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Item 1. Financial Statements

2024-07-18 compared with 2024-04-18 · 152 added, 93 removed, 586 unchanged (29% of the section changed)

2 unchanged sentences

CONSOLIDATED BALANCE SHEETS - UNAUDITED

(in thousands except share data) March 31, 2024 December 31, 2023

(in thousands except share data) June 30, 2024 December 31, 2023

Cash and due from banks $ 221,727 $ 200,493

25 unchanged sentences

Authorized shares - 10,000,000

Issued shares - 300,000 at March 31, 2024 and December 31, 2023

Issued shares - 300,000 at June 30, 2024 and December 31, 2023

300,000 300,000

1 unchanged sentence

Authorized shares - 100,000,000

Issued shares - 51,420,680 and 51,142,979 at March 31, 2024 and December 31, 2023, respectively

Issued shares - 51,474,581 and 51,142,979 at June 30, 2024 and December 31, 2023, respectively

Additional paid-in capital 1,050,114 1,045,576

Retained earnings 2,494,572 2,435,393

Treasury stock - 4,434,405 and 3,905,067 shares at cost at March 31, 2024 and December 31, 2023, respectively

Treasury stock - 5,286,503 and 3,905,067 shares at cost at June 30, 2024 and December 31, 2023, respectively

( 301,868 ) ( 220,334 )

6 unchanged sentences

COMPREHENSIVE INCOME - UNAUDITED

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

(in thousands except per share data) 2024 2023 2024 2023

50 unchanged sentences

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

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

Comprehensive income/(loss):

Net income — — — — — 68,651 — — — 68,651

Change in other comprehensive income/(loss), net of taxes — — — — — — — — ( 65,546 ) ( 65,546 )

Total comprehensive income 3,105

Stock-based compensation expense recognized in earnings — — — — 5,069 — — — — 5,069

Preferred stock dividend — — — — — ( 4,312 ) — — — ( 4,312 )

Issuance of stock related to stock-based awards — — 140,659 2 ( 1,911 ) — — — — ( 1,909 )

Balance at June 30, 2023 300,000 $ 300,000 51,087,965 $ 511 $ 1,035,063 $ 2,362,189 ( 3,095,444 ) $ ( 175,528 ) $ ( 440,308 ) $ 3,081,927

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

Comprehensive income/(loss):

Net income — — — — — 41,662 — — — 41,662

Change in other comprehensive income/(loss), net of taxes — — — — — — — — 12,154 12,154

Total comprehensive income 53,816

Stock-based compensation expense recognized in earnings — — — — 5,246 — — — — 5,246

Preferred stock dividend — — — — — ( 4,312 ) — — — ( 4,312 )

Issuance of stock related to stock-based awards — — 53,901 1 199 — — — — 200

Repurchase of common stock — — — — — — ( 852,098 ) ( 50,011 ) — ( 50,011 )

Balance at June 30, 2024 300,000 $ 300,000 51,474,581 $ 515 $ 1,050,114 $ 2,494,572 ( 5,286,503 ) $ ( 301,868 ) $ ( 367,732 ) $ 3,175,601

See accompanying notes to consolidated financial statements.

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:

Comprehensive income/(loss):

Net income — — — — — 107,312 — — — 107,312

8 unchanged sentences

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 June 30, 2023 300,000 $ 300,000 51,087,965 $ 511 $ 1,035,063 $ 2,362,189 ( 3,095,444 ) $ ( 175,528 ) $ ( 440,308 ) $ 3,081,927

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:

Comprehensive income/(loss):

Net income — — — — — 67,804 — — — 67,804

7 unchanged sentences

Repurchase of common stock — — — — — — ( 1,381,436 ) ( 81,534 ) — ( 81,534 )

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

Balance at June 30, 2024 300,000 $ 300,000 51,474,581 $ 515 $ 1,050,114 $ 2,494,572 ( 5,286,503 ) $ ( 301,868 ) $ ( 367,732 ) $ 3,175,601

See accompanying notes to consolidated financial statements.

1 unchanged sentence

CONSOLIDATED STATEMENTS OF CASH FLOWS

Three Months Ended March 31,

Six Months Ended June 30,

(in thousands) 2024 2023

29 unchanged sentences

Net increase/(decrease) in short-term borrowings 175,000 148,858

Redemption of long-term debt ( 200,000 ) ( 75,000 )

Net cash provided by financing activities

6 unchanged sentences

Cash paid during the period for interest $ 464,930 $ 314,089

Cash paid/(refunded) during the period for income taxes

Cash paid during the period for income taxes 47,988 43,286

Transfers of loans from held for investment to held for sale 18,411 —

5 unchanged sentences

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

TCBI is 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.

14 unchanged sentences

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

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

(in thousands except share and per share data) 2024 2023 2024 2023

13 unchanged sentences

Losses Estimated

March 31, 2024

June 30, 2024

Available-for-sale debt securities:

21 unchanged sentences

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.

(1) Excludes accrued interest receivable o f $ 12.0 million and $ 9.5 million at June 30, 2024 and December 31, 2023, respectively, related to available-for-sale debt securities and $ 1.3 million and $ 1.4 million at June 30, 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.

The Company did not sell any available-for-sale debt securities during the first six months 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.

The amortized cost and estimated fair value as of June 30, 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.

6 unchanged sentences

Total $ 3,849,492 $ 3,483,231 $ 831,513 $ 718,910

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.

The table below presents the weighted average yields for the Company’s available-for-sale debt securities for the six months ended June 30, 2024.

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

Treasury securities U.S.

8 unchanged sentences

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

March 31, 2024

June 30, 2024

Treasury securities $ — $ — $ 388,158 $ ( 15,483 ) $ 388,158 $ ( 15,483 )

9 unchanged sentences

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.

At June 30, 2024, the Company ha d 108 available-for-sale debt securities in an unrealized loss position, comprised of 10 U.S.

Treasury securities, five U.S.

3 unchanged sentences

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.

At June 30, 2024 and December 31, 2023, no allowance for credit losses was established for available-for-sale or held-to-maturity d ebt securities.

At June 30, 2024 and December 31, 2023, debt securities with carrying values of approximat ely $ 1.5 million and $ 1.6 million , respectively, were pledged to secure certain customer deposits.

Equity Securities

1 unchanged sentence

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,

Three Months Ended June 30, Six Months Ended June 30,

(in thousands) 2024 2023 2024 2023

4 unchanged sentences

Loans are summarized by portfolio segment as follows:

(in thousands) March 31, 2024 December 31, 2023

(in thousands) June 30, 2024 December 31, 2023

Loans held for investment(1):

12 unchanged sentences

Total loans held for sale $ 36,785 $ 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.

(1) Excludes accrued interest receivable of $ 121.9 million and $ 118.1 million at June 30, 2024 and December 31, 2023, respectively, that is recorded in accrued interest receivable and other assets on the consolidated balance sheets.

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

1 unchanged sentence

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

March 31, 2024

June 30, 2024

(1-7) Pass $ 517,216 $ 1,357,069 $ 1,369,181 $ 338,328 $ 100,090 $ 211,499 $ 6,149,823 $ 14,768 $ 10,057,974

50 unchanged sentences

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.

1 unchanged sentence

Finance Commercial Real Estate Consumer Total

Three Months Ended March 31, 2024

Six Months Ended June 30, 2024

Beginning balance $ 171,437 $ 4,173 $ 71,829 $ 2,534 $ 249,973

4 unchanged sentences

Ending balance $ 180,354 $ 5,618 $ 78,638 $ 2,687 $ 267,297

Three Months Ended March 31, 2023

Six Months Ended June 30, 2023

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

4 unchanged sentences

Ending balance $ 175,347 $ 7,085 $ 52,538 $ 2,373 $ 237,343

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.

The Company recorded a $ 40.0 million provision for credit losses on loans for the six months ended June 30, 2024, compared to $ 12.0 million for the same period of 2023.

The $ 40.0 million provision for credit losses on loans resulted primarily from growth in loans held for investment and $ 22.7 million in net charge-offs recorded during the six months ended June 30, 2024.

Net charge-offs of $ 22.7 million were recorded during the six months ended June 30, 2024, compared to net charge-offs of $ 28.1 million during the same period of 2023.

Criticized loans totaled $ 859.7 million at June 30, 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.

At June 30, 2024, the Company had $ 41.9 million in collateral-dependent commercial loans, collateralized by business assets, 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:

3 unchanged sentences

Due Non-accrual(1) Current Total Non-accrual With No Allowance

March 31, 2024

June 30, 2024

Commercial $ 12,050 $ 6,092 $ 286 $ 18,428 $ 83,772 $ 10,431,730 $ 10,533,930 $ 13,035

3 unchanged sentences

Total $ 14,025 $ 6,092 $ 286 $ 20,403 $ 85,021 $ 21,753,712 $ 21,859,136 $ 14,019

(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.

(1) As of June 30, 2024, $ 1.2 million of non-accrual loans were earning interest income on a cash basis compared to $ 358,000 as of December 31, 2023.

Additionally, $ 161,000 of interest income was recognized on non-accrual loans for the six months ended June 30, 2024 compared to $ 37,000 for the same period in 2023.

Accrued interest of $ 668,000 and $ 1.6 million was reversed during the six months ended June 30, 2024 and June 30, 2023, respectively.

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:

The table below details gross loans held for investment as of June 30, 2024 and June 30, 2023 made to borrowers experiencing financial difficulty that were modified during the three and six months ended June 30, 2024 and June 30, 2023, by type of modification granted and the financial effect of those modifications:

Financial Statement Impact

4 unchanged sentences

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

Three Months Ended June 30, 2024

Commercial $ 16,147 $ 253 $ 7,439 $ — $ 23,839 0.11 % — % 3 to 13

Commercial real estate — 15,831 — — 15,831 0.07 % — % 3

Total $ 16,147 $ 16,084 $ 7,439 $ — $ 39,670 0.18 %

Three Months Ended March 31, 2023

Three Months Ended June 30, 2023

Commercial $ — $ 261 $ 3,378 $ — $ 3,639 0.02 % — % 4 to 12

Total $ — $ 261 $ 3,378 $ — $ 3,639 0.02 %

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.

Six Months Ended June 30, 2024

Commercial $ 24,207 $ 703 $ 7,439 $ — $ 32,349 0.15 % — % 3 to 13

Commercial real estate — 15,831 — — 15,831 0.07 % — % 3

Total $ 24,207 $ 16,534 $ 7,439 $ — $ 48,180 0.22 %

Six Months Ended June 30, 2023

Commercial $ 31,356 $ 1,144 $ 6,562 $ 14,532 $ 53,594 0.25 % 0.70 % 4 to 36

Total $ 31,356 $ 1,144 $ 6,562 $ 14,532 $ 53,594 0.25 %

The table below details gross loans held for investment as of June 30, 2024 and June 30, 2023 that experienced a default during the periods presented 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)

Deferral Payment Deferral

Deferral Term

Extension Payment Deferral

and Term Extension

Three Months Ended March 31, 2024

Three Months Ended June 30, 2024

Commercial $ — $ — $ — $ —

Total $ — $ — $ — $ —

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:

Three Months Ended June 30, 2023

Commercial $ — $ 161 $ — $ 161

Six Months Ended June 30, 2024

Commercial $ — $ — $ 1,570 $ 1,570

Total $ — $ — $ 1,570 $ 1,570

Six Months Ended June 30, 2023

Commercial $ — $ 161 $ — $ 161

The table below provides an age analysis of gross loans held for investment as of June 30, 2024 made to borrowers experiencing financial difficulty that were modified in the prior twelve months, and as of June 30, 2023 for loans that were modified since January 1, 2023, the date of adoptions of Accounting Standards Update 2022-02:

(in thousands) 30-89 Days

1 unchanged sentence

Past Due Non-Accrual Current Total

March 31, 2024

June 30, 2024

Commercial $ — $ — $ 11,297 $ 30,757 $ 42,054

2 unchanged sentences

Total $ — $ — $ 11,297 $ 46,588 $ 57,885

June 30, 2023

Commercial $ — $ — $ 6,723 $ 46,871 $ 53,594

Total $ — $ — $ 6,723 $ 46,871 $ 53,594

(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

(in thousands) June 30, 2024 December 31, 2023

Federal Home Loan Bank borrowings $ 1,675,000 $ 1,500,000

1 unchanged sentence

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

(in thousands) March 31, 2024 December 31, 2023

(in thousands) June 30, 2024 December 31, 2023

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

5 unchanged sentences

Total long-term debt $ 659,997 $ 859,147

During the second quarter of 2024, the bank-issued senior unsecured credit-linked notes were redeemed in full.

(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 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

1 unchanged sentence

Real Estate Consumer Total

Three Months Ended March 31, 2024

Six Months Ended June 30, 2024

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

1 unchanged sentence

Ending balance $ 37,262 $ 29 $ 7,784 $ 244 $ 45,319

Three Months Ended March 31, 2023

Six Months Ended June 30, 2023

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

1 unchanged sentence

Ending balance $ 33,737 $ — $ 10,915 $ 118 $ 44,770

(in thousands) March 31, 2024 December 31, 2023

(in thousands) June 30, 2024 December 31, 2023

Commitments to extend credit - period end balance $ 8,934,459 $ 9,749,085

6 unchanged sentences

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.

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) require 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.

No dividends were declared or paid on the Company’s common stock during the six months ended June 30, 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.

During the six months ended June 30, 2024, the Company repurchased 1,381,436 shares of its common stock for an aggregate price, including excise tax expense, of $ 81.5 million, at a weighted average price of $ 58.57 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.

2 unchanged sentences

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

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

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.

2 unchanged sentences

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

As shown in the table below, the Company’s and Bank’s capital ratios exceeded the regulatory definition of well capitalized as of June 30, 2024 and December 31, 2023.

June 30, 2024 December 31, 2023

(dollars in thousands) Minimum Capital Required(2) Capital Required to be Well Capitalized Capital Amount Ratio Capital Amount Ratio

14 unchanged sentences

The table below summarizes the Company’s stock-based compensation expense:

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

(in thousands) 2024 2023 2024 2023

3 unchanged sentences

Total $ 6,221 $ 5,069 $ 14,755 $ 13,507

(in thousands except period data) March 31, 2024

(in thousands except period data) June 30, 2024

Unrecognized compensation expense related to unvested stock-settled awards $ 25,772

Weighted average period over which expense is expected to be recognized, in years 2.0

Weighted average period over which stock-settled awards expense is expected to be recognized, in years 1.8

Unrecognized compensation expense related to cash-settled units $ 10,685

Weighted average period over which cash-settled units expense is expected to be recognized, in years 2.7

(9) Fair Value Disclosures

4 unchanged sentences

(in thousands) Level 1 Level 2 Level 3

March 31, 2024

June 30, 2024

Available-for-sale debt securities:(1)

35 unchanged sentences

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

Three Months Ended March 31, 2024

Three Months Ended June 30, 2024

Available-for-sale debt securities:(1)

CRT securities $ 12,261 $ — $ ( 291 ) $ — $ 358 $ 12,328

Three Months Ended March 31, 2023

Three Months Ended June 30, 2023

Available-for-sale debt securities:(1)

CRT securities $ 11,928 $ — $ ( 281 ) $ — $ 109 $ 11,756

Six Months Ended June 30, 2024

Available-for-sale debt securities:(1)

CRT securities $ 11,995 $ — $ ( 500 ) $ — $ 833 $ 12,328

Six Months Ended June 30, 2023

Available-for-sale debt securities:(1)

CRT securities $ 11,861 $ — $ ( 487 ) $ — $ 382 $ 11,756

(1) Unrealized gains/(losses) on available-for-sale debt securities are recorded in AOCI .

2 unchanged sentences

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 June 30, 2024, the discount rates utilized ranged from 5.15 % to 6.99 % and the weighted-average life ranged from 4.63 years to 7.17 years.

On a combined amortized cost weighted-average basis a discount rate of 5.83 % and a weighted-average life of 5.57 years were utilized to determine the fair value of these securities at June 30, 2024.

At December 31, 2023, the combined weighted-average discount rate and weighted-average life utilized were 6.57 % and 6.06 years , respectively.

1 unchanged sentence

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 $ 18.0 million fair value of loans held for investment at June 30, 2024 reported above includes impaired loans with a carrying value of $ 42.8 million that were reduced by specific allowance allocations totaling $ 24.8 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.

3 unchanged sentences

(in thousands) Total Level 1 Level 2 Level 3

March 31, 2024

June 30, 2024

Financial assets:

29 unchanged sentences

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

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

Estimated Fair Value Estimated Fair Value

20 unchanged sentences

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.

The Company’s credit exposure associated with these instruments, net of any collateral pledged, was approximately $ 11.3 million at June 30, 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.

At June 30, 2024, the Company had $ 98.9 million in cash collateral pledged to counterparties included in interest bearing cash and cash equivalents on the consolidated balance sheet an d $ 46.9 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.

1 unchanged sentence

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.

The Company is party to 14 ri sk participation agreements where it acts as a participant bank with a notional amount of $ 227.0 million at June 30, 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 $ 6.1 million at June 30, 2024 and $ 4.5 million at December 31, 2023.

The fair value of these exposures was insignificant to the consolidated financial statements at both June 30, 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.

The Company is part y to 15 ri sk participation agreements where the Company acts as the lead bank having a notional amount of $ 202.9 million at June 30, 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.

During the six months ended June 30, 2024, the Company recorded $ 36.6 million in unrealized losses to adjust its cash flow hedges to fair value, which was recorded net of tax to AOCI, and reclassified $ 36.1 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 $ 55.2 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.

As of June 30, 2024, the maximum length of time over which forecasted transactions are hedged i s 1.67 years.

(11) Accumulated Other Comprehensive Income

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(in thousands) Cash Flow Hedges Available-for-Sale Securities Held-to-Maturity Securities Total

Three Months Ended March 31, 2024

Three Months Ended June 30, 2024

Beginning balance $ ( 53,544 ) $ ( 285,238 ) $ ( 41,104 ) $ ( 379,886 )

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Ending balance $ ( 45,215 ) $ ( 283,559 ) $ ( 38,958 ) $ ( 367,732 )

Three Months Ended March 31, 2023

Three Months Ended June 30, 2023

Beginning balance $ ( 46,916 ) $ ( 281,063 ) $ ( 46,783 ) $ ( 374,762 )

5 unchanged sentences

Ending balance $ ( 81,785 ) $ ( 313,196 ) $ ( 45,327 ) $ ( 440,308 )

(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.

Six Months Ended June 30, 2024

Beginning balance $ ( 45,749 ) $ ( 273,806 ) $ ( 42,449 ) $ ( 362,004 )

Change in unrealized gain/(loss) ( 36,611 ) ( 19,671 ) — ( 56,282 )

Amounts reclassified into net income 36,120 — 3,413 39,533

Total other comprehensive income/(loss) ( 491 ) ( 19,671 ) 3,413 ( 16,749 )

Income tax expense/(benefit) ( 1,025 ) ( 9,918 ) ( 78 ) ( 11,021 )

Total other comprehensive income/(loss), net of tax 534 ( 9,753 ) 3,491 ( 5,728 )

Ending balance $ ( 45,215 ) $ ( 283,559 ) $ ( 38,958 ) $ ( 367,732 )

Six Months Ended June 30, 2023

Beginning balance $ ( 66,394 ) $ ( 304,309 ) $ ( 48,240 ) $ ( 418,943 )

Change in unrealized gain/(loss) ( 45,529 ) ( 11,249 ) — ( 56,778 )

Amounts reclassified into net income 26,048 — 3,687 29,735

Total other comprehensive income/(loss) ( 19,481 ) ( 11,249 ) 3,687 ( 27,043 )

Income tax expense/(benefit) ( 4,090 ) ( 2,362 ) 774 ( 5,678 )

Total other comprehensive income/(loss), net of tax ( 15,391 ) ( 8,887 ) 2,913 ( 21,365 )

Ending balance $ ( 81,785 ) $ ( 313,196 ) $ ( 45,327 ) $ ( 440,308 )

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

What changed 10-Q

Item 1. Financial Statements