TEXAS CAPITAL BANCSHARES INC/TX 10-Q

ITEM 1. FINANCIAL STATEMENTS TEXAS CAPITAL BANCSHARES, INC. CONSOLIDATED BALANCE SHEETS - UNAUDITED (in thousands except share data) March 31, 2024 December 31, 2023 Assets Cash and due from banks $ 167,985 $ 200,493 Interest bearing cash and cash equivalents 3,148,157 3,042,357 Available-for-sale debt securities 3,491,510 3,225,892 Held-to-maturity debt securities 849,283 865,477 Equity securities 73,487 51,825 Investment securities 4,414,280 4,143,194 Loans held for sale 37,750 44,105 Loans held for investment, mortgage finance 4,153,313 3,978,328 Loans held for investment 16,677,691 16,362,230 Less: Allowance for credit losses on loans 263,962 249,973 Loans held for investment, net 20,567,042 20,090,585 Premises and equipment, net 49,899 32,366 Accrued interest receivable and other assets 793,976 801,670 Goodwill and intangibles, net 1,496 1,496 Total assets $ 29,180,585 $ 28,356,266 Liabilities and Stockholders’ Equity Liabilities: Non-interest bearing deposits $ 8,478,215 $ 7,328,276 Interest bearing deposits 15,475,822 15,043,563 Total deposits 23,954,037 22,371,839 Accrued interest payable 32,352 33,234 Other liabilities 413,711 392,904 Short-term borrowings 750,000 1,500,000 Long-term debt 859,823 859,147 Total liabilities 26,009,923 25,157,124 Stockholders’ equity: Preferred stock, $ 0.01 par value, $ 1,000 liquidation value: Authorized shares - 10,000,000 Issued shares - 300,000 at March 31, 2024 and December 31, 2023 300,000 300,000 Common stock, $ 0.01 par value: Authorized shares - 100,000,000 Issued shares - 51,420,680 and 51,142,979 at March 31, 2024 and December 31, 2023, respectively 514 511 Additional paid-in capital 1,044,669 1,045,576 Retained earnings 2,457,222 2,435,393 Treasury stock - 4,434,405 and 3,905,067 shares at cost at March 31, 2024 and December 31, 2023, respectively ( 251,857 ) ( 220,334 ) Accumulated other comprehensive loss, net of taxes ( 379,886 ) ( 362,004 ) Total stockholders’ equity 3,170,662 3,199,142 Total liabilities and stockholders’ equity $ 29,180,585 $ 28,356,266 See accompanying notes to consolidated financial statements. 3 Table of Contents TEXAS CAPITAL BANCSHARES, INC. CONSOLIDATED STATEMENTS OF INCOME AND OTHER COMPREHENSIVE INCOME - UNAUDITED Three Months Ended March 31, (in thousands except per share data) 2024 2023 Interest income Interest and fees on loans $ 330,879 $ 297,438 Investment securities 32,144 25,292 Interest bearing cash and cash equivalents 54,355 62,436 Total interest income 417,378 385,166 Interest expense Deposits 175,600 120,094 Short-term borrowings 12,783 14,744 Long-term debt 13,986 14,983 Total interest expense 202,369 149,821 Net interest income 215,009 235,345 Provision for credit losses 19,000 28,000 Net interest income after provision for credit losses 196,009 207,345 Non-interest income Service charges on deposit accounts 6,339 5,022 Wealth management and trust fee income 3,567 3,429 Brokered loan fees 1,911 1,895 Investment banking and advisory fees 18,424 14,564 Trading income 4,712 4,204 Other 6,366 8,289 Total non-interest income 41,319 37,403 Non-interest expense Salaries and benefits 128,727 128,670 Occupancy expense 9,737 9,619 Marketing 6,036 9,044 Legal and professional 16,195 14,514 Communications and technology 21,114 17,523 Federal Deposit Insurance Corporation insurance assessment 8,421 2,170 Other 12,163 12,487 Total non-interest expense 202,393 194,027 Income before income taxes 34,935 50,721 Income tax expense 8,793 12,060 Net income 26,142 38,661 Preferred stock dividends 4,313 4,313 Net income available to common stockholders $ 21,829 $ 34,348 Other comprehensive income/(loss) Change in unrealized gain/(loss) $ ( 42,343 ) $ 42,953 Amounts reclassified into net income 19,708 12,973 Other comprehensive income/(loss) ( 22,635 ) 55,926 Income tax expense/(benefit) ( 4,753 ) 11,745 Other comprehensive income/(loss), net of tax ( 17,882 ) 44,181 Comprehensive income $ 8,260 $ 82,842 Basic earnings per common share $ 0.46 $ 0.71 Diluted earnings per common share $ 0.46 $ 0.70 See accompanying notes to consolidated financial statements. 4 Table of Contents TEXAS CAPITAL BANCSHARES, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY - UNAUDITED Preferred Stock Common Stock Additional Treasury Stock Accumulated Other Paid-in Retained Comprehensive (in thousands except share data) Shares Amount Shares Amount Capital Earnings Shares Amount Income/(Loss) Total Balance at December 31, 2022 (audited) 300,000 $ 300,000 50,867,298 $ 509 $ 1,025,593 $ 2,263,502 ( 2,083,535 ) $ ( 115,310 ) $ ( 418,943 ) $ 3,055,351 Comprehensive income: Net income — — — — — 38,661 — — — 38,661 Change in other comprehensive income/(loss), net of taxes — — — — — — — — 44,181 44,181 Total comprehensive income 82,842 Stock-based compensation expense recognized in earnings — — — — 8,438 — — — — 8,438 Preferred stock dividend — — — — — ( 4,313 ) — — — ( 4,313 ) Issuance of stock related to stock-based awards — — 80,008 — ( 2,126 ) — — — — ( 2,126 ) Repurchase of common stock — — — — — — ( 1,011,909 ) ( 60,218 ) — ( 60,218 ) Balance at March 31, 2023 300,000 $ 300,000 50,947,306 $ 509 $ 1,031,905 $ 2,297,850 ( 3,095,444 ) $ ( 175,528 ) $ ( 374,762 ) $ 3,079,974 Balance at December 31, 2023 (audited) 300,000 $ 300,000 51,142,979 $ 511 $ 1,045,576 $ 2,435,393 ( 3,905,067 ) $ ( 220,334 ) $ ( 362,004 ) $ 3,199,142 Comprehensive income: Net income — — — — — 26,142 — — — 26,142 Change in other comprehensive income/(loss), net of taxes — — — — — — — — ( 17,882 ) ( 17,882 ) Total comprehensive income 8,260 Stock-based compensation expense recognized in earnings — — — — 8,026 — — — — 8,026 Preferred stock dividend — — — — — ( 4,313 ) — — — ( 4,313 ) Issuance of stock related to stock-based awards — — 277,701 3 ( 8,933 ) — — — — ( 8,930 ) Repurchase of common stock — — — — — — ( 529,338 ) ( 31,523 ) — ( 31,523 ) Balance at March 31, 2024 300,000 $ 300,000 51,420,680 $ 514 $ 1,044,669 $ 2,457,222 ( 4,434,405 ) $ ( 251,857 ) $ ( 379,886 ) $ 3,170,662 See accompanying notes to consolidated financial statements. 5 Table of Contents TEXAS CAPITAL BANCSHARES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS Three Months Ended March 31, (in thousands) 2024 2023 Operating activities Net income $ 26,142 $ 38,661 Adjustments to reconcile net income to net cash provided by/(used in) operating activities: Provision for credit losses 19,000 28,000 Depreciation and amortization 10,906 8,683 Net gain recognized on investment securities ( 4,034 ) ( 1,734 ) Stock-based compensation expense 8,534 8,438 Proceeds from sales and repayments of loans held for sale 15,605 8,749 Changes in operating assets and liabilities: Accrued interest receivable and other assets 48,253 ( 28,286 ) Accrued interest payable and other liabilities ( 28,586 ) ( 44,308 ) Net cash provided by operating activities 95,820 18,203 Investing activities Purchases of available-for-sale debt securities ( 596,610 ) ( 849,391 ) Proceeds from sales of available-for-sale debt securities — 56,923 Proceeds from maturities, redemptions and pay-downs of available-for-sale debt securities 317,717 45,716 Proceeds from maturities, redemptions and pay-downs of held-to-maturity debt securities 17,064 17,489 Sales/(purchases) of equity securities, net ( 17,628 ) 2,487 Originations of loans held for investment, mortgage finance ( 16,389,564 ) ( 14,897,110 ) Proceeds from pay-offs of loans held for investment, mortgage finance 16,214,579 14,926,573 Net increase in loans held for investment, excluding mortgage finance loans ( 335,475 ) ( 837,100 ) Purchase of premises and equipment, net ( 20,043 ) ( 1,363 ) Net cash used in investing activities ( 809,960 ) ( 1,535,776 ) Financing activities Net increase/(decrease) in deposits 1,582,198 ( 677,183 ) Issuance of stock related to stock-based awards ( 8,930 ) ( 2,126 ) Preferred dividends paid ( 4,313 ) ( 4,313 ) Repurchase of common stock ( 31,523 ) ( 60,218 ) Net increase/(decrease) in short-term borrowings ( 750,000 ) 898,858 Net cash provided by financing activities 787,432 155,018 Net increase/(decrease) in cash and cash equivalents 73,292 ( 1,362,555 ) Cash and cash equivalents at beginning of period 3,242,850 5,012,260 Cash and cash equivalents at end of period $ 3,316,142 $ 3,649,705 Supplemental disclosures of cash flow information Cash paid during the period for interest $ 267,955 $ 142,623 Cash paid/(refunded) during the period for income taxes ( 909 ) 451 Transfers of loans from held for investment to held for sale 9,250 — See accompanying notes to consolidated financial statements. 6 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED (1) Operations and Summary of Significant Accounting Policies Organization and Nature of Business Texas Capital Bancshares, Inc. (“TCBI” or the “Company”), a Delaware corporation, was incorporated in 1996 and commenced banking operations in 1998. The consolidated financial statements include the accounts of TCBI and its wholly owned subsidiary, Texas Capital Bank (the “Bank”), a full-service financial services firm that delivers customized solutions to businesses, entrepreneurs and individual customers. The Company is headquartered in Dallas, with primary banking offices in Austin, Dallas, Fort Worth, Houston and San Antonio, and has built a network of clients across the country. Basis of Presentation The Company’s accounting and reporting policies conform to accounting principles generally accepted in the United States (“GAAP”) and to generally accepted practices within the banking industry. Certain prior period balances have been reclassified to conform to the current period presentation. The consolidated interim financial statements are unaudited, and certain information and disclosures in the notes to consolidated unaudited financial statements that are presented in accordance with GAAP have been condensed or omitted. In the opinion of management, the interim financial statements include all normal and recurring adjustments and the disclosures made present a fair presentation of the Company’s financial position and results of operations. The consolidated financial statements have been prepared in accordance with GAAP for interim financial information and the instructions to Form 10-Q adopted by the U.S. Securities and Exchange Commission (“SEC”). Accordingly, the financial statements and the notes to the consolidated unaudited financial statements required by GAAP for complete annual financial statements do not include all of the information and should be read in conjunction with the consolidated financial statements, and notes thereto, for the year ended December 31, 2023, included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 (the “2023 Form 10-K”). Operating results for the interim periods disclosed herein are not necessarily indicative of the results that may be expected for a full year or any future period. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. Actual results could differ from those estimates. The allowance for credit losses, the fair value of financial instruments and the status of contingencies are particularly susceptible to significant change. (2) Earnings Per Share The following table presents the computation of basic and diluted earnings per share: Three Months Ended March 31, (in thousands except share and per share data) 2024 2023 Numerator: Net income $ 26,142 $ 38,661 Preferred stock dividends 4,313 4,313 Net income available to common stockholders $ 21,829 $ 34,348 Denominator: Basic earnings per common share—weighted average common shares 47,278,681 48,264,121 Effect of dilutive outstanding stock-settled awards 432,511 616,604 Dilutive earnings per common share—weighted average diluted common shares 47,711,192 48,880,725 Basic earnings per common share $ 0.46 $ 0.71 Diluted earnings per common share $ 0.46 $ 0.70 Anti-dilutive outstanding stock-settled awards 127,145 252,308 7 Table of Contents (3) Investment Securities The following is a summary of the Company’s investment securities: (in thousands) Amortized Cost(1) Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value March 31, 2024 Available-for-sale debt securities: U.S. Treasury securities $ 401,652 $ — $ ( 16,099 ) $ 385,553 U.S. government agency securities 125,000 — ( 19,230 ) 105,770 Residential mortgage-backed securities 3,312,491 6,977 ( 331,542 ) 2,987,926 CRT securities 13,427 — ( 1,166 ) 12,261 Total available-for-sale debt securities 3,852,570 6,977 ( 368,037 ) 3,491,510 Held-to-maturity debt securities: Residential mortgage-backed securities 849,283 — ( 112,172 ) 737,111 Total held-to-maturity debt securities 849,283 — ( 112,172 ) 737,111 Equity securities 73,487 Total investment securities(2) $ 4,414,280 December 31, 2023 Available-for-sale debt securities: U.S. Treasury securities $ 651,112 $ — $ ( 14,639 ) $ 636,473 U.S. government agency securities 125,000 — ( 18,408 ) 106,592 Residential mortgage-backed securities 2,782,734 540 ( 312,442 ) 2,470,832 CRT securities 13,636 — ( 1,641 ) 11,995 Total available-for-sale debt securities 3,572,482 540 ( 347,130 ) 3,225,892 Held-to-maturity securities: Residential mortgage-backed securities 865,477 — ( 101,633 ) 763,844 Total held-to-maturity securities 865,477 — ( 101,633 ) 763,844 Equity securities 51,825 Total investment securities(2) $ 4,143,194 (1) Excludes accrued interest receivable of $ 10.4 million and $ 9.5 million at March 31, 2024 and December 31, 2023, respectively, related to available-for-sale debt securities and $ 1.4 million and $ 1.4 million at March 31, 2024 and December 31, 2023, respectively, related to held-to-maturity debt securities that is recorded in accrued interest receivable and other assets on the consolidated balance sheets. (2) Includes available-for-sale debt securities and equity securities at estimated fair value and held-to-maturity debt securities at amortized cost. Debt Securities The Company did not sell any available-for-sale debt securities in the first quarter of 2024. 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 March 31, 2024, excluding accrued interest receivable, of available-for-sale and held-to-maturity debt securities are presented below by contractual maturity. Actual maturities may differ from contractual maturities of mortgage-backed securities because borrowers may have the right to call or prepay obligations with or without prepayment penalties. Available-for-sale Held-to-maturity (in thousands) Amortized Cost Fair Value Amortized Cost Fair Value Due within one year $ — $ — $ — $ — Due after one year through five years 451,652 429,431 — — Due after five years through ten years 105,716 88,977 — — Due after ten years 3,295,202 2,973,102 849,283 737,111 Total $ 3,852,570 $ 3,491,510 $ 849,283 $ 737,111 8 Table of Contents The table below presents the weighted average yields for the Company’s available-for-sale debt securities for the three months ended March 31, 2024. Weighted average yields are calculated based on amortized cost on a tax-exempt basis assuming a 21% tax rate, where applicable. U.S. Treasury securities U.S. government agency securities Residential mortgage-backed securities CRT securities Due within one year — % — % — % — % Due after one year through five years 2.71 1.00 — — Due after five years through ten years — 1.21 1.23 5.45 Due after ten years — — 3.32 — Total 2.71 % 1.13 % 3.31 % 5.45 % The following table discloses the Company’s available-for-sale debt securities that have been in a continuous unrealized loss position for less than 12 months and those that have been in a continuous unrealized loss position for 12 or more months: Less Than 12 Months 12 Months or Longer Total (in thousands) Fair Value Unrealized Loss Fair Value Unrealized Loss Fair Value Unrealized Loss March 31, 2024 U.S. Treasury securities $ — $ — $ 385,553 $ ( 16,099 ) $ 385,553 $ ( 16,099 ) U.S. government agency securities — — 105,771 ( 19,230 ) 105,771 ( 19,230 ) Residential mortgage-backed securities 395,176 ( 4,230 ) 2,291,560 ( 327,312 ) 2,686,736 ( 331,542 ) CRT securities — — 12,261 ( 1,166 ) 12,261 ( 1,166 ) Total $ 395,176 $ ( 4,230 ) $ 2,795,145 $ ( 363,807 ) $ 3,190,321 $ ( 368,037 ) December 31, 2023 U.S. Treasury securities $ — $ — $ 636,473 $ ( 14,639 ) $ 636,473 $ ( 14,639 ) U.S. government agency securities — — 106,592 ( 18,408 ) 106,592 ( 18,408 ) Residential mortgage-backed securities 910,999 ( 19,751 ) 1,501,340 ( 292,691 ) 2,412,339 ( 312,442 ) CRT securities — — 11,995 ( 1,641 ) 11,995 ( 1,641 ) Total $ 910,999 $ ( 19,751 ) $ 2,256,400 $ ( 327,379 ) $ 3,167,399 $ ( 347,130 ) At March 31, 2024, the Company had 112 available-for-sale debt securities in an unrealized loss position, comprised of 10 U.S. Treasury securities, five U.S. government agency securities, 95 residential mortgage-backed securities and two CRT securities. The unrealized losses on the available-for-sale debt securities were the result of changes in market interest rates compared to the date the securities were acquired rather than the credit quality of the issuers or underlying loans. The Company does not currently intend to sell and based on current conditions it does not believe it is likely that the Company will be required to sell these available-for-sale debt securities before recovery of the amortized cost of such securities in an unrealized loss position and has therefore recorded the unrealized losses related to this portfolio in accumulated other comprehensive income/(loss), net (“AOCI”). Held-to-maturity securities consist of government guaranteed securities for which no loss is expected. At March 31, 2024 and December 31, 2023, no allowance for credit losses was established for available-for-sale or held-to-maturity debt securities. At March 31, 2024 and December 31, 2023, debt securities with carrying values of approximately $ 1.5 million and $ 1.6 million, respectively, were pledged to secure certain customer deposits. Equity Securities Equity securities consist of investments that qualify for consideration under the regulations implementing the Community Reinvestment Act and investments in exchange traded funds. The following is a summary of unrealized and realized gains/(losses) recognized on equity securities included in other non-interest income on the consolidated statements of income and other comprehensive income: Three Months Ended March 31, (in thousands) 2024 2023 Net gains/(losses) recognized during the period $ 4,034 $ 1,245 Less: Realized net gains/(losses) recognized on securities sold 312 ( 596 ) Unrealized net gains/(losses) recognized on securities still held $ 3,722 $ 1,841 9 Table of Contents (4) Loans and Allowance for Credit Losses on Loans Loans are summarized by portfolio segment as follows: (in thousands) March 31, 2024 December 31, 2023 Loans held for investment(1): Commercial $ 10,383,184 $ 10,410,766 Mortgage finance 4,153,313 3,978,328 Commercial real estate 5,822,461 5,500,774 Consumer 549,963 530,948 Gross loans held for investment 20,908,921 20,420,816 Unearned income (net of direct origination costs) ( 77,917 ) ( 80,258 ) Total loans held for investment 20,831,004 20,340,558 Allowance for credit losses on loans ( 263,962 ) ( 249,973 ) Total loans held for investment, net $ 20,567,042 $ 20,090,585 Loans held for sale: Mortgage loans, at fair value $ 700 $ 706 Non-mortgage loans, at lower of cost or fair value 37,050 43,399 Total loans held for sale $ 37,750 $ 44,105 (1) Excludes accrued interest receivable of $ 114.0 million and $ 118.1 million at March 31, 2024 and December 31, 2023, respectively, that is recorded in accrued interest receivable and other assets on the consolidated balance sheets. 10 Table of Contents The following tables summarize gross loans held for investment by year of origination and internally assigned credit grades: (in thousands) 2024 2023 2022 2021 2020 2019 and prior Revolving lines of credit Revolving lines of credit converted to term loans Total March 31, 2024 Commercial (1-7) Pass $ 259,505 $ 1,520,538 $ 1,318,364 $ 273,069 $ 121,851 $ 279,527 $ 6,133,867 $ 15,177 $ 9,921,898 (8) Special mention — 41,444 89,022 33,634 274 8,444 72,605 — 245,423 (9) Substandard - accruing — 21,802 48,945 16,246 17,859 3,478 27,017 — 135,347 (9+) Non-accrual — 12,835 3,204 — 1,891 23,159 39,427 — 80,516 Total commercial $ 259,505 $ 1,596,619 $ 1,459,535 $ 322,949 $ 141,875 $ 314,608 $ 6,272,916 $ 15,177 $ 10,383,184 Mortgage finance (1-7) Pass $ — $ — $ — $ — $ — $ — $ 4,153,313 $ — $ 4,153,313 (8) Special mention — — — — — — — — — (9) Substandard - accruing — — — — — — — — — (9+) Non-accrual — — — — — — — — — Total mortgage finance $ — $ — $ — $ — $ — $ — $ 4,153,313 $ — $ 4,153,313 Commercial real estate (1-7) Pass $ 25,635 $ 783,034 $ 1,765,387 $ 1,104,942 $ 462,880 $ 996,932 $ 261,278 $ 25,810 $ 5,425,898 (8) Special mention — 1,019 240,303 268 24,416 72,393 — — 338,399 (9) Substandard - accruing — — 12,545 17,127 — 17,143 — — 46,815 (9+) Non-accrual — — — — — 11,349 — — 11,349 Total commercial real estate $ 25,635 $ 784,053 $ 2,018,235 $ 1,122,337 $ 487,296 $ 1,097,817 $ 261,278 $ 25,810 $ 5,822,461 Consumer (1-7) Pass $ 15,677 $ 28,709 $ 53,989 $ 77,692 $ 45,897 $ 113,642 $ 212,667 $ — $ 548,273 (8) Special mention — — — — 689 — — 17 706 (9) Substandard - accruing — — — — — — — — — (9+) Non-accrual — — — — — 984 — — 984 Total consumer $ 15,677 $ 28,709 $ 53,989 $ 77,692 $ 46,586 $ 114,626 $ 212,667 $ 17 $ 549,963 Total $ 300,817 $ 2,409,381 $ 3,531,759 $ 1,522,978 $ 675,757 $ 1,527,051 $ 10,900,174 $ 41,004 $ 20,908,921 Gross charge-offs $ — $ 6,731 $ 311 $ 3,512 $ — $ 232 $ 83 $ — $ 10,869 (in thousands) 2023 2022 2021 2020 2019 2018 and prior Revolving lines of credit Revolving lines of credit converted to term loans Total December 31, 2023 Commercial (1-7) Pass $ 1,546,257 $ 1,408,672 $ 279,266 $ 144,699 $ 142,301 $ 157,808 $ 6,284,464 $ 16,580 $ 9,980,047 (8) Special mention 22,148 118,991 35,619 285 823 13,385 40,647 89 231,987 (9) Substandard - accruing 12,477 50,876 9,334 18,547 — 78 38,372 — 129,684 (9+) Non-accrual 9,395 34,229 340 2,085 15,080 7,840 79 — 69,048 Total commercial $ 1,590,277 $ 1,612,768 $ 324,559 $ 165,616 $ 158,204 $ 179,111 $ 6,363,562 $ 16,669 $ 10,410,766 Mortgage finance (1-7) Pass $ — $ — $ — $ — $ — $ — $ 3,978,328 $ — $ 3,978,328 (8) Special mention — — — — — — — — — (9) Substandard - accruing — — — — — — — — — (9+) Non-accrual — — — — — — — — — Total mortgage finance $ — $ — $ — $ — $ — $ — $ 3,978,328 $ — $ 3,978,328 Commercial real estate (1-7) Pass $ 561,801 $ 1,689,325 $ 1,042,953 $ 419,703 $ 317,480 $ 559,026 $ 575,928 $ 28,175 $ 5,194,391 (8) Special mention — 136,801 32,937 24,440 34,181 22,833 7,895 — 259,087 (9) Substandard - accruing — 2,232 — — — 28,573 4,141 — 34,946 (9+) Non-accrual — — 12,350 — — — — — 12,350 Total commercial real estate $ 561,801 $ 1,828,358 $ 1,088,240 $ 444,143 $ 351,661 $ 610,432 $ 587,964 $ 28,175 $ 5,500,774 Consumer (1-7) Pass $ 31,876 $ 56,425 $ 78,096 $ 47,423 $ 14,141 $ 102,691 $ 199,171 $ — $ 529,823 (8) Special mention — — — — — — 100 41 141 (9) Substandard - accruing — — — — — 984 — — 984 (9+) Non-accrual — — — — — — — — — Total Consumer $ 31,876 $ 56,425 $ 78,096 $ 47,423 $ 14,141 $ 103,675 $ 199,271 $ 41 $ 530,948 Total $ 2,183,954 $ 3,497,551 $ 1,490,895 $ 657,182 $ 524,006 $ 893,218 $ 11,129,125 $ 44,885 $ 20,420,816 Gross charge-offs $ 8,364 $ 5,090 $ 25,578 $ — $ 15,243 $ 883 $ 698 $ 871 $ 56,727 11 Table of Contents The following table details activity in the allowance for credit losses on loans. As discussed in Note 1 - Operations and Summary of Significant Accounting Policies in the Company’s 2023 Form 10-K, 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, prior period balances in the table below have been reclassified to conform to the current period presentation of portfolio segments. 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 Three Months Ended March 31, 2024 Beginning balance $ 171,437 $ 4,173 $ 71,829 $ 2,534 $ 249,973 Provision for credit losses on loans 19,976 1,825 2,786 166 24,753 Charge-offs 7,544 — 3,325 — 10,869 Recoveries 105 — — — 105 Net charge-offs (recoveries) 7,439 — 3,325 — 10,764 Ending balance $ 183,974 $ 5,998 $ 71,290 $ 2,700 $ 263,962 Three Months Ended March 31, 2023 Beginning balance $ 185,303 $ 10,745 $ 54,268 $ 3,153 $ 253,469 Provision for credit losses on loans 34,380 ( 3,345 ) ( 3,810 ) 144 27,369 Charge-offs 20,732 — — — 20,732 Recoveries 819 — — 3 822 Net charge-offs (recoveries) 19,913 — — ( 3 ) 19,910 Ending balance $ 199,770 $ 7,400 $ 50,458 $ 3,300 $ 260,928 The Company recorded a $ 24.8 million provision for credit losses on loans for the three months ended March 31, 2024, compared to $ 27.4 million for the same period of 2023. The $ 24.8 million provision for credit losses on loans resulted primarily from increases in criticized and non-accrual loans, growth in loans held for investment and $ 10.8 million in net charge-offs recorded during the three months ended March 31, 2024. Net charge-offs of $ 10.8 million were recorded during the three months ended March 31, 2024, compared to net charge-offs of $ 19.9 million during the same period of 2023. Criticized loans totaled $ 859.5 million at March 31, 2024, compared to $ 738.2 million at December 31, 2023. A loan is considered collateral-dependent when the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral. At March 31, 2024, the Company had $ 47.1 million in collateral-dependent commercial loans, collateralized by business assets, $ 11.3 million in collateral-dependent commercial real estate loans, collateralized by real estate, and $ 1.0 million in collateral-dependent consumer loans, collateralized by real estate. The table below provides an age analysis of gross loans held for investment: (in thousands) 30-59 Days Past Due 60-89 Days Past Due 90 Days or More Past Due Total Past Due Non-accrual(1) Current Total Non-accrual With No Allowance March 31, 2024 Commercial $ 3,340 $ 759 $ 3,406 $ 7,505 $ 80,516 $ 10,295,163 $ 10,383,184 $ 14,889 Mortgage finance — — — — — 4,153,313 4,153,313 — Commercial real estate — — 268 268 11,349 5,810,844 5,822,461 — Consumer 689 — — 689 984 548,290 549,963 984 Total $ 4,029 $ 759 $ 3,674 $ 8,462 $ 92,849 $ 20,807,610 $ 20,908,921 $ 15,873 (1) As of March 31, 2024, $ 1.3 million of non-accrual loans were earning interest income on a cash basis compared to $ 358,000 as of December 31, 2023. Additionally, $ 18,000 of interest income was recognized on non-accrual loans for the three months ended March 31, 2024 compared to none for the same period in 2023, respectively. Accrued interest of $ 487,000 and $ 1.5 million was reversed during the three months ended March 31, 2024 and March 31, 2023, respectively. 12 Table of Contents Modifications to Borrowers Experiencing Financial Difficulty The table below details gross loans held for investment as of March 31, 2024 and March 31, 2023 made to borrowers experiencing financial difficulty that were modified during the three months ended March 31, 2024 and March 31, 2023 by type of modification granted and the financial effect of those modifications: Financial Statement Impact ($ in thousands) Payment Deferral Term Extension Payment Deferral and Term Extension Interest Rate Reduction and Term Extension Total Percentage of Loans Held for Investment Interest Rate Reduction Term Extension (in months) Payment Deferrals Three Months Ended March 31, 2024 Commercial $ 11,575 $ 300 $ — $ — $ 11,875 0.06 % — % 12 $ 3,650 Total $ 11,575 $ 300 $ — $ — $ 11,875 0.06 % Three Months Ended March 31, 2023 Commercial $ 31,431 $ 1,800 $ 3,477 $ 14,933 $ 51,641 0.26 % 0.70 % 6 to 36 $ 4,723 Total $ 31,431 $ 1,800 $ 3,477 $ 14,933 $ 51,641 0.26 % The table below details loans that experienced a default during the three months ended March 31, 2024, subsequent to being granted a modification in the prior twelve months. Default is defined as movement to nonperforming status, foreclosure or charge-off, whichever occurs first. (in thousands) Payment Deferral Payment Deferral and Term Extension Total Three Months Ended March 31, 2024 Commercial $ 3,129 $ 1,756 $ 4,885 Total $ 3,129 $ 1,756 $ 4,885 The table below provides an age analysis of gross loans held for investment as of March 31, 2024 made to borrowers experiencing financial difficulty that were modified in the prior twelve months: (in thousands) 30-89 Days Past Due 90+ Days Past Due Non-Accrual Current Total March 31, 2024 Commercial $ 259 $ — $ 12,463 $ 34,253 $ 46,975 Commercial real estate — — — 18,581 18,581 Total $ 259 $ — $ 12,463 $ 52,834 $ 65,556 (5) Short-Term Borrowings and Long-Term Debt The table below presents a summary of short-term borrowings: (in thousands) March 31, 2024 December 31, 2023 Federal Home Loan Bank borrowings 750,000 1,500,000 Total short-term borrowings $ 750,000 $ 1,500,000 The table below presents a summary of long-term debt: (in thousands) March 31, 2024 December 31, 2023 Bank-issued floating rate senior unsecured credit-linked notes due 2024 $ 200,000 $ 199,499 Bank-issued 5.25 % fixed rate subordinated notes due 2026 174,522 174,457 Company-issued 4.00 % fixed rate subordinated notes due 2031 371,895 371,785 Trust preferred floating rate subordinated debentures due 2032 to 2036 113,406 113,406 Total long-term debt $ 859,823 $ 859,147 13 Table of Contents (6) Financial Instruments with Off-Balance Sheet Risk The table below presents the Company’s financial instruments with off-balance sheet risk, as well as the activity in the allowance for off-balance sheet credit losses related to those financial instruments. As discussed in Note 1 - Operations and Summary of Significant Accounting Policies in the Company’s 2023 Form 10-K, 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, prior period balances in the table below have been reclassified to conform to the current period presentation of portfolio segments. (in thousands) Commercial Mortgage Finance Commercial Real Estate Consumer Total Three Months Ended March 31, 2024 Beginning balance $ 36,040 $ 6 $ 10,147 $ 169 $ 46,362 Provision for off-balance sheet credit losses ( 3,728 ) 28 ( 2,048 ) ( 5 ) ( 5,753 ) Ending balance $ 32,312 $ 34 $ 8,099 $ 164 $ 40,609 Three Months Ended March 31, 2023 Beginning balance $ 16,550 $ — $ 5,222 $ 21 $ 21,793 Provision for off-balance sheet credit losses 1,335 — ( 711 ) 7 631 Ending balance $ 17,885 $ — $ 4,511 $ 28 $ 22,424 (in thousands) March 31, 2024 December 31, 2023 Commitments to extend credit - period end balance $ 9,470,887 $ 9,749,085 Standby letters of credit - period end balance 551,421 595,079 (7) Regulatory Ratios and Capital The Company and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory (and possibly additional discretionary) actions by regulators that, if undertaken, could have a direct material adverse effect on the Company’s and the Bank’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and the Bank must meet specific capital guidelines that involve quantitative measures of the Company’s and the Bank’s assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The Company’s and the Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors. The Basel III Capital Rules adopted by U.S. federal banking agencies, among other things, (i) establish the capital measure called “Common Equity Tier 1” (“CET1”), (ii) specify that Tier 1 capital consists of CET1 and “Additional Tier 1 Capital” instruments meeting stated requirements, (iii) requires that most deductions/adjustments to regulatory capital measures be made to CET1 and not to other components of capital and (iv) define the scope of the deductions/adjustments to the capital measures. Additionally, the Basel III Capital Rules require that the Company maintain a 2.5 % capital conservation buffer comprised of CET1, with respect to each of CET1, Tier 1 and total capital to risk-weighted asset ratios. A financial institution with a conservation buffer of less than the required amount is subject to limitations on capital distributions, including dividend payments and stock repurchases, and certain discretionary bonus payments to executive officers. No dividends were declared or paid on the Company’s common stock during the three months ended March 31, 2024 or during 2023. On January 17, 2024, the Company’s board of directors authorized a new share repurchase program under which the Company could repurchase up to $ 150.0 million in shares of its outstanding common stock, which is set to expire on January 31, 2025. During the three months ended March 31, 2024, the Company repurchased 529,338 shares of its common stock for an aggregate price, including excise tax expense, of $ 31.5 million, at a weighted average price of $ 59.27 per share. In February 2019, the federal bank regulatory agencies issued a final rule (the “2019 CECL Rule”) that revised certain capital regulations to account for changes to credit loss accounting under GAAP. The 2019 CECL Rule included a transition option that allows banking organizations to phase in, over a three-year period, the day-one adverse effects of adopting the new accounting standard related to the measurement of current expected credit losses on their regulatory capital ratios (three-year transition option). In March 2020, the federal bank regulatory agencies issued an interim final rule that maintains the three-year transition option of the 2019 CECL Rule and also provides banking organizations that were required under GAAP to implement CECL before the end of 2020 the option to delay for two years an estimate of the effect of CECL on regulatory capital, relative to the incurred loss methodology's effect on regulatory capital, followed by a three-year transition period (five-year transition option). The Company adopted CECL on January 1, 2020 and has elected to utilize the five-year transition option. 14 Table of Contents Because the Bank had less than $ 15.0 billion in total consolidated assets as of December 31, 2009, it is allowed to continue to classify the trust preferred securities, all of which were issued prior to May 19, 2010, as Tier 1 capital. At the beginning of each of the last five years of the life of the Bank-issued fixed rate subordinated notes due 2026, the amount that is eligible to be included in Tier 2 capital is reduced by 20% of the original amount of the notes (net of redemptions). In 2024, the amount of the notes that qualify as Tier 2 capital has been reduced by 80%. The table below summarizes the Company’s and the Bank’s actual and required capital ratios under the Basel III Capital Rules and other standards. As shown in the table below, the Company’s and Bank’s capital ratios exceeded the regulatory definition of well capitalized as of March 31, 2024 and December 31, 2023. The ratios presented below include the effects of the election to utilize the five-year CECL transition described above. March 31, 2024 December 31, 2023 (dollars in thousands) Minimum Capital Required(2) Capital Required to be Well Capitalized Capital Amount Ratio Capital Amount Ratio The Company CET1 capital (to risk-weighted assets) 7.00 % N/A $ 3,251,260 12.38 % $ 3,264,609 12.65 % Tier 1 capital (to risk-weighted assets) 8.50 % 6.00 % 3,661,260 13.95 % 3,674,609 14.24 % Total capital (to risk-weighted assets) 10.50 % 10.00 % 4,368,943 16.64 % 4,405,575 17.07 % Tier 1 capital (to average assets)(1) 4.00 % N/A 3,661,260 12.40 % 3,674,609 12.21 % The Bank CET1 capital (to risk-weighted assets) 7.00 % 6.50 % 3,612,873 13.84 % 3,599,919 14.01 % Tier 1 capital (to risk-weighted assets) 8.50 % 8.00 % 3,612,873 13.84 % 3,599,919 14.01 % Total capital (to risk-weighted assets) 10.50 % 10.00 % 3,948,661 15.13 % 3,959,100 15.41 % Tier 1 capital (to average assets)(1) 4.00 % 5.00 % 3,612,873 12.30 % 3,599,919 12.00 % (1) The Tier 1 capital ratio (to average assets) is not impacted by the Basel III Capital Rules; however, the Federal Reserve Board and the FDIC may require the Company and the Bank, respectively, to maintain a Tier 1 capital ratio (to average assets) above the required minimum. (2) Percentages represent the minimum capital ratios plus, as applicable, the fully phased-in 2.5% CET1 capital buffer under the Basel III Capital Rules. (8) Stock-Based Compensation The Company has long-term incentive plans under which stock-based compensation awards are granted to employees and directors by the Company’s board of directors or its designated committee. Grants are subject to vesting requirements and may include, among other things, nonqualified stock options, stock appreciation rights, restricted stock units (“RSUs”), restricted stock and performance units, or any combination thereof. The table below summarizes the Company’s stock-based compensation expense: Three Months Ended March 31, (in thousands) 2024 2023 Stock-settled awards: RSUs $ 8,026 $ 8,438 Cash-settled units 508 — Total $ 8,534 $ 8,438 (in thousands except period data) March 31, 2024 Unrecognized compensation expense related to unvested stock-settled awards $ 32,201 Weighted average period over which expense is expected to be recognized, in years 2.0 (9) Fair Value Disclosures The Company determines the fair market values of its assets and liabilities measured at fair value on a recurring and nonrecurring basis using the fair value hierarchy as prescribed in Accounting Standards Codification 820, Fair Value Measurements and Disclosures. See Note 1 - Operations and Summary of Significant Accounting Policies in our 2023 Form 10-K for information regarding the fair value hierarchy and a description of the methods and significant assumptions used by the Company in estimating its fair value disclosures for financial statements. 15 Table of Contents Assets and liabilities measured at fair value are as follows: Fair Value Measurements Using (in thousands) Level 1 Level 2 Level 3 March 31, 2024 Available-for-sale debt securities:(1) U.S. Treasury securities $ 385,553 $ — $ — U.S. government agency securities — 105,770 — Residential mortgage-backed securities — 2,987,926 — CRT securities — — 12,261 Equity securities(1)(2) 57,421 16,066 — Mortgage loans held for sale(3) — 700 — Loans held for investment(4) — — 30,467 Derivative assets(5) — 11,613 — Securities sold not yet purchased(6) 34,705 — — Derivative liabilities(5) — 85,030 — Non-qualified deferred compensation plan liabilities(7) 19,966 — — December 31, 2023 Available-for-sale debt securities:(1) U.S. Treasury securities $ 636,473 $ — $ — U.S. government agency securities — 106,592 — Residential mortgage-backed securities — 2,470,832 — CRT securities — — 11,995 Equity securities(1)(2) 40,661 11,164 — Mortgage loans held for sale(3) — 706 — Loans held for investment(4) — — 38,341 Derivative assets(5) — 32,944 — Securities sold not yet purchased(6) 10,602 — — Derivative liabilities(5) — 70,917 — Non-qualified deferred compensation plan liabilities(7) 20,387 — — (1) Available-for-sale debt securities and equity securities are measured at fair value on a recurring basis, generally monthly. (2) Equity securities consist of investments that qualify for consideration under the regulations implementing the Community Reinvestment Act and investments in exchange traded funds. (3) Loans held for sale are measured at fair value on a recurring basis, generally monthly. (4) Includes certain collateral-dependent loans held for investment for which a specific allocation of the allowance for credit losses is based upon the fair value of the loan’s underlying collateral. These loans held for investment are measured on a nonrecurring basis, generally annually or more often as warranted by market and economic conditions. (5) Derivative assets and liabilities are measured at fair value on a recurring basis, generally quarterly. (6) Securities sold not yet purchased are measured at fair value on a recurring basis, generally monthly. (7) Non-qualified deferred compensation plan liabilities represent the fair value of the obligation to the employee, which generally corresponds to the fair value of the invested assets, and are measured at fair value on a recurring basis, generally monthly. Level 3 Valuations The following table presents a reconciliation of the level 3 fair value category measured at fair value on a recurring basis: Net Gains/(Losses) (in thousands) Balance at Beginning of Period Purchases / Additions Sales / Reductions Realized Unrealized Balance at End of Period Three Months Ended March 31, 2024 Available-for-sale debt securities:(1) CRT securities $ 11,995 $ — $ ( 209 ) $ — $ 475 $ 12,261 Three Months Ended March 31, 2023 Available-for-sale debt securities:(1) CRT securities $ 11,861 $ — $ — $ — $ 67 $ 11,928 (1) Unrealized gains/(losses) on available-for-sale debt securities are recorded in AOCI . Realized gains/(losses) are recorded in other non-interest income on the consolidated statements of income and other comprehensive income/(loss). 16 Table of Contents CRT securities The fair value of CRT securities is based on a discounted cash flow model, which utilizes Level 3 inputs, the most significant of which were a discount rate and weighted-average life. At March 31, 2024, the discount rates utilized ranged from 5.43 % to 7.99 % and the weighted-average life ranged from 4.76 years to 7.42 years. On a combined amortized cost weighted-average basis a discount rate of 6.36 % and a weighted-average life of 5.73 years were utilized to determine the fair value of these securities at March 31, 2024. At December 31, 2023, the combined weighted-average discount rate and weighted-average life utilized were 6.57 % and 6.06 years, respectively. Loans held for investment Certain collateral-dependent loans held for investment are reported at fair value when, based upon an individual evaluation, the specific allocation of the allowance for credit losses that is deducted from the loan's amortized cost is based upon the fair value of the loan's underlying collateral. The $ 30.5 million fair value of loans held for investment at March 31, 2024 reported above includes impaired loans with a carrying value of $ 59.4 million that were reduced by specific allowance allocations totaling $ 28.9 million based on collateral valuations utilizing Level 3 inputs. The $ 38.3 million fair value of loans held for investment at December 31, 2023 reported above includes impaired loans with a carrying value of $ 58.3 million that were reduced by specific allowance allocations totaling $ 20.0 million based on collateral valuations utilizing Level 3 inputs. Fair Value of Financial Instruments A summary of the carrying amounts and estimated fair values of financial instruments is as follows: Carrying Amount Estimated Fair Value (in thousands) Total Level 1 Level 2 Level 3 March 31, 2024 Financial assets: Cash and cash equivalents $ 3,316,142 $ 3,316,142 $ 3,316,142 $ — $ — Available-for-sale debt securities 3,491,510 3,491,510 385,553 3,093,696 12,261 Held-to-maturity debt securities 849,283 737,111 — 737,111 — Equity securities 73,487 73,487 57,421 16,066 — Loans held for sale 37,750 37,750 9,250 28,500 — Loans held for investment, net 20,567,042 20,452,964 — — 20,452,964 Derivative assets 11,613 11,613 — 11,613 — Financial liabilities: Total deposits 23,954,037 23,953,821 — — 23,953,821 Short-term borrowings 750,000 750,000 — 750,000 — Long-term debt 859,823 798,890 — 798,890 — Securities sold not yet purchased 34,705 34,705 34,705 — — Derivative liabilities 85,030 85,030 — 85,030 — December 31, 2023 Financial assets: Cash and cash equivalents $ 3,242,850 $ 3,242,850 $ 3,242,850 $ — $ — Available-for-sale debt securities 3,225,892 3,225,892 636,473 2,577,424 11,995 Held-to-maturity debt securities 865,477 763,844 — 763,844 — Equity securities 51,825 51,825 40,661 11,164 — Loans held for sale 44,105 44,105 15,000 29,105 — Loans held for investment, net 20,090,585 20,050,974 — — 20,050,974 Derivative assets 32,944 32,944 — 32,944 — Financial liabilities: Total deposits 22,371,839 22,379,452 — — 22,379,452 Short-term borrowings 1,500,000 1,500,000 — 1,500,000 — Long-term debt 859,147 801,309 — 801,309 — Securities sold not yet purchased 10,602 10,602 10,602 — — Derivative liabilities 70,917 70,917 — 70,917 — 17 Table of Contents (10) Derivative Financial Instruments The notional amounts and estimated fair values of derivative positions outstanding are presented in the following table. March 31, 2024 December 31, 2023 Estimated Fair Value Estimated Fair Value (in thousands) Notional Amount Asset Derivative Liability Derivative Notional Amount Asset Derivative Liability Derivative Derivatives designated as hedges Cash flow hedges: Interest rate contracts: Swaps hedging loans $ 2,850,000 $ — $ 68,771 $ 2,850,000 $ 668 $ 57,961 Non-hedging derivatives Customer-initiated and other derivatives: Foreign currency forward contracts 327,276 396 316 4,824 52 31 Interest rate contracts: Swaps 5,681,887 72,254 72,254 5,673,822 65,247 69,863 Caps and floors written 1,124,522 127 9,880 637,971 1,654 2,228 Caps and floors purchased 1,124,522 9,880 127 637,971 2,228 1,654 Forward contracts 14,478,341 23,652 22,907 8,665,675 39,123 38,570 Gross derivatives 106,309 174,255 108,972 170,307 Netting adjustment - offsetting derivative assets/liabilities ( 36,754 ) ( 36,754 ) ( 37,346 ) ( 37,346 ) Netting adjustment - cash collateral received/posted ( 57,942 ) ( 52,471 ) ( 38,682 ) ( 62,044 ) Net derivatives included on the consolidated balance sheets $ 11,613 $ 85,030 $ 32,944 $ 70,917 The Company’s credit exposure on derivative instruments is limited to the net favorable value and interest payments by each counterparty. In some cases, collateral may be required from the counterparties involved if the net value of the derivative instruments exceeds a nominal amount. The Company’s credit exposure associated with these instruments, net of any collateral pledged, was approximately $ 11.6 million at March 31, 2024 and approximately $ 32.9 million at December 31, 2023. Collateral levels are monitored and adjusted on a regular basis for changes in the value of derivative instruments. At March 31, 2024, the Company had $ 109.5 million in cash collateral pledged to counterparties included in interest bearing cash and cash equivalents on the consolidated balance sheet and $ 58.7 million in cash collateral received from counterparties included in interest bearing deposits on the consolidated balance sheet. The comparative amounts at December 31, 2023, were $ 119.0 million in cash collateral pledged to counterparties and $ 42.3 million cash collateral received from counterparties. The Company also enters into credit risk participation agreements with financial institution counterparties for interest rate swaps related to loans in which the Company is either a participant or a lead bank. The risk participation agreements entered into by the Company as a participant bank provide credit protection to the financial institution counterparty should the borrower fail to perform on its interest rate derivative contract with that financial institution. The Company is party to 14 risk participation agreements where it acts as a participant bank with a notional amount of $ 229.0 million at March 31, 2024, compared to 14 risk participation agreements with a notional amount of $ 230.7 million at December 31, 2023. The maximum estimated exposure to these agreements, assuming 100% default by all obligors, was approximately $ 6.4 million at March 31, 2024 and $ 4.5 million at December 31, 2023. The fair value of these exposures was insignificant to the consolidated financial statements at both March 31, 2024 and December 31, 2023. Risk participation agreements entered into by the Company as the lead bank provide credit protection should the borrower fail to perform on its interest rate derivative contract. The Company is party to 16 risk participation agreements where the Company acts as the lead bank having a notional amount of $ 211.3 million at March 31, 2024, compared to 15 agreements having a notional amount of $ 204.8 million at December 31, 2023. Derivatives Designated as Cash Flow Hedges The Company enters into interest rate derivative contracts that are designated as qualifying cash flow hedges to hedge the exposure to variability in expected future cash flows attributable to changes in a contractually specified interest rate. During the three months ended March 31, 2024, the Company recorded $ 27.9 million in unrealized losses to adjust its cash flow hedges to fair value, which was recorded net of tax to AOCI, and reclassified $ 18.0 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 $ 58.1 million related to active and terminated hedges will be reclassified from AOCI as a decrease to interest income. As of March 31, 2024, the maximum length of time over which forecasted transactions are hedged is 1.92 years. 18 Table of Contents (11) Accumulated Other Comprehensive Income The following table provides the change in AOCI by component: (in thousands) Cash Flow Hedges Available-for-Sale Securities Held-to-Maturity Securities Total Three Months Ended March 31, 2024 Beginning balance $ ( 45,749 ) $ ( 273,806 ) $ ( 42,449 ) $ ( 362,004 ) Change in unrealized gain/(loss) ( 27,873 ) ( 14,470 ) — ( 42,343 ) Amounts reclassified into net income 18,006 — 1,702 19,708 Total other comprehensive income/(loss) ( 9,867 ) ( 14,470 ) 1,702 ( 22,635 ) Income tax expense/(benefit) ( 2,072 ) ( 3,038 ) 357 ( 4,753 ) Total other comprehensive income/(loss), net of tax ( 7,795 ) ( 11,432 ) 1,345 ( 17,882 ) Ending balance $ ( 53,544 ) $ ( 285,238 ) $ ( 41,104 ) $ ( 379,886 ) Three Months Ended March 31, 2023 Beginning balance $ ( 66,394 ) $ ( 304,309 ) $ ( 48,240 ) $ ( 418,943 ) Change in unrealized gain/(loss) 13,528 29,425 — 42,953 Amounts reclassified into net income 11,129 — 1,844 12,973 Total other comprehensive income/(loss) 24,657 29,425 1,844 55,926 Income tax expense/(benefit) 5,179 6,179 387 11,745 Total other comprehensive income/(loss), net of tax 19,478 23,246 1,457 44,181 Ending balance $ ( 46,916 ) $ ( 281,063 ) $ ( 46,783 ) $ ( 374,762 ) (12) New Accounting Standards Accounting Standards Update 2024-01 “Compensation - Stock Compensation (Topic 718) - Scope Application of Profits Interest and Similar Awards” (“ASU 2024-01”) clarifies how an entity determines whether a profits interest or similar award is within the scope of Topic 718 or is not a share-based payment arrangement and therefore within the scope of other guidance. ASU 2024-01 provides an illustrative example with multiple fact patterns and also amends certain language in the “Scope” and “Scope Exceptions” sections of Topic 718 to improve its clarity and operability without changing the guidance. Entities can apply the amendments either retrospectively to all prior periods presented in the financial statements or prospectively to profits interest and similar awards granted or modified on or after the date of adoption. If prospective application is elected, an entity must disclose the nature of and reason for the change in accounting principle. ASU 2024-01 is effective January 1, 2025, including interim periods, and is not expected to have a significant impact on our financial statements. Accounting Standards Update 2024-02 “Codification Improvements” (“ASU 2024-02”) amends the Codification to remove references to various concepts statements and impacts a variety of topics in the Codification. The amendments apply to all reporting entities within the scope of the affected accounting guidance, but in most instances the references removed are extraneous and not required to understand or apply the guidance. Generally, the amendments in ASU 2024-02 are not intended to result in significant accounting changes for most entities. ASU 2024-02 is effective January 1, 2025 and is not expected to have a significant impact on our financial statements. 19 Table of Contents