collective (pool) evaluation.

For purposes of determining the collective (pool) allowance for credit losses, the loan portfolio is segregated into pools first by portfolio segment and then by past due status or credit grade.

Each pool is assigned a loss estimate, reflecting historical loss rates that incorporate probability of default and severity of losses over the estimated remaining life of the loans.

These loss estimates are then modified to incorporate a reasonable and supportable forecast of future losses at the pool level, as well as any necessary qualitative adjustments using a Portfolio Level Qualitative Factor (“PLQF”) and/or a Portfolio Segment Level Qualitative Factor (“SLQF”).

A similar process is employed to calculate a reserve assigned to off-balance financial instruments, specifically unfunded loan commitments and letters of credit.

Modified loss estimates are assigned based on the balance of the commitments estimated to be outstanding at the time of default.

The PLQF and SLQF are utilized to address factors that are not present in historical loss rates and are otherwise unaccounted for in the quantitative process.

2 unchanged sentences

The Company generally uses a two-year forecast period, based on a single forecast scenario or a blend of multiple forecast scenarios, using variables management believes are most relevant to each portfolio segment.

For periods beyond which management is able to develop reasonable and supportable forecasts, they immediately revert to the average historical loss rate.

For periods beyond which management is able to develop reasonable and supportable forecasts, the Company reverts to the average historical loss rate, reflecting historical default probabilities and loss severities, using a reversion speed that approximates 1 to 2 years.

The forecast period and scenario(s) used are reviewed on a quarterly basis and may be adjusted based on management's view of the current economic conditions and level of predictability the forecast can provide.

1 unchanged sentence

A summary of the primary portfolio segments is as follows:

The commercial loan portfolio is comprised of lines of credit for working capital, term loans and leases to finance equipment and other business assets across a variety of industries.

These loans are used for general corporate purposes including financing working capital, internal growth, acquisitions and business insurance premiums and are generally secured by accounts receivable, inventory, equipment and other assets of clients’ businesses.

The commercial loan portfolio also includes consumer loans because the Company’s small portfolio of consumer loans is largely comprised of accommodation loans to individuals associated with its commercial clients.

The energy loan portfolio is primarily comprised of loans to exploration and production companies that are generally collateralized with proven reserves based on appropriate valuation standards that take into account the risk of oil and gas price volatility.

The majority of this portfolio is first lien, senior secured, reserve-based lending, which the Company believes is the lowest-risk form of energy lending.

Energy loans are impacted by commodity price volatility, as well as changes in consumer and business demand.

The commercial loan portfolio is comprised of lines of credit for working capital, term loans, reserve-based loans to energy exploration and production companies, and leases to finance equipment and other business assets across a variety of industries.

These loans are used for general corporate purposes including financing working capital, internal growth, and acquisitions and are generally secured by accounts receivable, inventory, oil and gas reserves, equipment and other assets of clients’ businesses.

Mortgage Finance.

3 unchanged sentences

Market conditions or events of default by an investor or originator could require that the Company repurchases the remaining interests in the mortgage loans and hold them beyond the expected 10-20 days.

Real estate .

The real estate portfolio is comprised of the following types of loans:

Commercial Real Estate (“CRE”).

The CRE portfolio is comprised of both construction/development financing and limited term financing provided to professional real estate developers and owners/managers of commercial real estate

projects and properties who have a demonstrated record of past success with similar properties.

Collateral properties include office buildings, warehouse/distribution buildings, shopping centers, hotels/motels, senior living, apartment buildings and residential and commercial tract development.

The CRE portfolio is comprised of construction/development financing and limited term financing provided to professional real estate developers, owners/managers of commercial real estate projects and properties, and residential builders/developers.

Collateral properties include office buildings, warehouse/distribution buildings, shopping centers, hotels/motels, senior living, apartment buildings, residential and commercial tract developments, and raw land or lots to be developed into single-family homes.

The primary source of repayment on these loans is expected to come from the sale, permanent financing or lease of the real property collateral.

CRE loans are impacted by fluctuations in collateral values, as well as the ability of the borrower to obtain permanent financing.

Residential homebuilder finance (“RBF”) .

The RBF portfolio is comprised of loans made to residential builders and developers.

Loans to residential builders are typically in the form of uncommitted guidance lines and are for the purpose of developing lots into single-family homes, while loans to developers are typically in the form of borrowing base lines extended for the purpose of acquiring and developing raw land into lots that can be further sold to home builders.

RBF loans, if not structured and monitored correctly, can be impacted by volatility in consumer demand, as well as fluctuation in housing prices.

Secured by 1-4 family .

This category of loans includes both first and second lien loans made for the purpose of purchasing or constructing 1-4 family residential dwellings, as well as home equity revolving lines of credit and loans to purchase lots for future construction of 1-4 family residential dwellings.

The “other” category is primarily comprised of real estate loans originated through a Small Business Administration (SBA) program where repayment is partially guaranteed by the SBA, as well as other loans secured by real estate where the primary source of repayment is not expected to come from the sale or lease of the real property collateral.

The performance of these loans is impacted by fluctuations in collateral values, the ability of the borrower to obtain permanent financing, and, in the case of loans to residential builder/developers, volatility in consumer demand.

This category of loans is comprised of loans made to consumers for personal expenditures, first and second lien mortgages made for the purpose of purchasing or constructing 1-4 family residential dwellings and home equity revolving lines of credit.

The Company has several pass credit grades that are assigned to loans based on varying levels of risk, ranging from credits that are secured by cash or marketable securities, to watch credits which have all the characteristics of an acceptable credit risk but warrant more than the normal level of monitoring.

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Substandard loans have a well-defined weakness or weaknesses that jeopardizes the liquidation of the debt.

They are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected.

They are characterized by the distinct possibility that the

Company will sustain some loss if the deficiencies are not corrected.

Some substandard loans are inadequately protected by the sound worth and paying capacity of the borrower and of the collateral pledged and may be considered impaired.

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When foreclosure occurs, the acquired asset is recorded at fair value less selling costs, generally based on appraised value, which may result in partial charge-off of the loan through a charge to the allowance for credit losses, if necessary.

Subsequent write-downs required for declines in value are recorded through a valuation allowance, or taken directly

to the asset, and are recorded in other non-interest expense on the consolidated statements of income and other comprehensive income.

Subsequent write-downs required for declines in value are recorded through a valuation allowance, or taken directly to the asset, and are recorded in other non-interest expense on the consolidated statements of income and other comprehensive income.

Gains or losses on sale of OREO are recorded in other non-interest income on the consolidated statements of income and other comprehensive income.

1 unchanged sentence

Intangible assets are acquired assets that lack physical substance but can be distinguished from goodwill because of contractual or other legal rights or because the asset is capable of being sold or exchanged either on its own or in combination with a related contract, asset or liability.

The Company’s goodwill and intangible assets relate primarily to customer relationships purchased as part of business acquisitions.

The Company had $ 1.5 million of goodwill at both December 31, 2023 and December 31, 2022.

Intangible assets with definite useful lives are amortized over their estimated life.

No amortization expense related to intangible assets was recorded during the year ended December 31, 2023, as compared to $ 338,000 and $ 405,000 during the years ended December 31, 2022 and 2021, respectively.

Goodwill and intangible assets are tested for impairment at least annually or whenever changes in circumstances indicate the carrying amount of the assets may not be recoverable from future undiscounted cash flows.

If impaired, the assets are recorded at fair value.

In 2023 and 2022, the annual test of goodwill impairment was performed, and in both periods, no impairment was indicated.

Premises and Equipment, Net

1 unchanged sentence

Depreciation is computed using the straight-line method over the estimated useful lives of the assets.

Furniture and equipment is generally depreciated over three to five years , while leasehold improvements are generally depreciated over the term of their respective lease.

Furniture and equipment are generally depreciated over three to five years , while leasehold improvements are generally depreciated over the term of their respective lease.

Gains or losses on disposals of premises and equipment are included in other non-interest income on the consolidated statements of income and other comprehensive income.

Costs incurred in connection with development or purchase of internal use software and cloud computing arrangements, including in-substance software licenses, are capitalized.

Amortization is computed on a straight-line basis over the estimated useful life of the asset, which generally ranges from one to five years .

Amortization is computed on a straight-line basis over the estimated

useful life of the asset, which generally ranges from one to five years .

Capitalized software is included in other assets on the consolidated balance sheets.

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The Company has undertaken certain guarantee obligations in the ordinary course of business which include liabilities with off-balance sheet risk.

The Company considers the following arrangements to be guarantees:

commitments to extend credit, standby letters of credit and indemnification agreements included within third party contractual arrangements.

The Company is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers.

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The Company evaluates each customer’s creditworthiness on a case-by-case basis.

Commitments to extend credit do not include mortgage finance arrangements with mortgage loan originators through the mortgage warehouse lending division, which are established as uncommitted “guidance” purchase and sale facilities under which the mortgage originator has no obligation to offer and the Company has no obligation to purchase interests in the mortgage loans subject to the arrangements.

Commitments to extend credit generally do not include mortgage finance arrangements with mortgage loan originators through the mortgage warehouse lending division, which are established as uncommitted “guidance” purchase and sale facilities under which the mortgage originator has no obligation to offer and the Company has no obligation to purchase interests in the mortgage loans subject to the arrangements.

Standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party.

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The repurchase, indemnification and make-whole obligations vary based upon the terms of the applicable agreements, the nature of the asserted breach and the status of the mortgage loan at the time a claim is made.

The Company establishes reserves for estimated losses of this nature inherent in the sale of mortgage loans by estimating the

losses inherent in the population of all loans sold based on trends in claims and actual loss severities experienced.

The Company establishes reserves for estimated losses of this nature inherent in the sale of mortgage loans by estimating the losses inherent in the population of all loans sold based on trends in claims and actual loss severities experienced.

The reserve will include accruals for probable contingent losses in addition to those identified in the pipeline of claims received.

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Finance leases in which the Company is the lessee are recorded as finance lease ROU assets and finance lease liabilities and are included in premises and equipment, net, and other liabilities, respectively, on the consolidated balance sheets.

Finance lease expense is comprised of amortization of the ROU asset, which is recognized on a straight-line basis over the lease term and recorded in net occupancy expense on the consolidated statements of income and other comprehensive income, and the implicit interest accreted on the operating lease liability, which is recognized using the effective interest method over the lease term and recorded in interest expense on the consolidated statements of income and other comprehensive income.

Finance lease expense is comprised of amortization of the ROU asset, which is recognized on a straight-line basis over the lease term and

recorded in net occupancy expense on the consolidated statements of income and other comprehensive income, and the implicit interest accreted on the operating lease liability, which is recognized using the effective interest method over the lease term and recorded in interest expense on the consolidated statements of income and other comprehensive income.

Variable costs, such as maintenance expenses, parking and property and sales taxes, are expensed as they are incurred, and are recorded in net occupancy expense on the consolidated statements of income and other comprehensive income.

Revenue Recognition

1 unchanged sentence

The core principle requires an entity to recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration that it expects to be entitled to receive in exchange for those goods or services recognized as performance obligations are satisfied.

The majority of the Company’s revenue-generating transactions are not subject to ASC 606, including revenue generated from financial instruments, such as loans, letters of credit, derivatives and investment securities, as well as revenue related to mortgage servicing activities, as these activities are subject to other GAAP discussed elsewhere within the Company’s disclosures.

The majority of the Company’s revenue-generating transactions are not subject to ASC 606, including revenue generated from financial instruments, such as loans, letters of credit, derivatives and investment securities, as these activities are subject to other GAAP discussed elsewhere within the Company’s disclosures.

Descriptions of revenue-generating activities that are within the scope of ASC 606, which are presented in the income statements as components of non-interest income are as follows:

9 unchanged sentences

Revenue related to the MCA business is recognized at the time a loan is purchased.

• Investment banking and trading income - these include fees for merger, acquisition, divestiture and restructuring advisory services, fees for securities underwriting activities, loan syndication fees, and swap fees.

• Investment banking and trading income - includes the following:

Year Ended December 31,

2023 2022 2021

Investment banking and advisory fees $ 61,366 $ 24,974 $ 22,007

Trading income 24,816 10,080 2,434

Total $ 86,182 $ 35,054 $ 24,441

• Investment banking and advisory fees includes fees for merger, acquisition, divestiture and restructuring advisory services, fees for securities underwriting activities and loan and security syndication fees.

Advisory fees are generally earned as performance obligations of the advisory service are satisfied.

1 unchanged sentence

Loan syndication fees are generally recognized upon closing of a loan syndication transaction.

• Trading income includes fees for derivative transactions which are generally recognized when the derivative transaction occurs.

Also included in trading income are realized and unrealized gains and losses recognized on the Company’s trading assets and liabilities.

Realized gains and losses are generally recognized when a sale occurs and unrealized gains and losses are generally recognized monthly as the trading assets and liabilities are marked to fair value.

• Other non-interest income includes items such as letter of credit fees, bank owned life insurance income, dividends on FHLB and FRB stock and other general operating income, none of which are subject to the requirements of ASC 606.

Also included in other-non-interest income are interchange fees earned when commercial credit card clients process transactions through card networks.

Also included in other-non-interest income are interchange fees earned when commercial credit card clients process

transactions through card networks.

The Company’s performance obligations are generally complete when the transactions generating the fees are processed.

7 unchanged sentences

Deferred tax assets, net, are included in other assets on the consolidated balance sheets.

The tax effect of unrealized gains and losses on available-for-sale debt securities is recorded to other comprehensive income and is not a component of income tax expense/(benefit).

The tax effect of unrealized gains and losses on available-for-sale debt securities and derivative instruments designated as hedges is recorded to other comprehensive income and is not a component of income tax expense/(benefit).

GAAP does not permit the adjustment of tax amounts in AOCI for changes in tax rates;

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The Company’s U.S.

Treasury securities are valued based on quoted market prices for identical securities in an active market and are classified as Level 1 assets in the fair value hierarchy, while the Company’s U.S.

Treasury securities are valued based on quoted

market prices for identical securities in an active market and are classified as Level 1 assets in the fair value hierarchy, while the Company’s U.S.

government agency and residential mortgage-backed securities are valued based on quoted market prices for the same or similar securities and are characterized as Level 2 assets in the fair value hierarchy.

Management obtains documentation from the primary independent pricing service regarding the processes and controls applicable to pricing investment securities, and on a quarterly basis independently verify the prices that were received from the service provider using two additional independent pricing sources.

Tax-exempt asset-backed securities and CRT securities are valued using a discounted cash flow model, which utilizes Level 3 inputs, and are classified as Level 3 assets in the fair value hierarchy.

Within the investment securities portfolio, the Company holds equity securities that consist of investments that qualify for consideration under the regulations implementing the Community Reinvestment Act and investments related to non-qualified deferred compensation plan.

CRT securities are valued using a discounted cash flow model, which utilizes Level 3 inputs, and are classified as Level 3 assets in the fair value hierarchy.

Some of these equity securities are valued using quoted market prices for identical equity securities in an active market and are classified as Level 1 assets in the fair value hierarchy and others are traded in less active markets and are classified as Level 2 assets in the fair value hierarchy.

1 unchanged sentence

The fair value for loans held for sale is derived from quoted market prices for similar loans, in which case they are characterized as Level 2 assets in the fair value hierarchy, or is derived from third party pricing models, in which case they are characterized as Level 3 assets in the fair value hierarchy.

Securities Sold Not Yet Purchased

The fair value for securities sold but not yet purchased is derived from quoted prices in active markets and are classified as Level 1 liabilities in the fair value hierarchy.

Derivative Assets and Liabilities

5 unchanged sentences

Non-Hedging Derivatives

The Company enters into an interest rate swap, cap and/or floor derivative instruments with customers while at the same time entering into offsetting interest rate swap, cap and/or floor derivative instruments with another financial institution.

In connection with each swap transaction, the Company agrees to pay interest to the customer on a notional amount at a variable interest rate and receive interest from the customer on a similar notional amount at a fixed interest rate.

At the same time, the Company agrees to pay another financial institution the same fixed interest rate on the same notional amount and receive the same variable interest rate on the same notional amount.

The transaction allows the customer to effectively convert a variable rate loan to a fixed rate.

The Company enters into interest rate derivative instruments with customers while at the same time entering into offsetting interest rate derivative instruments with another financial institution.

These transactions allow the customer to effectively manage their exposure to a variable rate loan.

Because the Company acts as an intermediary for its customers, changes in the fair value of the underlying derivative instruments substantially offset each other and do not have a material impact on the Company’s results of operations.

1 unchanged sentence

agency residential mortgage-back securities, to its mortgage banking customers to allow the customers to mitigate exposure to market risks associated with the purchase or origination of mortgage loans.

To mitigate the Company’s exposure to these forward contracts, the Company will enter offsetting forward contracts, most typically with a financial institution.

To mitigate the Company’s exposure to these forward contracts, the Company will enter into offsetting forward contracts, most typically with a financial institution.

Any changes in fair value to the forward contract derivative instruments are recorded in investment banking and trading income on the consolidated statements of income and other comprehensive income.

The Company also offers foreign currency forward contracts derivative instruments in which the Company enters into a contract with a customer to buy or sell a foreign currency at a future date for a specified price while at the same time entering into an offsetting contract with a financial institution to buy or sell the same currency at the same future date for a specified

The Company also offers foreign currency derivative instruments in which the Company enters into a contract with a customer to buy or sell a foreign currency at a future date for a specified price while at the same time entering into an offsetting contract with a financial institution to buy or sell the same currency at the same future date for a specified price.

The transaction allows the customer to manage their exposure to foreign currency exchange rate fluctuations.

Prior to the transition of its MCA program to a third party in 2021, the Company entered into loan purchase commitment contracts with mortgage originators to purchase residential mortgage loans at a future date, as well as forward sales commitment contracts to sell residential mortgage loans or to deliver mortgage-backed securities at a future date.

The objective of these transactions was to mitigate the Company’s exposure to interest rate risk associated with the purchase of mortgage loans held for sale.

Any changes in fair value were recorded in gain/(loss) on sale of loans held for sale on the consolidated statements of income and other comprehensive income.

Prior to the sale of its portfolio of MSRs to a third party in 2021, the Company entered into interest rate derivative contracts, primarily interest rate swap futures and forward sale commitments of mortgage-backed securities, in order to mitigate exposure to potential impairment losses from adverse changes in the fair value of the Company’s residential MSR portfolio.

These derivative instruments were considered highly liquid and could be settled daily, which allowed the Company to dynamically manage its exposure.

The derivative instruments were used to economically hedge the fair value of the residential MSR portfolio impacted by changes in anticipated prepayments resulting from mortgage interest rate movements and were classified as other assets and other liabilities on the consolidated balance sheets.

Any unrealized or realized gains/(losses) related to derivatives economically hedging the residential MSR portfolio were recognized in servicing-related expenses along with changes to the MSR valuation allowance.

Derivatives Designated as Hedges

The Company enters into interest rate derivative contracts that are designated as qualifying cash flow hedges to hedge the exposure to variability in expected future cash flows attributable to changes in a contractually specified interest rate.

To qualify for hedge accounting, a formal assessment is prepared to determine whether the hedging relationship, both at inception and on an ongoing basis, is expected to be highly effective in achieving offsetting cash flows attributable to the hedged risk during the term of the hedge if a cash flow hedge.

term of the hedge if a cash flow hedge.

At inception a statistical regression analysis is prepared to determine hedge effectiveness.

2 unchanged sentences

The cash flow hedges are recorded at fair value in other assets and other liabilities on the consolidated balance sheets with changes in fair value recorded in AOCI, net of tax.

All related cash flows are reported in the operating activities section of the consolidated statement of cash flows.

Amounts recorded to AOCI are reclassified into earnings in the same period in which the hedged asset or liability affects earnings and are presented in the same income statement line item as the earnings effect of the hedged asset or liability.

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Net income available to common stockholders $ 171,891 $ 315,228 $ 235,218

Denominator for basic earnings per common share—weighted average common shares 50,457,746 50,580,660 50,430,326

Basic earnings per common share—weighted average common shares 48,054,935 50,457,746 50,580,660

Effect of dilutive outstanding stock-settled awards 555,271 588,996 560,314

Denominator for dilutive earnings per common share—weighted average diluted common shares 51,046,742 51,140,974 50,582,979

Dilutive earnings per common share—weighted average diluted common shares 48,610,206 51,046,742 51,140,974

Basic earnings per common share $ 3.58 $ 6.25 $ 4.65

11 unchanged sentences

Residential mortgage-backed securities 2,782,734 540 ( 312,442 ) 2,470,832

Tax-exempt asset-backed securities — — — —

CRT securities 13,636 — ( 1,641 ) 11,995

7 unchanged sentences

Available-for-sale debt securities:

Treasury securities $ 698,769 $ — $ ( 28,187 ) $ 670,582

government agency securities 125,000 — ( 22,846 ) 102,154

Residential mortgage-backed securities 2,162,364 3 ( 331,320 ) 1,831,047

Tax-exempt asset-backed securities 170,626 9,407 — 180,033

CRT securities 14,713 — ( 2,852 ) 11,861

Total available-for-sale debt securities 3,000,846 3 ( 385,205 ) 2,615,644

Held-to-maturity securities:

Residential mortgage-backed securities 935,514 — ( 118,600 ) 816,914

Total held-to-maturity securities 935,514 — ( 118,600 ) 816,914

Equity securities 33,956

Total investment securities(2) $ 3,585,114

(1) Excludes accrued interest receivable of $ 6.6 million and $ 6.6 million at December 31, 2022 and December 31, 2021, respectively, related to available-for-sale debt securities and $ 1.5 million at December 31, 2022 related to held-to-maturity debt securities that is recorded in accrued interest receivable and other assets on the consolidated balance sheets.

(1) Excludes accrued interest receivable of $ 9.5 million and $ 6.6 million at December 31, 2023 and December 31, 2022, respectively, related to available-for-sale debt securities and $ 1.4 million and $ 1.5 million at December 31, 2023 and December 31, 2022, respectively, related to held-to-maturity debt securities that is recorded in accrued interest receivable and other assets on the consolidated balance sheets.

(2) Includes available-for-sale debt securities and equity securities at estimated fair value and held-to-maturity debt securities at amortized cost.

Debt Securities

In the first quarter of 2022, the Company transferred $ 1.0 billion of available-for-sale debt securities to held-to-maturity at fair value.

The transfer was the result of deliberate actions taken to execute on asset-liability management strategies in response to rising interest rates.

Management determined that it has both the positive intent and ability to hold these securities to maturity.

There were no gains or losses recognized as a result of this transfer.

In the second quarter of 2022, the Company’s tax-exempt asset-backed securities were redeemed at par.

The outstanding certificates were cancelled and related trusts were terminated.

Unrealized gains and losses previously recorded, net of tax, in AOCI were reversed and no additional gains or losses were recognized as a result of the redemption.

In the first quarter of 2023, the Company sold U.S.

Treasury securities with an amortized cost of $ 56.4 million and realized a gain of $ 489,000 .

The amortized cost and estimated fair value as of December 31, 2023, excluding accrued interest receivable, of available-for-sale and held-to-maturity debt securities are presented below by contractual maturity.

7 unchanged sentences

Total $ 3,572,482 $ 3,225,892 $ 865,477 $ 763,844

The table below presents the weighted average yields for the Company’s available-for-sale debt securities for the year ended December 31, 2023.

Weighted average yields are calculated based on amortized cost on a tax-exempt basis assuming a 21% tax rate, where applicable.

Treasury securities

government agency securities Residential mortgage-backed securities CRT securities

Due within one year 1.16 % — % — % — %

Due after one year through five years 2.70 1.00 — —

Due after five years through ten years — 1.21 1.20 5.51

Due after ten years — — 2.79 —

Total 2.11 % 1.13 % 2.78 % 5.51 %

The following table discloses the Company’s available-for-sale debt securities that have been in a continuous unrealized loss position for less than 12 months and those that have been in a continuous unrealized loss position for 12 or more months:

8 unchanged sentences

December 31, 2022

Treasury securities $ 670,582 $ ( 28,187 ) $ — $ — $ 670,582 $ ( 28,187 )

government agency securities — — 102,154 ( 22,846 ) 102,154 ( 22,846 )

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The unrealized losses on the available-for-sale debt securities were the result of changes in market interest rates compared to the date the securities were acquired rather than the credit quality of the issuers or underlying loans.

The Company does not intend to sell and it is not more likely than not that the Company will be required to sell these available-for-sale debt securities before recovery of the amortized cost of such securities in an unrealized loss position and has, therefore recorded the unrealized losses related to this portfolio in AOCI.

The Company does not currently intend to sell and based on current conditions it does not believe it is likely that the Company will be required to sell these available-for-sale debt securities before recovery of the amortized cost of such securities in an unrealized loss position and has, therefore recorded the unrealized losses related to this portfolio in AOCI.

Held-to-maturity securities consist of government guaranteed securities for which no loss is expected.

At December 31, 2023 and December 31, 2022, no allowance for credit losses was established for available-for-sale or held-to-maturity debt securities.

Debt securities with carrying values of approximately $ 16.1 million and $ 1.4 million were pledged to secure certain customer repurchase agreements and deposits, respectively, at December 31, 2022.

The comparative amounts at December 31, 2021 were $ 22.0 million and $ 2.0 million, respectively.

At December 31, 2023, debt securities with carrying values of approximately $ 1.6 million were pledged to secure certain customer deposits.

At December 31, 2022, debt securities with carrying values of approximately $ 16.1 million and $ 1.4 million were pledged to secure certain customer repurchase agreements and deposits, respectively.

Equity Securities

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

Equity securities consist of investments that qualify for consideration under the regulations implementing the Community Reinvestment Act and investments in exchange traded funds.

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

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(4) Loans and Allowance for Credit Losses on Loans

As discussed in Note 1 - Operations and Summary of Significant Accounting Policies, in the second quarter of 2023, changes were made to certain estimates used in the Company’s current expected credit loss model which resulted in adjustments being made to the Company’s portfolio segments.

As a result, certain prior period balances below have been reclassified to conform to the current period presentation of portfolio segments.

Loans are summarized by portfolio segment as follows:

(in thousands) 2022 2021

(in thousands) December 31, 2023 December 31, 2022

Loans held for investment(1):

Commercial $ 10,410,766 $ 9,832,676

Energy 1,159,296 721,373

Mortgage finance 3,978,328 4,090,033

Real estate 5,198,643 4,777,530

Commercial real estate 5,500,774 4,875,363

Consumer 530,948 552,848

Gross loans held for investment 20,420,816 19,350,920

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

(in thousands) 2022 2021 2020 2019 2018 2017 and prior Revolving lines of credit Revolving lines of credit converted to term loans Total

(in thousands) 2023 2022 2021 2020 2019 2018

and prior Revolving lines of credit Revolving lines of credit converted to term loans Total

December 31, 2023

4 unchanged sentences

Total commercial $ 1,590,277 $ 1,612,768 $ 324,559 $ 165,616 $ 158,204 $ 179,111 $ 6,363,562 $ 16,669 $ 10,410,766

(1-7) Pass $ 124,691 $ 12,517 $ — $ — $ — $ 3,317 $ 1,007,776 $ — $ 1,148,301

(8) Special mention — — — — — — — — —

(9) Substandard - accruing — — — — — — 7,337 — 7,337

(9+) Non-accrual — — — — — — 3,658 — 3,658

Total energy $ 124,691 $ 12,517 $ — $ — $ — $ 3,317 $ 1,018,771 $ — $ 1,159,296

Mortgage finance

4 unchanged sentences

Total mortgage finance $ — $ — $ — $ — $ — $ — $ 3,978,328 $ — $ 3,978,328

(1-7) Pass $ 1,085,254 $ 756,180 $ 563,341 $ 447,346 $ 183,634 $ 284,698 $ 97,337 $ 11,944 $ 3,429,734

(8) Special mention 2,765 6,524 37,791 5,295 19,350 3,652 — — 75,377

(9) Substandard - accruing — 17,850 — — 11,458 17,698 — — 47,006

(9+) Non-accrual — — — — — 182 — — 182

(1-7) Pass 94,066 70,951 12,161 6,106 2,655 — 326,164 — 512,103

(8) Special mention — — — — — — — — —

(9) Substandard - accruing 7,840 — — — — — — — 7,840

(9+) Non-accrual — — — — — — — — —

Commercial real estate

(1-7) Pass $ 561,801 $ 1,689,325 $ 1,042,953 $ 419,703 $ 317,480 $ 559,026 $ 575,928 $ 28,175 $ 5,194,391

2 unchanged sentences

(9+) Non-accrual — — 12,350 — — — — — 12,350

Secured by 1-4 family

Total commercial real estate $ 561,801 $ 1,828,358 $ 1,088,240 $ 444,143 $ 351,661 $ 610,432 $ 587,964 $ 28,175 $ 5,500,774

(1-7) Pass $ 31,876 $ 56,425 $ 78,096 $ 47,423 $ 14,141 $ 102,691 $ 199,171 $ — $ 529,823

2 unchanged sentences

(9+) Non-accrual — — — — — — — — —

Total real estate $ 1,437,544 $ 1,073,010 $ 770,709 $ 550,826 $ 311,001 $ 541,571 $ 470,745 $ 43,237 $ 5,198,643

Total consumer $ 31,876 $ 56,425 $ 78,096 $ 47,423 $ 14,141 $ 103,675 $ 199,271 $ 41 $ 530,948

Total $ 2,183,954 $ 3,497,551 $ 1,490,895 $ 657,182 $ 524,006 $ 893,218 $ 11,129,125 $ 44,885 $ 20,420,816

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

Gross charge-offs $ 8,364 $ 5,090 $ 25,578 $ — $ 15,243 $ 883 $ 698 $ 871 $ 56,727

(in thousands) 2022 2021 2020 2019 2018 2017

and prior Revolving lines of credit Revolving lines of credit converted to term loans Total

December 31, 2022

4 unchanged sentences

Total commercial $ 2,051,137 $ 757,872 $ 245,404 $ 324,837 $ 355,256 $ 241,653 $ 5,833,334 $ 23,183 $ 9,832,676

(1-7) Pass $ 71,750 $ — $ — $ 3 $ — $ 7,188 $ 577,988 $ — $ 656,929

(8) Special mention — — — — — — 27,421 — 27,421

(9) Substandard - accruing — — — — — 8,643 — — 8,643

(9+) Non-accrual — — — — — — 28,380 — 28,380

Total energy $ 71,750 $ — $ — $ 3 $ — $ 15,831 $ 633,789 $ — $ 721,373

Mortgage finance

4 unchanged sentences

Total mortgage finance $ — $ — $ — $ — $ — $ — $ 4,090,033 $ — $ 4,090,033

(1-7) Pass $ 497,462 $ 576,344 $ 600,005 $ 294,005 $ 155,252 $ 451,042 $ 73,988 $ 25,970 $ 2,674,068

(8) Special mention — — 291 8,827 20,089 26,344 — — 55,551

(9) Substandard - accruing 17,850 — — 40,900 37,393 38,188 — 2,308 136,639

(9+) Non-accrual — — — — — 198 — — 198

(1-7) Pass 155,595 44,362 9,693 8,565 — 12,732 460,888 — 691,835

(8) Special mention — — — — — — — — —

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

(9+) Non-accrual — — — — — — — — —

Commercial real estate

(1-7) Pass $ 1,362,160 $ 958,669 $ 670,113 $ 520,970 $ 263,240 $ 448,536 $ 465,834 $ 43,237 $ 4,732,759

2 unchanged sentences

(9+) Non-accrual — — 1,081 — — 182 — — 1,263

Secured by 1-4 family

Total commercial real estate $ 1,373,494 $ 983,043 $ 717,706 $ 526,512 $ 294,048 $ 471,489 $ 465,834 $ 43,237 $ 4,875,363

(1-7) Pass $ 69,320 $ 95,470 $ 57,060 $ 24,773 $ 20,055 $ 89,919 $ 196,088 $ 130 $ 552,815

2 unchanged sentences

(9+) Non-accrual — — — 33 — — — — 33

Total real estate $ 934,008 $ 844,518 $ 769,592 $ 481,616 $ 326,691 $ 762,427 $ 587,064 $ 71,614 $ 4,777,530

Total Consumer $ 69,320 $ 95,470 $ 57,060 $ 24,806 $ 20,055 $ 89,919 $ 196,088 $ 130 $ 552,848

Total $ 3,493,951 $ 1,836,385 $ 1,020,170 $ 876,155 $ 669,359 $ 803,061 $ 10,585,289 $ 66,550 $ 19,350,920

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

Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories.

(in thousands) Commercial Energy Mortgage

The changes made to the Company’s current expected credit loss model, as discussed above and in Note 1 - Operations and Summary of Significant Accounting Policies, resulted in a reallocation of the allowance for credit losses between loan portfolio segments and allowance balances allocated to off-balance sheet financial instruments, the results of which are included in the table below.

The changes made result in a higher allocation of losses to off-balance sheet financial instruments.

See Note 9 - Financial Instruments with Off-Balance Sheet Risk for information regarding the allowance for credit losses on off-balance sheet financial instruments.

Allocation of a portion of the allowance to one category does not preclude its availability to absorb losses in other categories.

(in thousands) Commercial Mortgage

Finance Commercial Real Estate Consumer Total

Year Ended December 31, 2023

12 unchanged sentences

Ending balance $ 185,303 $ 10,745 $ 54,268 $ 3,153 $ 253,469

The Company recorded a $ 61.5 million provision for credit losses for the year ended December 31, 2022, compared to a $ 29.8 million negative provision for the same period of 2021.

The $ 61.5 million provision for credit losses resulted primarily from updated views on the downside risks to the economic forecast and an increase in net charge-offs during 2022.

Net charge-offs for the year ended December 31, 2022 were $ 19.9 million, compared to $ 12.9 million during the same period of 2021.

The Company recorded a $ 47.4 million provision for credit losses on loans for the year ended December 31, 2023, compared to $ 61.5 million for the same period of 2022.

The $ 47.4 million provision for credit losses on loans resulted primarily from increases in total loans held for investment, criticized and non-accrual loans and net charge-offs during the year ended December 31, 2023.

Net charge-offs of $ 50.9 million were recorded during the year ended December 31, 2023, compared to net charge-offs of $ 19.9 million during the same period of 2022.

Criticized loans totaled $ 738.2 million at December 31, 2023 and $ 513.2 million at December 31, 2022.

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.

There were no loans that met these criteria at December 31, 2022.

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

At December 31, 2023, the Company had $ 46.0 million in collateral-dependent commercial loans, collateralized by business assets, and $ 12.4 million in collateral-dependent commercial real estate loans, collateralized by real estate.

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

(in thousands) 30-59 Days

4 unchanged sentences

Commercial $ 2,642 $ 9,584 $ 18,540 $ 30,766 $ 69,048 $ 10,310,952 $ 10,410,766 $ 7,773

Energy — — — — 3,658 1,155,638 1,159,296 3,658

Mortgage finance — — — — — 3,978,328 3,978,328 —

CRE 440 — — 440 182 3,551,677 3,552,299 —

RBF — — — — — 519,943 519,943 —

Other 2,438 — — 2,438 1,081 799,602 803,121 —

Secured by 1-4 family — — — — — 323,280 323,280 —

Commercial real estate 679 4,140 — 4,819 12,350 5,483,605 5,500,774 —

Consumer 1,290 — 983 2,273 — 528,675 530,948 —

Total $ 4,611 $ 13,724 $ 19,523 $ 37,858 $ 81,398 $ 20,301,560 $ 20,420,816 $ 7,773

(1) As of December 31, 2022 $ 2.2 million of non-accrual loans were earning interest income on a cash basis compared to none as of December 31, 2021.

(1) As of December 31, 2023, $ 358,000 of non-accrual loans were earning interest income on a cash basis compared to $ 2.2 million as of December 31, 2022.

Additionally, $ 37,000 and $ 801,000 of interest income was recognized on non-accrual loans for the years ended December 31, 2023 and 2022, respectively.

Accrued interest of $ 1.6 million and $ 1.2 million was reversed during the years ended December 31, 2022 and 2021, respectively.

As of December 31, 2022 and December 31, 2021, the Company did not have any loans considered restructured that were not on non-accrual.

Of the non-accrual loans at December 31, 2022 and 2021, $ 531,000 and $ 19.4 million, respectively, met the criteria for restructured.

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

The following table details the recorded investment at December 31, 2022 of loans restructured during the year ended December 31, 2022:

Accrued interest of $ 3.0 million and $ 1.6 million was reversed during the years ended December 31, 2023 and December 31, 2022, respectively.

Modifications to Borrowers Experiencing Financial Difficulty

The Company adopted Accounting Standards Update (“ASU”) 2022-02, Financial Instruments - Credit Losses (Topic 326) Troubled Debt Restructurings and Vintage Disclosures (“ASU 2022-02”) effective January 1, 2023.

The amendments in ASU 2022-02 eliminated the recognition and measurement of troubled debt restructurings and enhanced disclosures for loan modifications to borrowers experiencing financial difficulty.

The table below details gross loans held for investment as of December 31, 2023 made to borrowers experiencing financial difficulty that were modified during the year ended December 31, 2023:

(in thousands) Payment

Deferral Term

Extension Payment

Extension Interest Rate

Extension Total Percentage of

Commercial $ 30,873 $ 733 $ 5,458 $ 6,064 $ 43,128 0.21 %

Commercial real estate

— 21,364 — — 21,364 0.10 %

Total $ 30,873 $ 22,097 $ 5,458 $ 6,064 $ 64,492 0.32 %

The following table summarizes the financial impacts of loan modifications made to borrowers experiencing financial difficulty during the year ended December 31, 2023:

Interest Rate

Reduction Term Extension

(in months) Total Payment

(in thousands)

Commercial 0.70 % 4 to 36

Commercial real estate

During the year ended December 31, 2023, commercial loans totaling $ 6.3 million experienced a default subsequent to being granted a term extension modification in the prior twelve months.

Default is defined as movement to nonperforming status, foreclosure or charge-off, whichever occurs first.

The table below provides an age analysis of gross loans held for investment as of December 31, 2023 made to borrowers experiencing financial difficulty that were modified on or after January 1, 2023, the date the Company adopted ASU 2022-02:

(in thousands) 30-89 Days

Past Due 90+ Days

Past Due Non-Accrual Current Total

December 31, 2023

Commercial $ 7,617 $ — $ 11,601 $ 23,910 $ 43,128

Commercial real estate

4,141 — — 17,223 21,364

Total $ 11,758 $ — $ 11,601 $ 41,133 $ 64,492

Troubled Debt Restructuring Disclosures Prior to the Adoption of ASU 2022-02

The following table details the recorded investments of loans restructured during the year ended December 31, 2022.

Extended Maturity Adjusted Payment Schedule Total

(dollars in thousands) Number of Contracts Balance at Period End Number of Contracts Balance at Period End Number of Contracts Balance at Period End

(in thousands, except number of contracts) Number of Contracts Balance at Period End Number of Contracts Balance at Period End Number of Contracts Balance at Period End

Year Ended December 31, 2022

Commercial — $ — 1 $ 531 1 $ 531

— $ — 1 $ 531 1 $ 531

Total — $ — 1 $ 531 1 $ 531

The Company did not have any loans that were restructured during the year ended December 31, 2021.

The restructuring of these loans did not have a significant impact on the allowance for credit losses at December 31, 2022 or 2021.

As of December 31, 2022 and 2021, the Company did not have any loans that were restructured within the last 12 months that subsequently defaulted.

As of December 31, 2022, the Company did no t have any loans considered restructured that were not on non-accrual.

Of the non-accrual loans at December 31, 2022, $ 531,000 met the criteria for restructured.

These loans had no unfunded commitments at December 31, 2022.

The following table presents ROU assets and lease liabilities:

8 unchanged sentences

Total $ 111,073 $ 106,691

As of December 31, 2022, operating leases had remaining lease terms of generally 1 year to 17 years, while finance leases had remaining terms of generally 2 years.

As of December 31, 2023, operating leases had remaining lease terms of approximately 1 year to 16 years, while finance leases had remaining terms of approximately 1 year.

The table below summarizes the Company’s net lease cost:

32 unchanged sentences

Present value of lease liabilities $ 1,550 $ 109,523 $ 111,073

(6) Goodwill and Other Intangible Assets

Goodwill and other intangible assets are summarized as follows:

(in thousands) Goodwill and Intangible Assets Accumulated

Amortization Goodwill and Intangible Assets, Net

December 31, 2022

Goodwill $ 1,870 $ ( 374 ) $ 1,496

Intangible assets—customer relationships and trademarks — — —

Total goodwill and intangible assets $ 1,870 $ ( 374 ) $ 1,496

December 31, 2021

Goodwill $ 15,468 $ ( 374 ) $ 15,094

Intangible assets—customer relationships and trademarks 9,006 ( 6,838 ) 2,168

Total goodwill and intangible assets $ 24,474 $ ( 7,212 ) $ 17,262

On November 1, 2022, the sale of BDCF was completed, resulting in the removal of goodwill and other intangible assets, net of accumulated amortization, of $ 15.4 million.

In 2022 and 2021, the annual test of goodwill impairment was performed, and in both periods, no impairment was indicated.

Amortization expense related to intangible assets totaled $ 338,000 in 2022, $ 405,000 in 2021 and $ 432,000 in 2020.

As of December 31, 2023, the Company had $ 133.1 million of future payments for leases, primarily for banking centers and corporate offices, that have not yet commenced.

These leases will commence during 2024, with lease terms ranging from 10 to 15 years.

(6) Premises & Equipment

37 unchanged sentences

Maximum month-end outstanding during the year $ 525,000 $ 2,320 $ 2,650,000

The following table summarizes the Company’s short-term borrowing capacities net of balances outstanding:

(in thousands) December 31, 2023 December 31, 2022

FHLB borrowing capacity relating to loans and pledged securities $ 2,602,092 $ 2,621,218

FHLB borrowing capacity relating to unencumbered securities 3,737,615 3,539,297

Total FHLB borrowing capacity(1) $ 6,339,707 $ 6,160,515

Unused federal funds lines available from commercial banks $ 1,188,000 $ 1,479,000

Unused Federal Reserve borrowings capacity $ 4,094,801 $ 3,574,762

Unused revolving line of credit(2) $ 100,000 $ 75,000

(1) FHLB borrowings are collateralized by a blanket floating lien on certain real estate secured loans, mortgage finance assets and certain pledged securities.

(2) Unsecured revolving, non-amortizing line of credit with maturity date of February 8, 2025.

Proceeds may be used for general corporate purposes, including funding regulatory capital infusions into the Bank.

The loan agreement contains customary financial covenants and restrictions.

No borrowings were made against this line of credit during the twelve months ended December 31, 2023 or 2022.

The line of credit was reduced to $ 75.0 million in the first quarter of 2024.

The table below presents a summary of long-term debt:

(in thousands) 2022 2021

(in thousands) December 31, 2023 December 31, 2022

Bank-issued floating rate senior unsecured credit-linked notes due 2024 $ 199,499 $ 272,492

5 unchanged sentences

Total long-term debt $ 859,147 $ 931,442

In the second quarter of 2023, the Company partially paid down $ 75.0 million of the senior unsecured credit-linked notes in accordance with the term of the notes.

The following table summarizes the significant terms of the Company’s trust preferred subordinated debentures:

8 unchanged sentences

Floating or fixed rate securities Floating Floating Floating Floating Floating

Interest rate on subordinated debentures 3 month LIBOR

3 month LIBOR

Interest rate on subordinated debentures 3 month SOFR

Maturity date November 2032 April 2033 December 2035 June 2036 December 2036

1 unchanged sentence

The table below presents the Company’s financial instruments with off-balance sheet risk, as well as the activity in the allowance for off-balance sheet credit losses related to those financial instruments.

The changes made to the Company’s current expected credit loss model, as discussed in Note 1 - Operations and Summary of Significant Accounting Policies, resulted in a reallocation of the allowance for credit losses between loan portfolio segments and allowance balances allocated to off-balance sheet financial instruments, the results of which are included in the table below.

The changes made result in a higher allocation of losses to off-balance sheet financial instruments.

See Note 4 - Loans and Allowance for Credit Losses on Loans for information regarding the allowance for credit losses on loans.

(in thousands) Commercial Mortgage

Finance Commercial

Real Estate Consumer Total

Year Ended December 31, 2023

(in thousands) 2022 2021

Beginning balance of allowance for off-balance sheet credit losses $ 17,265 $ 17,434

Beginning balance $ 16,550 $ — $ 5,222 $ 21 $ 21,793

Provision for off-balance sheet credit losses 19,490 6 4,925 148 24,569

Ending balance of allowance for off-balance sheet credit losses $ 21,793 $ 17,265

(in thousands) 2022 2021

Ending balance $ 36,040 $ 6 $ 10,147 $ 169 $ 46,362

Year Ended December 31, 2022

Beginning balance $ 15,107 $ — $ 2,136 $ 22 $ 17,265

Provision for off-balance sheet credit losses 1,443 — 3,086 ( 1 ) 4,528

Ending balance $ 16,550 $ — $ 5,222 $ 21 $ 21,793

(in thousands) December 31, 2023 December 31, 2022

Commitments to extend credit - period end balance $ 9,749,085 $ 9,673,082

10 unchanged sentences

No dividends were declared or paid on the Company’s common stock during 2023 or 2022.

On April 19, 2022, the Company’s board of directors authorized the Company to repurchase up to $ 150.0 million in shares of its outstanding common stock.

During the year ended December 31, 2022, the Company repurchased 2,083,118 shares

of its common stock for an aggregate price of $ 115.3 million, at a weighted average price of $ 55.35 per share.

On January 18, 2023, the Company’s board of directors authorized a new share repurchase program under which the Company may repurchase up to $ 150.0 million in shares of its outstanding common stock.

In January 2023, the Company completed the full $ 150.0 million of share repurchases authorized by the Company’s board of directors on April 19, 2022.

On January 18, 2023, the Company’s board of directors authorized a new share repurchase program under which the Company could repurchase up to $ 150.0 million in shares of its outstanding common stock.

During the year ended December 31, 2023, the Company repurchased 1,821,532 shares of its common stock for an aggregate price, including excise tax expense, of $ 105.0 million, at a weighted average price of $ 57.17 per share.

On January 17, 2024, the Company’s board of directors authorized a new share repurchase program under which the Company may repurchase up to $ 150.0 million in shares of its outstanding common stock, which is set to expire on January 31, 2025.

Remaining repurchase authorization under the January 18, 2023 share repurchase program was terminated upon authorization of this new program.

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).

In March 2020, the federal bank regulatory agencies issued an interim final rule that maintains the three-year

transition option of the 2019 CECL Rule and also provides banking organizations that were required under GAAP to implement CECL before the end of 2020 the option to delay for two years an estimate of the effect of CECL on regulatory capital, relative to the incurred loss methodology's effect on regulatory capital, followed by a three-year transition period (five-year transition option).

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

2 unchanged sentences

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

As shown in the table below, the Company’s and Bank’s capital ratios exceeded the regulatory definition of well capitalized as of December 31, 2022 and 2021.

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

As shown in the table below, the Company’s and Bank’s capital ratios exceeded the regulatory definition of well capitalized as of December 31, 2023 and December 31, 2022.

The regulatory authorities can apply changes in the classification of assets and such changes may retroactively subject the Company and the Bank 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 the Bank’s condition and results of operations.

In addition, a change may result in imposition of additional assessments by the Federal Deposit Insurance Corporation (“FDIC”) or could result in regulatory actions that could have a material effect on the Bank’s condition and results of operations.

Because the Bank had less than $ 15.0 billion in total consolidated assets as of December 31, 2009, it is allowed to continue to classify the trust preferred securities, all of which were issued prior to May 19, 2010, as Tier 1 capital.

33 unchanged sentences

The Company is required to maintain reserve balances in cash and on deposit with the Federal Reserve based on a percentage of transactional deposits;

however, the Federal Reserve reduced the reserve requirement ratio to zero effective March 26, 2020, therefore the total requirement was zero at both December 31, 2022 and 2021.

(12) Stock-Based Compensation and Employee Benefits

however, the Federal Reserve reduced the reserve requirement ratio to zero effective March 26, 2020, therefore the total requirement was zero at both December 31, 2023 and December 31, 2022.

(11) Stock-Based Compensation

The Company has a qualified retirement plan with a salary deferral feature designed to qualify under Section 401 of the Internal Revenue Code (“the 401(k) Plan”).

7 unchanged sentences

The plan allows the Company to make discretionary contributions on behalf of a participant as well as matching contributions.

The Company did not make a matching contribution in 2022, compared to matching contributions of $ 274,000 in 2021 and $ 1.0 million in 2020.

The Company did not make any matching contributions in 2023 or 2022, compared to $ 274,000 in 2021.

All participant contributions to the plan and any related earnings are immediately vested and may be withdrawn upon the participant's separation from service, death or disability or upon a date specified by the participant.

3 unchanged sentences

Eligible employees may contribute between 1 % and 10 % of eligible compensation up to the Section 423 of the Internal Revenue Code limit of $25,000.

Employee contributions to the ESPP were temporarily suspended throughout 2020.

On January 1, 2021, the suspension was removed and employee contributions commenced.

In 2006, stockholders approved the ESPP, which allocated 400,000 shares for purchase.

34 unchanged sentences

Weighted average years over which unrecognized compensation expense is expected to be recognized 1.89 2.31 2.79

Fair value of shares vested during the year $ 18,117,000 $ 16,835,000 $ 11,030,000

Intrinsic value of shares vested during the year

$ 20,125,000 $ 18,640,000 $ 12,870,000

The Company may make grants of restricted common stock to various non-employee directors as to which restrictions lapse ratably over a period of three years .

No grants of restricted stock were made during 2022, 2021 or 2020 and no compensation expense was recorded during 2022, compared to compensation expense of $ 1,000 and $ 26,000 for the years ended December 31, 2021 and 2020, respectively.

No grants of restricted stock were made during 2023, 2022 or 2021 and no compensation expense was recorded during 2023 or 2022, compared to compensation expense of $ 1,000 for the year ended December 31, 2021.

As of December 31, 2023, there were no remaining restrictions on any grants of restricted common stock.

3 unchanged sentences

Since these units have a cash payout feature, they are accounted for under the liability method with related expense based on the stock price at period end.

Compensation cost for the cash-settled units was $ 186,000 , $ 1.3 million and $ 1.8 million for the years ended December 31, 2022, 2021 and 2020, respectively.

No compensation expense for cash-settled units was recorded for the year ended December 31, 2023, compared to $ 186,000 and $ 1.3 million for the years ended December 31, 2022 and 2021, respectively.

(12) Income Taxes

25 unchanged sentences

Total $ 57,454 23 % $ 99,277 23 % $ 84,116 25 %

At December 31, 2022, 2021 and 2020, the Company had unrecognized tax benefits of $ 889,000 , $ 722,000 and $ 1.1 million, respectively.

At December 31, 2023, 2022 and 2021, the Company had unrecognized tax benefits of $ 1.0 million, $ 889,000 and $ 722,000 , respectively.

The Company is no longer subject to U.S.

34 unchanged sentences

Equity securities(1)(2) 40,661 11,164 —

Mortgage loans held for sale(3) — 706 —

Loans held for investment(4)

Derivative assets(5)

Securities sold not yet purchased(6)

Derivative liabilities(5)

2 unchanged sentences

Available-for-sale debt securities:(1)

Treasury securities $ 670,582 $ — $ —

government agency securities — 102,154 —

Residential mortgage-backed securities — 1,831,047 —

Tax-exempt asset-backed securities — — 180,033

CRT securities — — 11,861

Equity securities(1)(2) 22,879 11,077 —

Mortgage loans held for sale(3) — 465 7,658

Derivative assets(5)

1 unchanged sentence

Non-qualified deferred compensation plan liabilities(7)

(1) Investment 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 investments that qualify for consideration under the regulations implementing the Community Reinvestment Act and investments related to non-qualified deferred compensation plan.

(3) Mortgage loans held for sale measured at fair value on a recurring basis, generally monthly.

(1) Investment securities are measured at fair value on a recurring basis, generally monthly.

(2) Equity securities consist of investments that qualify for consideration under the regulations implementing the Community Reinvestment Act and investments in exchange traded funds.

(3) Loans held for sale are measured at fair value on a recurring basis, generally monthly.

(4) Includes certain collateral-dependent loans held for investment for which a specific allocation of the allowance for credit losses is based upon the fair value of the loan’s underlying collateral.

These loans held for investment are measured on a nonrecurring basis, generally annually or more often as warranted by market and economic conditions.

(5) Derivative assets and liabilities are measured at fair value on a recurring basis, generally quarterly.

(6) Securities sold not yet purchased are measured at fair value on a recurring basis, generally monthly.

(7) Non-qualified deferred compensation plan liabilities represent the fair value of the obligation to the employee, which generally corresponds to the fair value of the invested assets, and are measured at fair value on a recurring basis, generally monthly.

1 unchanged sentence

The following table presents a reconciliation of the level 3 fair value category measured at fair value on a recurring basis:

Net Realized/Unrealized Gains (Losses)

Net Gains/(Losses)

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

1 unchanged sentence

Available-for-sale debt securities:(1)

Tax-exempt asset-backed securities $ 180,033 $ — $ ( 170,626 ) $ — $ ( 9,407 ) $ —

CRT securities $ 11,861 $ — $ ( 1,077 ) $ — $ 1,211 $ 11,995

Loans held for sale(2) 7,658 1,569 ( 8,132 ) ( 1,095 ) — —

Year Ended December 31, 2022

5 unchanged sentences

Realized gains/(losses) are recorded in other non-interest income on the consolidated statements of income and other comprehensive income/(loss).

(2) Realized and unrealized gains/(losses) on loans held for sale are recorded in gain/(loss) on sale of loans held for sale on the consolidated statements of income and other comprehensive income/(loss).

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.

The securities were redeemed in full in the second quarter of 2022.

At December 31, 2021, the combined weighted-average discount rate and weighted-average life utilized were 2.60 % and 4.61 years, respectively.

(2) Realized and unrealized gains/(losses) on loans held for sale are recorded in other non-interest income on the consolidated statements of income and other comprehensive income/(loss).

CRT securities

3 unchanged sentences

At December 31, 2022, the combined weighted-average discount rate and weighted-average life utilized were 8.24 % and 6.26 years, respectively.

Loans held for sale

The fair value of mortgage loans held for sale using Level 3 inputs include loans that cannot be sold through normal sale channels and thus require significant management judgment or estimation when determining the fair value.

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

There were no loans held for sale that were measured at fair value on a recurring basis at December 31, 2022.

At December 31, 2021, the fair value of loans held for sale was calculated using a weighted-average discounted price of 97.8 %.

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 $ 38.3 million fair value of loans held for investment at December 31, 2023 reported above includes impaired loans with a carrying value of $ 58.3 million that were reduced by specific allowance allocations totaling $ 20.0 million based on collateral valuations utilizing Level 3 inputs.

There were no collateral-dependent loans held for investment reported at fair value at December 31, 2022.

Fair Value of Financial Instruments

15 unchanged sentences

Long-term debt 859,147 801,309 — 801,309 —

Securities sold not yet purchased 10,602 10,602 10,602 — —

Derivative liabilities 70,917 70,917 — 70,917 —

3 unchanged sentences

Available-for-sale debt securities 2,615,644 2,615,644 670,582 1,933,201 11,861

Held-to-maturity debt securities 935,514 816,914 — 816,914 —

Equity securities 33,956 33,956 22,879 11,077 —

20 unchanged sentences

Customer-initiated and other derivatives:

Foreign currency forward contracts 4,824 52 31 — — —

Interest rate contracts:

12 unchanged sentences

At December 31, 2023, the Company had $ 119.0 million in cash collateral pledged to counterparties included in interest bearing cash and cash equivalents on the consolidated balance sheet and $ 42.3 million in cash collateral received from counterparties included in interest bearing deposits on the consolidated balance sheet.

The comparative amounts at December 31, 2021, were $ 40.3 million in cash collateral pledged to counterparties and no cash collateral received from counterparties.

The comparative amounts at December 31, 2022, were $ 89.2 million in cash collateral pledged to counterparties and $ 72.5 million cash collateral received from counterparties.

The Company also enters into credit risk participation agreements with financial institution counterparties for interest rate swaps related to loans in which the Company is either a participant or a lead bank.

The risk participation agreements entered into by the Company as a participant bank provide credit protection to the financial institution counterparty should the borrower fail to perform on its interest rate derivative contract with that financial institution.

The Company is party to 19 risk participation agreements where it acts as a participant bank with a notional amount of $ 291.2 million at December 31, 2022, compared to seven risk participation agreements with a notional amount of $ 79.2 million at December 31, 2021.

The Company is party to 14 risk participation agreements where it acts as a participant bank with a notional amount of $ 230.7 million at December 31, 2023, compared to 19 risk participation agreements with a notional amount of $ 291.2 million at December 31, 2022.

The maximum estimated exposure to these agreements, assuming 100% default by all obligors, was approximately $ 4.5 million at December 31, 2023 and $ 8.9 million at December 31, 2022.

3 unchanged sentences

Derivatives Designated as Cash Flow Hedges

During 2022, the Company entered into interest rate derivative contracts that were designated as qualifying cash flow hedges to hedge the exposure to variability in expected future cash flows attributable to changes in a contractually specified interest rate.

During 2022, the Company recorded $ 85.8 million in unrealized losses to adjust its cash flow hedges to fair value, which was recorded net of tax to AOCI, and reclassified $ 1.8 million from AOCI into interest income on loans.

Based on current market conditions, the Company estimates that during the next 12 months, an additional $ 50.9 million will be reclassified from AOCI as a decrease to interest income.

As of December 31, 2022, the maximum length of time over which forecasted transactions are hedged is 3.75 years.

During the year ended December 31, 2023, the Company recorded $ 34.8 million in unrealized losses to adjust its cash flow hedges to fair value, which was recorded net of tax to AOCI, and reclassified $ 60.9 million from AOCI as a decrease to interest income on loans.

Based on current market conditions, the Company estimates that during the next 12 months, an additional $ 53.1 million related to active and terminated hedges will be reclassified from AOCI as a decrease to interest income.

As of December 31, 2023, the maximum length of time over which forecasted transactions are hedged is 2.17 .

(15) Accumulated Other Comprehensive Income

18 unchanged sentences

(16) Related Party Transactions

During 2022 and 2021, the Company has had transactions with its directors, executive officers and their affiliates and its employees.

During 2023 and 2022, the Company had transactions with its directors, executive officers and their affiliates and its employees.

These transactions were made in the ordinary course of business and include extensions of credit and deposit transactions, all made on the same terms as the then prevailing market and credit terms extended to other customers.

6 unchanged sentences

Cash and cash equivalents $ 301,672 $ 245,777

Investment securities 18,845 —

Investment in subsidiaries 3,306,095 3,183,767

22 unchanged sentences

Interest expense 23,714 19,721 15,946

Salaries and employee benefits 782 720 725

Salaries and benefits

Legal and professional 1,504 1,583 1,803

21 unchanged sentences

Investing Activities

Sales/(purchases) of equity securities, net ( 18,337 ) — —

Net decrease in loans held for investment — — 7,500

Investments in and advances to subsidiaries ( 50,000 ) — —

Repayments of investments in/(advances to) subsidiaries

160,000 ( 50,000 ) —

Net cash provided by/(used in) investing activities 141,663 ( 50,000 ) 7,500

11 unchanged sentences

Cash and cash equivalents at end of year $ 301,672 $ 245,777 $ 438,761

(19) Material Transactions Affecting Stockholders' Equity

On April 19, 2022, the Company’s board of directors authorized the Company to repurchase up to $ 150.0 million in shares of its outstanding common stock.

During the year ended December 31, 2022, the Company repurchased 2,083,118 shares of its common stock for an aggregate price of $ 115.3 million, at a weighted average price of $ 55.35 per share.

On March 3, 2021, the Company completed an issuance of 5.75 % fixed rate non-cumulative perpetual preferred stock, Series B, with a liquidation preference of $ 1,000 per share (equivalent to $ 25 per depositary share) (the “Series B Preferred Stock”) and an issuance and sale of 12,000,000 depositary shares, each representing a 1/40th interest in a share of the Series B Preferred Stock.

Dividends on the Series B Preferred Stock are not cumulative and will be paid when declared by the board of directors to the extent that the Company has legally available funds to pay dividends.

If declared, dividends will accrue and be payable quarterly, in arrears, on the liquidation preference amount, on a non-cumulative basis, at a rate of 5.75 % per annum.

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, providing additional capital to be used for general corporate purposes.

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

The redemption of the Series A preferred stock occurred on June 15, 2021.

(20) Quarterly Financial Data (unaudited)

The tables below summarize quarterly financial information:

2022 Selected Quarterly Financial Data

(in thousands except per share data) Fourth Third Second First

Interest income $ 371,287 $ 322,071 $ 242,349 $ 208,530

Interest expense 123,687 82,991 36,818 24,983

Net interest income 247,600 239,080 205,531 183,547

Provision for credit losses 34,000 12,000 22,000 ( 2,000 )

Net interest income after provision for credit losses 213,600 227,080 183,531 185,547

Non-interest income 277,672 25,333 26,242 20,282

Non-interest expense 213,090 197,047 164,303 153,092

Income before income taxes 278,182 55,366 45,470 52,737

Income tax expense 60,931 13,948 11,311 13,087

Net income 217,251 41,418 34,159 39,650

Preferred stock dividends 4,312 4,313 4,312 4,313

Net income available to common stockholders $ 212,939 $ 37,105 $ 29,847 $ 35,337

Basic earnings per share $ 4.28 $ 0.74 $ 0.59 $ 0.70

Diluted earnings per share $ 4.23 $ 0.74 $ 0.59 $ 0.69

2021 Selected Quarterly Financial Data

(in thousands except per share data) Fourth Third Second First

Interest income $ 219,892 $ 216,589 $ 216,953 $ 223,151

Interest expense 25,860 26,053 27,496 28,339

Net interest income 194,032 190,536 189,457 194,812

Provision for credit losses ( 10,000 ) 5,000 ( 19,000 ) ( 6,000 )

Net interest income after provision for credit losses 204,032 185,536 208,457 200,812

Non-interest income 31,459 24,779 37,639 44,353

Non-interest expense 146,649 152,987 149,060 150,316

Income before income taxes 88,842 57,328 97,036 94,849

Income tax expense 23,712 13,938 23,555 22,911

Net income 65,130 43,390 73,481 71,938

Preferred stock dividends 4,313 4,312 6,317 3,779

Net income available to common stockholders $ 60,817 $ 39,078 $ 67,164 $ 68,159

Basic earnings per share $ 1.20 $ 0.76 $ 1.31 $ 1.33

Diluted earnings per share $ 1.19 $ 0.76 $ 1.31 $ 1.33

(18) New Accounting Standards

ASU 2022-02, “Financial Instruments - Credit Losses (Topic 326)” (“ASU 2022-02”) eliminates the guidance on troubled debt restructurings and requires entities to evaluate all loan modifications to determine if they result in a new loan or a continuation of the existing loan.

ASU 2022-02 also requires that entities disclose current-period gross charge-offs by year of origination for loans and leases.

ASU 2022-02 is effective January 1, 2023 and is not expected to have a significant impact on the Company’s financial statements.

Accounting Standard Update 2022-04, “Liabilities - Supplier Finance Programs (Subtopic 405-50)” (“ASU 2022-04”) enhances the transparency of supplier finance programs and the related financial statement disclosures.

The amendments require that a buyer in a supplier finance program disclose information about the key terms of the program, outstanding confirmed amounts as of the end of the period, a rollforward of such amounts during each annual period and a description of where in the financial statements outstanding amounts are presented.

ASU 2022-04 is effective January 1, 2023, except for the disclosure of rollforward information, which is effective January 1, 2024, and is not expected to have an impact on the Company’s consolidated financial statements.

ASU 2022-06, “Reference Rate Reform (Topic 848)” (“ASU 2022-06”) provides optional guidance to ease the potential burden in account for (or recognizing the effects of) reference rate reform on financial reporting.

The objective of the guidance is to provide temporary relief during the transition period away from LIBOR toward new interest rate benchmarks.

The amendments in ASU 2022-06 defer the sunset date provision from December 31, 2022 to December 31, 2024.

ASU 2022-06 was effective immediately upon issuance and is not expected to have an impact on the Company’s financial statements or disclosures.

ASU 2023-06 “Disclosure Improvements” (“ASU 2023-06”) amends the disclosure or presentation requirements related to various subtopics in the FASB Accounting Standards Codification (the “Codification”).

ASU 2023-06 was issued in response to the SEC’s initiative to update and simplify disclosure requirements.

The SEC identified 27 disclosure requirements that were incremental to those in the Codification and referred them to the FASB for potential incorporation into U.S.

To avoid duplication, the SEC intended to eliminate those disclosure requirements from existing SEC regulations as the FASB incorporated them into the relevant Codification subtopics.

ASU 2023-06 adds 14 of the 27 identified disclosure or presentation requirements to the Codification.

ASU 2023-06 is to be applied prospectively, and early adoption is prohibited.

For reporting entities subject to the SEC’s existing disclosure requirements, the effective dates of ASU 2023-06 will be the date on which the SEC’s removal of that related disclosure requirement from Regulation S-X or Regulation S-K becomes effective.

If by June 30, 2027, the SEC has not removed the applicable requirement from Regulation S-X or Regulation S-K, the pending content of the related amendment will be removed from the Codification and will not become effective for any entities.

ASU 2023-06 is not expected to have a significant impact on our financial statements.

ASU 2023-07 “Segment Reporting (Topic 280) - Improvement to Reportable Segment Disclosures” (“ASU 2023-07”) amends the disclosure requirements related to segment reporting primarily through enhanced disclosure about significant segment expenses and by requiring disclosure of segment information on an annual and interim basis.

ASU 2023-07 is effective January 1, 2024 and is not expected to have a significant impact on our financial statements.

ASU 2023-09 “Income Taxes (Topic 740) - Improvements to Income Tax Disclosures” (“ASU 2023-09”) enhances the transparency and decision usefulness of income tax disclosures.

ASU 2023-09 will require disaggregated information about a reporting entity’s effective tax rate reconciliation as well as information on income taxes paid.

Entities will also be required to disclose income/(loss) from continuing operations before income tax expense/(benefit) disaggregated between domestic and foreign, as well as income tax expense/(benefit) from continuing operations disaggregated by federal, state and foreign.

ASU 2023-09 is effective January 1, 2025 and is not expected to have a significant impact on our financial statements.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES

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 8. Financial Statements and Supplementary Data