19 unchanged sentences
• The Company is dependent on funds obtained from borrowing or capital transactions or from the Bank to fund its obligations.
−Removed: • The Company must effectively manage its interest rate risks.
+Added: • The Company must effectively manage its interest rate risk.
• The Company must effectively manage market risk associated primarily with sales and trading activities.
−Removed: • Rising interest rates have decreased the value of the Company’s securities portfolio, and the Company may realize losses if it were to sell such securities.
+Added: • Changes in interest rates affect the value of the Company’s securities portfolio, and the Company may realize losses if it were to sell such securities at a time when interest rates are higher than the yield on the Company’s securities portfolio.
Strategic Risks
−Removed: • The Company must be effective in developing and executing new lines of business and new products and services while managing associated risks.
• The Company competes with many banks and other traditional, non-traditional, brick and mortar and online financial service providers.
• The Company must effectively execute its business strategy in order to continue asset and earnings growth.
+Added: • The Company must be effective in developing and executing new lines of business and new products and services while managing associated risks, including the ability to use technology to provide products and services that will satisfy customer demands.
+Added: • The Company may pursue bank and non-bank acquisition opportunities as they arise.
+Added: However, even if the Company identifies attractive acquisition opportunities, it may not be able to complete such acquisitions on favorable terms or realize the anticipated benefits from such acquisitions.
Operational Risks
+Added: • The Company must continue to attract, retain and develop key personnel.
• The Company, its vendors and customers must effectively manage information systems and cyber risk and threats which may result in disruptions, failures or breaches in security.
1 unchanged sentence
• The Company’s operations rely extensively on a broad range of external vendors.
−Removed: • The Company must continue to attract, retain and develop key personnel.
+Added: • The development and use of AI presents risks and challenges that may adversely impact the Company’s business.
• The Company’s accounting estimates and risk management processes rely on management judgment, which may prove inadequate, wrong or be adversely impacted by inaccurate or mistakes in assumptions or models.
5 unchanged sentences
• The Company is subject to claims and litigation in the ordinary course of its business, including claims that may not be covered by insurance.
−Removed: • Any regulatory examination scrutiny or new regulatory requirements arising from the recent events in the banking industry could increase the Company’s expenses and affect the Company’s operations.
Other Risks Affecting the Business
1 unchanged sentence
• The soundness of other financial institutions could adversely affect the business.
−Removed: • Recent negative developments affecting the banking industry, and resulting media coverage, have eroded customer confidence in the banking system.
+Added: • Negative developments affecting the banking industry, and resulting media coverage, have eroded customer confidence in the banking system.
• The Company is subject to environmental liability risk associated with lending activities.
−Removed: • Severe weather, earthquakes, other natural disasters, pandemics, acts of war or terrorism and other external and geopolitical events could significantly impact the business.
−Removed: • Climate change and related legislative and regulatory initiatives including interpretations thereof have the potential to disrupt the business and result in operational changes and expenditures that could significantly impact the business and the operations and creditworthiness of the Company’s clients.
+Added: • Severe weather, earthquakes, other natural disasters, climate change, pandemics, acts of war or terrorism and other external and geopolitical events could significantly impact the business.
• Negative public opinion could damage the Company’s reputation and adversely affect its earnings.
−Removed: • Environmental, social and governance (“ESG”) risks could adversely affect the Company’s reputation and shareholder, employee, client and third-party relationships and may negatively affect the Company’s stock price.
Risks Relating to Company Securities
16 unchanged sentences
Competitive pressures could erode underwriting standards, leading to a decline in general credit quality and increases in credit defaults and non-performing asset levels.
−Removed: If the Company’s credit portfolio management routines, policies and procedures are not able to adequately adapt to changes in economic, competitive or other conditions that affect customers and the quality of the loan portfolio, the Company may incur increased losses that could adversely affect its financial results and lead to increased regulatory scrutiny, restrictions on its lending activity or financial penalties.
+Added: If the Company’s credit portfolio management routines, policies and procedures are not able to adequately adapt to
+Added: changes in economic, competitive or other conditions that affect customers and the quality of the loan portfolio, the Company may incur increased losses that could adversely affect its financial results and lead to increased regulatory scrutiny, restrictions on its lending activity or financial penalties.
A significant portion of the Company’s assets consists of commercial loans, which may involve a higher degree of credit risk.
17 unchanged sentences
As a result, the Company’s financial condition and results of operations may be strongly affected by any prolonged period of economic recession or other adverse business, economic or regulatory conditions affecting Texas businesses and financial institutions.
−Removed: Furthermore, while the Texas economy is increasingly more diversified, the energy sector continues to play an important role in the overall Texas economy.
−Removed: Furthermore, energy production and related industries represent a significant part of the economies in some of the primary markets in which the Company operates.
+Added: Furthermore, while the Texas economy is increasingly more diversified, the energy sector and related industries continue to play an important role in the overall Texas economy and represent a significant part of the economies in some of the primary markets in which the Company operates.
The Company’s portfolio of energy loans consists primarily of producing reserve-based loans to exploration and production companies, with a smaller portion of loan balances attributable to royalty owners, midstream operators, saltwater disposal and other service companies whose businesses primarily relate to production, not exploration and development, of oil and gas.
15 unchanged sentences
The failure to maintain above-peer credit quality metrics could have a material adverse impact on growth and profitability.
−Removed: Historically, the Company has sought to take action prior to economic downturns by slowing growth rates and decreasing the risk level of its assets by, among other things, allowing runoff of loans that the Company believes may not perform well during a weakening or declining economic environment.
If management’s assessment of inherent risk and losses in the loan portfolio is inaccurate, or geopolitical, economic and market conditions or borrowers' financial performance experience material unanticipated changes, the allowance may become inadequate, requiring larger provisions for loan losses that can materially decrease the Company’s earnings or profitability.
4 unchanged sentences
The impact of these changes or the application thereof on the Company’s financial condition and operations can be difficult to predict.
−Removed: For example, the Company adopted ASU 2016-13 Financial Instruments - Credit Losses (Topic 326) on January 1, 2020 which replaced the incurred loss methodology for determining the provision for credit losses and allowance for credit losses with the CECL model.
−Removed: Implementation of CECL requires that management determines periodic estimates of lifetime expected future credit losses on loans in the provision for credit losses in the period when the loans are booked.
−Removed: The adoption of CECL resulted in an increase to the allowance for credit losses by $9.1 million.
−Removed: The impact of CECL in future periods will be significantly influenced by the composition, characteristics and quality of the loan portfolio, as well as the prevailing economic conditions and forecasts utilized.
−Removed: Should these factors materially change, the Company may be required to increase or decrease the allowance for credit losses, decreasing or increasing reported income, and introducing additional volatility into reported earnings.
Liquidity Risks
3 unchanged sentences
The Company’s principal source of funding consists of customer deposits, supplemented by its short-term and long-term borrowings, including federal funds purchased and Federal Home Loan Bank (“FHLB”) borrowings.
−Removed: Recently proposed changes to the FHLB system could adversely impact the
−Removed: Company’s access to FHLB borrowings or increase the cost of such borrowings.
+Added: Recently proposed changes to the FHLB system could adversely impact the Company’s access to FHLB borrowings or increase the cost of such borrowings.
The Company also relies on the availability of the mortgage secondary market provided by Ginnie Mae and the government sponsored entities (“GSEs”) to support the liquidity of its residential mortgage assets.
6 unchanged sentences
The Company sources a significant volume of its non-interest bearing deposits from its commercial clients, creating concentrations of deposits that may carry a greater risk of unexpected material withdrawals.
−Removed: These customers are more likely to actively monitor the Company’s financial condition and results of operations and could withdraw their deposits quickly upon the occurrence of a material adverse development affecting the Company or its businesses or based on market rumors regarding the Company or other regional banks.
+Added: These customers are more likely to actively monitor the Company’s financial condition and results of operations and could withdraw their deposits quickly upon the occurrence of a material adverse development affecting the Company or its businesses or based on market rumors regarding
+Added: the Company or other regional banks.
In response to this risk, the Company has increased its liquidity and developed techniques for monitoring and planning for changes in liquidity and capital, but there is no assurance that the Company will maintain or have access to sufficient funding and capital to fully mitigate its liquidity risk.
1 unchanged sentence
The Company receives these deposits from certain of its customers in connection with its delivery of other financial services to them or their customers.
−Removed: The deposits are subject to regulatory classification as brokered deposits even though the Company considers these to be relationship deposits and they are not subject to the typical risks or market pricing associated with conventional brokered deposits.
−Removed: However, brokered deposits are generally considered to be more sensitive to interest rates, with a higher withdrawal than other deposits if the rates offered are not competitive with rates offered by the Bank’s competitors.
+Added: The deposits are subject to regulatory classification as brokered deposits, which are generally considered to be more sensitive to interest rates, with a higher withdrawal than other deposits if the rates offered are not competitive with rates offered by the Bank’s competitors.
Furthermore, banks with higher levels of brokered deposits may be viewed as having higher liquidity risks, which may lead to further deposit outflow.
1 unchanged sentence
The Bank could also be required to suspend or eliminate deposit gathering from any source classified as brokered deposits.
−Removed: The FDIC can change the definition of brokered deposits or extend the classification to deposits not currently classified as brokered deposits.
+Added: The FDIC can change the definition of brokered deposits or extend the classification to deposits not currently classified as brokered deposits and the FDIC has proposed rules that would reclassify certain deposits as brokered deposits.
These non-traditional deposits are subject to greater operational and reputational risk of unexpected withdrawal than traditional demand and time deposits, particularly those provided by consumers.
−Removed: A significant decrease in balances of brokered deposits could have a material adverse effect on the Bank’s and the Company’s financial condition, results of operations or profitability.
−Removed: See Management’s Discussion and Analysis of Financial Condition and Results of Operations below for further discussion of liquidity.
The Company’s growth plans are dependent on the availability of capital and funding .
6 unchanged sentences
Increases in cost of capital, including dilution and increased interest or dividend requirements, could have a direct adverse impact on the Company’s operating performance and its ability to achieve its growth objectives.
−Removed: The Company’s mortgage finance business has experienced, and will likely continue to experience, highly variable usage of the Company’s funding capacity resulting from seasonal demands for credit, surges in consumer demand driven by changes in
−Removed: interest rates and month-end “spikes” of residential mortgage closings.
+Added: The Company’s mortgage finance business has experienced, and will likely continue to experience, highly variable usage of the Company’s funding capacity resulting from seasonal demands for credit, changes in consumer demand driven by changes in interest rates, housing affordability and supply and month-end “spikes” of residential mortgage closings.
These spikes could also result in the Company and the Bank having capital ratios that are below internally targeted levels or even levels that could cause the Bank to not be well capitalized and could affect liquidity levels.
1 unchanged sentence
The Company has historically responded to these variable funding demands by, among other things, increasing the extent of participations sold in its mortgage loan interests, as needed, and by maintaining a substantial borrowing relationship with the FHLB.
−Removed: Its mortgage finance customers have also provided significant low-cost deposit balances associated with the borrower escrow accounts created at the time certain mortgage loans are funded, which have benefited liquidity and net interest margin.
+Added: Its mortgage finance customers have also provided significant deposit balances associated with the borrower escrow accounts created at the time certain mortgage loans are funded, which have benefited liquidity and net interest margin.
In response to competitive pressures, the Company sometimes finds it necessary to pay interest on some of these accounts, as regulations allow or require and this trend may continue, which can affect its costs of funds.
11 unchanged sentences
The Company’s profitability is dependent to a large extent on its net interest income, which is the difference between the interest income paid on its loans and investments and the interest the Company pays to third parties such as its depositors, lenders and debtholders.
+Added: Periods of volatile interest rates may have a material effect on the Company’s earnings.
Changes in interest rates can impact profits and the fair values of certain assets and liabilities.
Models that the Company uses to forecast and plan for the impact of rising and falling interest rates may be incorrect or fail to consider the impact of competition and other conditions affecting loans and deposits.
−Removed: Periods of volatile interest rates may have a material effect on the Company’s earnings.
−Removed: Throughout 2023, the Federal Reserve has increased the target Federal Funds rate at a steady pace, reaching its current range of 5.25% to 5.50% at the July 2023 meeting.
−Removed: At the most recent meeting in November 2023, the Federal Reserve voted to maintain this target range.
−Removed: Increases in interest rates and economic conditions affecting consumer demand for housing can have a material impact on the volume of mortgage originations and refinancings, adversely affecting the profitability of the mortgage finance business.
Interest rate risk can also result from mismatches between the dollar amounts of repricing or maturing assets and liabilities and from mismatches in the timing and rates at which the assets and liabilities reprice.
The Company actively monitors and manages the balances of maturing and repricing assets and liabilities to reduce the adverse impact of changes in interest rates, but there can be no assurance that the Company will be able to avoid material adverse effects on net interest margin in all market conditions.
−Removed: Rising interest rates in prior periods have increased interest expense, with a commensurate positive effect on net interest income, but may not be expected to do so in future periods.
−Removed: In a rising rate environment, competition for cost-effective deposits increases, making it more costly for the Company to fund loan growth.
+Added: Rising interest rates in prior periods have increased interest expense, with a commensurate positive effect on net interest income;
+Added: however, interest rates have begun to decrease following three cuts to the Federal Funds rate by the Federal Reserve in 2024.
Rapid and unexpected volatility in interest rates creates additional uncertainty and potential for adverse financial effects.
1 unchanged sentence
The company must effectively manage market risk associated primarily with sales and trading activities.
−Removed: In addition to interest rate risk, the Company is exposed to other forms of market risk, principally related to trading activities which support customer transactions.
−Removed: The Company has typically minimized the market and liquidity risks of customer-related positions with similar offsetting positions with broker-dealers.
+Added: In addition to interest rate risk, the Company is exposed to market risk, principally related to trading activities conducted to support customer transactions or to provide customers with liquidity.
+Added: The Company typically seeks to manage the market risks of its positions with offsetting positions that eliminate or reduce market risk to fall within acceptable tolerances.
The Company uses VaR as a primary risk measure to aggregate, monitor and limit risks at the portfolio level across all trading activities.
−Removed: VaR is calculated based on one year historical moves in key market risk factors relevant to the portfolio and it estimates potential loss on current portfolio at 95th percentile confidence interval.
−Removed: Rising interest rates have decreased the value of the Company’s securities portfolio, and the Company may realize losses if it were to sell such securities.
−Removed: As a result of inflationary pressures and the resulting rapid increases in interest rates over the last two years, the trading value of previously issued government and other fixed income securities has declined significantly.
+Added: VaR is calculated based on one year historical moves in key market risk factors relevant to the financial asset and any associated portfolio and estimates potential loss on subject positions at 95th percentile confidence interval.
+Added: Changes in interest rates affect the value of the Company’s securities portfolio, and the Company may realize losses if it were to sell such securities at a time when interest rates are higher than the yield on the Company’s securities portfolio.
+Added: As a result of inflationary pressures and the resulting rapid increases in interest rates in prior periods, the trading value of previously issued government and other fixed income securities declined significantly.
These securities make up a majority of the securities portfolio of most banks in the U.S., including the Company’s, resulting in unrealized losses embedded in U.S.
banks’ securities portfolios.
−Removed: If the Company were to sell such securities with embedded unrealized losses, it may incur losses, which could impair the Company’s capital, financial condition, and results of operations and require the Company to raise additional capital on unfavorable terms, thereby negatively impacting its profitability.
+Added: If the Company were to sell securities with embedded unrealized losses, as the Company did in the third quarter of 2024, it may incur losses, which could impair the Company’s capital, financial condition, and results of operations and require the Company to raise additional capital on unfavorable terms, thereby negatively impacting its profitability.
While the Company has taken actions to maximize its funding sources, there is no guarantee that such actions will be successful or sufficient in the event of sudden liquidity needs.
−Removed: Furthermore, while the Federal Reserve Board has announced a Bank Term Funding Program available to eligible depository institutions secured by U.S.
−Removed: treasuries, agency debt and mortgage-backed securities, and other qualifying assets as collateral at par, to mitigate the risk of potential losses on the sale of such instruments, there is no guarantee that this program or similar programs will be available in the future or effective in addressing liquidity needs on favorable terms as they arise.
Strategic Risks
−Removed: The Company must be effective in developing and executing new lines of business and new products and services while managing associated risks .
−Removed: The Company’s business strategy involves developing and growing new lines of business and offering new products and services within existing lines of business to grow its client base, retain existing clients and realize strategic priorities for both loans and deposits.
−Removed: Substantial costs, risks and uncertainties are associated with these efforts, particularly in instances where the markets are not fully developed.
−Removed: Developing and marketing new activities requires that the Company invests significant time and resources before new sources of revenues, funding and profits can be realized.
−Removed: Timetables for the development and launch of new activities may not be achieved and price and profitability targets may not prove feasible, or their realization may be delayed.
−Removed: External factors, such as compliance with regulations, receipt of necessary licenses or permits, competitive alternatives and shifting market preferences, may also adversely impact the successful execution of new activities.
−Removed: New activities necessarily entail additional risks and may present additional risks to the effectiveness of the Company’s system of internal controls and risk management strategies.
−Removed: All service offerings, including current offerings and new activities, may become more risky due to changes in economic, competitive and market conditions beyond the Company’s control.
−Removed: Regulators could determine that the Company’s or the Bank’s risk management practices are not adequate or the Company’s or the Bank’s capital levels are not sufficiently in excess of well capitalized levels and take action to restrain growth.
−Removed: Failure to successfully manage these risks, generally and to the satisfaction of regulators, in the development and implementation of new lines of business or new products or services could have a material adverse effect on the business, results of operations and financial condition.
The Company competes with many banks and other traditional, non-traditional, brick and mortar and online financial service providers .
1 unchanged sentence
The Company competes with other financial and bank holding companies, state and national commercial banks, savings and loan associations, consumer finance companies, credit unions, securities brokerages, insurance companies, mortgage banking companies, money market mutual funds, asset-based non-bank lenders, government sponsored or subsidized lenders, financial technology companies and other financial services providers.
−Removed: Many of these competitors have substantially greater financial resources, lending limits and technological resources and larger branch networks than the Company does and are able to offer a broader range of products and services than the Company can, including systems and services that could more effectively protect customers from cyber threats.
+Added: Many of these competitors have substantially greater financial resources, lending limits and technological resources and larger branch networks than the Company does and are able to offer a broader range of products and services than the Company can.
Many competitors offer lower interest rates and more liberal loan terms that appeal to borrowers but adversely affect net interest margin and assurance of repayment.
1 unchanged sentence
Failure to compete effectively for deposit, loan and other banking customers in any of the lines of business could cause the Company to lose market share, slow or reverse growth rate or suffer adverse effects on financial condition, results of operations or profitability.
−Removed: See the discussion above at Business – Competition for additional discussion of the Company’s competition.
+Added: See the discussion above in Item 1.
+Added: Business – Competition for additional discussion of the Company’s competition.
The Company must effectively execute its business strategy in order to continue asset and earnings growth .
The Company’s core strategy is to develop its business principally through organic growth by offering a differentiated banking experience to companies in high-value business segments.
−Removed: Its prospects for continued growth must be considered in light of the risks, expenses and difficulties frequently encountered by growing companies.
+Added: Its prospects for continued growth must be considered in light of the risks,
+Added: expenses and difficulties frequently encountered by growing companies.
In order to execute the Company’s business strategy successfully, the Company must, among other things:
9 unchanged sentences
Failure to effectively execute the business strategy could have a material adverse effect on the business, future prospects, financial condition, results of operations or profitability.
+Added: The Company must be effective in developing and executing new lines of business and new products and services while managing associated risks, including the ability to use technology to provide products and services that will satisfy customer demands .
+Added: The Company’s business strategy involves developing and growing new lines of business and offering new products and services, including through the introduction of new technologies, within existing lines of business to grow its client base, retain existing clients and realize strategic priorities for revenue growth.
+Added: Substantial costs, risks and uncertainties are associated with these efforts, particularly in instances where the markets are not fully developed.
+Added: Developing and marketing new activities requires that the Company invests significant time and resources before new sources of revenues, funding and profits can be realized.
+Added: Timetables for the development and launch of new activities may not be achieved and price and profitability targets may not prove feasible, or their realization may be delayed.
+Added: External factors, such as compliance with regulations, receipt of necessary licenses or permits, competitive alternatives and shifting market preferences, may also adversely impact the successful execution of new activities.
+Added: New activities necessarily entail additional risks and may present additional risks to the effectiveness of the Company’s system of internal controls and risk management strategies.
+Added: All service offerings, including current offerings and new activities, may become more risky due to changes in economic, competitive and market conditions beyond the Company’s control.
+Added: Regulators could determine that the Company’s, the Bank’s or TCBI Securities’ risk management practices are not adequate or the Company’s, the Bank’s or TCBI Securities’ capital levels are not sufficiently in excess of well capitalized levels and take action to restrain growth.
+Added: Failure to successfully manage these risks, generally and to the satisfaction of regulators, in the development and implementation of new lines of business or new products or services could have a material adverse effect on the business, results of operations and financial condition.
+Added: The Company may pursue bank and non-bank acquisition opportunities as they arise.
+Added: However, even if the Company identifies attractive acquisition opportunities, it may not be able to complete such acquisitions on favorable terms or realize the anticipated benefits from such acquisitions.
+Added: While the Company continues to focus on organic growth opportunities, it may pursue attractive bank or non-bank acquisition and consolidation opportunities that arise in the Company’s core markets and beyond.
+Added: The number of financial institutions headquartered in Texas, regionally and nationally, continues to decline through merger and other consolidation activity.
+Added: In the event that attractive acquisition opportunities arise, the Company would likely face competition for such acquisitions from other banking and financial companies, many of which have significantly greater resources and may have more attractive valuations.
+Added: This competition could either prevent the Company from being able to complete attractive acquisition opportunities or increase prices for potential acquisitions which could reduce the Company’s potential returns and reduce the attractiveness of these opportunities.
+Added: Furthermore, even if the Company is able to identify and complete acquisitions, the terms of such acquisitions may not be favorable to the Company or it may fail to realize the anticipated benefits from such acquisitions.
+Added: In addition, all acquisitions are subject to various regulatory approvals, and if the Company were unable (or there was a perception that the Company would be unable) to obtain such approvals for any reason, including due to any actual or perceived capital, liquidity, profitability, or regulatory compliance issues, it would impair the Company’s ability to consummate acquisitions.
+Added: Any acquisition could also be dilutive to the Company’s earnings and shareholders’ equity per share of the Company’s common stock.
Operational Risks
+Added: The Company must continue to attract, retain and develop key personnel .
+Added: The Company’s success depends to a significant extent upon its ability to attract, develop and retain experienced personnel in each of its lines of business and markets including managers in operational areas, compliance and other support areas to build and maintain the infrastructure and controls required
+Added: to support continuing growth.
+Added: Competition for the best people in the industry can be intense, and there is no assurance that the Company will continue to attract or retain talent or develop personnel.
+Added: Factors that affect its ability to attract, develop and retain key employees include compensation and benefits programs, profitability, ability to establish appropriate succession plans for key talent, reputation for rewarding and promoting qualified employees and market competition for employees with certain skills, including information systems development and security.
+Added: The cost of employee compensation is a significant portion of operating expenses and can materially impact results of operations or profitability, especially during periods of wage inflation.
+Added: The unanticipated loss of the services of key personnel could have an adverse effect on the business.
The Company, its vendors and customers must effectively manage information systems and cyber risk and threats which may result in disruptions, failures or breaches in security.
18 unchanged sentences
Breaches can be perpetrated by unknown third parties, but could also be facilitated by employees either inadvertently or by consciously attempting to create disruption or certain acts of fraud.
−Removed: The Company’s customers and employees have been, and
−Removed: will continue to be, targeted by parties using fraudulent e-mails and other communications in attempts to misappropriate passwords, bank account information or other personal information or to introduce viruses or other malware through “Trojan horse” programs to the Company’s information systems, the information systems of merchants or third-party service providers and/or customers' computers.
+Added: The Company’s customers and employees have been, and will continue to be, targeted by parties using fraudulent e-mails and other communications in attempts to misappropriate passwords, bank account information or other personal information or to introduce viruses or other malware through “Trojan horse” programs to the Company’s information systems, the information systems of merchants or third-party service providers and/or customers' computers.
Although the Company, with the help of third-party service providers, will continue to implement information security technology solutions and establish operational procedures to protect sensitive data, there can be no assurance that these measures will be effective.
The Company advises, or alerts and provides some guidance to customers and evaluates and imposes security requirements on vendors regarding protection of their respective information systems, but there is no assurance that these actions will have the intended positive effects or will be effective to prevent losses or attacks.
−Removed: Successful cyber-attacks on the Company, vendors or customers may affect the Company’s reputation, and failure to meet customer expectations could have a material impact on the Company’s ability to attract and retain deposits as a primary source of funding.
+Added: Successful cyber-attacks on the Company, vendors or customers may affect the Company’s reputation, and failure to meet
+Added: customer expectations could have a material impact on the Company’s ability to attract and retain deposits as a primary source of funding.
A security breach or other significant disruption of information systems or those related to customers, merchants and third-party vendors, including as a result of cyber-attacks, could (i) disrupt the proper functioning of networks and systems and therefore the operations and/or those of certain customers;
18 unchanged sentences
The extent of a particular cyber attack and the steps that the Company may need to take to investigate the attack may not be immediately clear, and it may take a significant amount of time before such an investigation or determination, judicial or otherwise, can be completed.
−Removed: While such an investigation is ongoing, the Company may not necessarily know the full extent of the harm caused by the cyber attack,
−Removed: and that damage may continue to spread.
+Added: While such an investigation is ongoing, the Company may not necessarily know the full extent of the harm caused by the cyber attack, and that damage may continue to spread.
These factors may inhibit the Company’s ability to provide rapid, full and reliable information about the cyber attack to its clients, customers, counterparties and regulators, and the public.
3 unchanged sentences
The Company relies on a large number of vendors to provide products and services necessary to maintain the day-to-day operations, particularly in the areas of operations, treasury management systems, information technology and security.
−Removed: This reliance exposes the Company to the risk that these vendors will not perform as required by agreements including risks resulting from disruptions in communications with vendors, cyber-attacks and security breaches at vendors, failure of a vendor to provide services for other reasons and poor performance of services.
+Added: This reliance exposes the Company to the risk
+Added: that these vendors will not perform as required by agreements including risks resulting from disruptions in communications with vendors, cyber-attacks and security breaches at vendors, failure of a vendor to provide services for other reasons and poor performance of services.
An external vendor’s failure to perform in any of these areas could be disruptive to the business and operations, which could have a material adverse impact on the business, financial condition, results of operations or profitability, including causing reputational damage.
1 unchanged sentence
While the Company has implemented an active program of oversight to address this risk, there can be no assurance that the Company will not experience material security breaches associated with vendors or other third parties.
−Removed: The Company must continue to attract, retain and develop key personnel .
−Removed: The Company’s success depends to a significant extent upon its ability to attract, develop and retain experienced personnel in each of its lines of business and markets including managers in operational areas, compliance and other support areas to build and maintain the infrastructure and controls required to support continuing growth.
−Removed: Competition for the best people in the industry can be intense, and there is no assurance that the Company will continue to attract or retain talent or develop personnel.
−Removed: Factors that affect its ability to attract, develop and retain key employees include compensation and benefits programs, profitability, ability to establish appropriate succession plans for key talent, reputation for rewarding and promoting qualified employees and market competition for employees with certain skills, including information systems development and security.
−Removed: The cost of employee compensation is a significant portion of operating expenses and can materially impact results of operations or profitability, especially during periods of wage inflation.
−Removed: The unanticipated loss of the services of key personnel could have an adverse effect on the business.
+Added: The development and use of AI presents risks and challenges that may adversely impact the Company’s business.
+Added: The Company or its third-party (or fourth party) vendors, clients or counterparties may develop or incorporate AI technology in certain business processes, services, or products.
+Added: The development and use of AI presents a number of risks and challenges to the Company’s business.
+Added: The legal and regulatory environment relating to AI is uncertain and rapidly evolving, both in the U.S.
+Added: and internationally, and includes regulatory schemes targeted specifically at AI as well as provisions in intellectual property, privacy, consumer protection, employment, and other laws applicable to the use of AI.
+Added: These evolving laws and regulations could require changes in the Company’s implementation of AI technology and increase the Company’s compliance costs and the risk of non-compliance.
+Added: AI models, particularly generative AI models, may produce output or take action that is incorrect, that reflects biases included in the data on which they are trained, that results in the release of private, confidential, or proprietary information, that infringes on the intellectual property rights of others, or that is otherwise harmful.
+Added: In addition, the complexity of many AI models makes it difficult to understand why they are generating particular outputs.
+Added: This limited transparency increases the challenges associated with assessing the proper operation of AI models, understanding and monitoring the capabilities of the AI models, reducing erroneous output, eliminating bias, and complying with regulations that require documentation or explanation of the basis on which decisions are made.
+Added: Further, the Company may rely on AI models developed by third parties, and, to that extent, would be dependent in part on the manner in which those third parties develop and train their models, including risks arising from the inclusion of any unauthorized material in the training data for their models and the effectiveness of the steps these third parties have taken to limit the risks associated with the output of their models, matters over which the Company may have limited visibility.
+Added: Any of these risks could expose the Company to liability or adverse legal or regulatory consequences and harm the Company’s reputation and the public perception of its business or the effectiveness of its security measures.
The Company’s accounting estimates and risk management processes rely on management judgment, which may prove inadequate, wrong or be adversely impacted by inaccurate or mistakes in assumptions or models.
11 unchanged sentences
If the Company has a material weakness in its internal control over financial reporting, the Company may not detect errors on a timely basis and its financial statements may be materially misstated.
−Removed: If the Company is unable to maintain effective internal controls over financial reporting and disclosure controls, the Company could become subject to investigations by the NASDAQ, the SEC or other regulatory authorities or shareholder litigation, which could require additional management attention and which could adversely affect the Company’s business, financial condition and results of operations.
+Added: If the Company is unable to maintain effective internal controls over financial reporting and disclosure controls, the Company could become subject to investigations by Nasdaq, the SEC or other regulatory authorities or shareholder litigation, which could require
+Added: additional management attention and which could adversely affect the Company’s business, financial condition and results of operations.
Any system of controls, however well designed and operated, is based in part on certain assumptions and management judgment and can provide only reasonable, not absolute, assurances that the objectives of the system are met.
12 unchanged sentences
The Company, as a bank holding company and financial holding company, and the Bank, as a Texas state-chartered bank, are subject to extensive federal and state regulation and supervision and the potential for regulatory enforcement actions, which impact the business on a daily basis.
−Removed: TCBI Securities, Inc., the Bank’s wholly owned non-bank subsidiary, is also subject to the jurisdiction of several regulatory bodies, including the SEC, FINRA and state securities regulators.
+Added: TCBI Securities is also subject to the jurisdiction of several regulatory bodies, including the SEC, FINRA, MSRB and state securities regulators.
These regulations affect lending practices, permissible products and services and their terms and conditions, customer relationships, capital structure, investment practices, accounting, financial reporting, operations and ability to grow, among other things.
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The Company devotes a significant amount of management time and expense to enhancing the infrastructure to support its compliance obligations, which can pose significant regulatory enforcement, financial and reputational risks if not appropriately addressed.
−Removed: The Regulatory Relief Act passed on May 22, 2018, has provided a limited degree of regulatory relief for institutions of the Company’s size.
−Removed: Uncertainty regarding how regulators will evaluate or require capital and liquidity planning going forward remains a risk.
−Removed: The Company continues to increase its capital and liquidity and expand regulatory compliance staffing and systems in order to address evolving regulatory requirements.
−Removed: There is no assurance that financial performance in future years will not be similarly burdened.
The Company expends substantial effort and incurs costs to maintain and improve its systems, controls, accounting, operations, information security, compliance, audit effectiveness, analytical capabilities, staffing and training in order to satisfy regulatory requirements or recommendations.
The Company cannot offer assurance that these efforts will be accepted by regulators as satisfying the applicable legal and regulatory requirements.
−Removed: Failure to comply with relevant laws, regulations, recommendations
−Removed: or policies could result in sanctions by regulatory agencies, civil money penalties and/or reputation damage, which could have a material adverse effect on the business, financial condition and results of operations.
+Added: Failure to comply with relevant laws, regulations, recommendations or policies could result in sanctions by regulatory agencies, civil money penalties and/or reputation damage, which could have a material adverse effect on the business, financial condition and results of operations.
While the Company has policies and procedures designed to prevent any such violations, there can be no assurance that such violations will not occur.
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The Company could be required to pursue legal actions against insurers to obtain payment of amounts owed, and there is no assurance that such actions, if pursued, would be successful.
−Removed: Any regulatory examination scrutiny or new regulatory requirements arising from the recent events in the banking industry could increase the Company’s expenses and affect the Company’s operations.
−Removed: The Company also anticipates increased regulatory scrutiny – in the course of routine examinations and otherwise – and new regulations directed towards banks of similar size to the Bank, designed to address the recent negative developments in the banking industry, all of which may increase the Company’s costs of doing business and reduce its profitability.
−Removed: Among other things, there may be an increased focus by both regulators and investors on the on-balance sheet liquidity of and funding sources for financial institutions, the composition of their deposits and the level of uninsured deposits, the amount of accumulated other comprehensive loss, capital levels and interest rate risk management.
−Removed: As primarily a commercial bank, the Bank has a high degree of uninsured deposits
−Removed: compared to larger national banks or smaller community banks with a stronger focus on retail deposits.
−Removed: As a result, the Bank could face increased scrutiny or be viewed as higher risk by regulators and the investor community.
Other Risks Affecting the Business
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• impact of the 2024 presidential and congressional elections and other political conditions;
−Removed: • the financial health of customers and economic conditions affecting them and the value of collateral, including effects from the COVID-19 pandemic and other pandemics and the continued price volatility of oil and gas and other commodities;
+Added: • the financial health of customers and economic conditions affecting them and the value of collateral, including effects from the continued price volatility of oil and gas and other commodities;
• the incidence of fraud, illegal payments, security breaches and other illegal acts among or impacting the Company, its customers and third parties;
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There can be no assurance that any such losses would not materially and adversely affect results of operations or profitability.
−Removed: Recent negative developments affecting the banking industry, and resulting media coverage, have eroded customer confidence in the banking system.
−Removed: The closures of Silicon Valley Bank and Signature Bank in March 2023 and First Republic Bank in
−Removed: May 2023, and concerns about similar future events, have generated significant market volatility among publicly traded bank holding companies and, in particular, regional banks like the Company.
−Removed: These market developments have negatively impacted customer confidence in the safety and soundness of regional banks.
+Added: Negative developments affecting the banking industry, and resulting media coverage, have eroded customer confidence in the banking system.
+Added: Any future bank failures like those experienced in 2023 or similar events may negatively impact customer confidence in the safety and soundness of regional banks and may generate market volatility among publicly traded bank holding companies and, in particular, regional banks like the Company.
As a result, customers may choose to maintain deposits with larger financial institutions or invest in higher yielding short-term fixed income securities, all of which could materially adversely impact the Company’s liquidity, loan funding capacity, net interest margin, capital and results of operations.
−Removed: While the Department of the Treasury, the Federal Reserve, and the FDIC took action to ensure that depositors of these failed banks had access to their deposits, including uninsured deposit accounts, there is no guarantee that such actions will be successful in restoring customer confidence in regional banks and the banking system more broadly.
−Removed: Furthermore, there is no guarantee that regional bank failures or bank runs similar to the ones that occurred in 2023 will not occur in the future and, if they were to occur, they may have a material and adverse impact on customer and investor confidence in regional banks negatively impacting the Company’s liquidity, capital, results of operations and stock price.
+Added: While the Department of the Treasury, the Federal Reserve, and the FDIC historically have taken action to ensure that depositors of failed banks had access to their deposits, including uninsured deposit accounts, there is no guarantee that regional bank failures or bank runs will not occur in the future and, if they were to occur, they may have a material and adverse impact on customer and investor confidence in regional banks negatively impacting the Company’s liquidity, capital, results of operations and stock price.
The Company is subject to environmental liability risk associated with lending activities.
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Environmental laws may require incurring substantial expenses and may materially reduce the affected property's value by limiting the ability to use or sell it.
−Removed: Although the Company has policies and procedures requiring environmental review before initiating any foreclosure action on real property, these reviews may not be sufficient to detect all potential environmental hazards.
+Added: Although the Company has policies and procedures requiring environmental review before initiating any foreclosure
+Added: action on real property, these reviews may not be sufficient to detect all potential environmental hazards.
The remediation costs and any other financial liabilities associated with an environmental hazard could have a material adverse effect on financial condition, results of operations and profitability.
Future laws or regulations or more stringent interpretations or enforcement policies with respect to existing laws and regulations may increase the Company’s exposure to environmental liability.
−Removed: Severe weather, earthquakes, other natural disasters, pandemics, acts of war or terrorism and other external and geopolitical events could significantly impact the business .
−Removed: Severe weather, earthquakes, other natural disasters, pandemics (such as the COVID-19 pandemic), acts of war or terrorism and other adverse external events could have a significant impact on the Company’s ability to conduct business.
−Removed: Such events could affect the stability of its deposit base, impair the ability of borrowers to repay outstanding loans, impair the value of collateral securing loans, cause significant property damage, result in loss of revenue and/or cause us to incur additional expenses.
+Added: Severe weather, earthquakes, other natural disasters, climate change, pandemics, acts of war or terrorism and other external and geopolitical events could significantly impact the business .
+Added: Severe weather, earthquakes, other natural disasters, pandemics, climate change, acts of war or terrorism and other adverse external events could have a significant impact on the Company’s ability to conduct business.
+Added: Such events could affect the stability of its deposit base, impair the ability of borrowers to repay outstanding loans, impair the value of collateral securing loans, cause significant property damage, result in loss of revenue, cause us to incur additional expenses or disrupt the Company’s operations.
In recent years, hurricanes have caused extensive flooding and destruction along the coastal areas of Texas and in other areas in the U.S., including communities where the Company conducts business.
+Added: Climate change has the potential to increase to frequency and severity of these severe weather events in the future.
Although management has established disaster recovery policies and procedures, the occurrence of any such events could have a material adverse effect on the business, financial condition, results of operations or profitability.
−Removed: Climate change and related legislative and regulatory initiatives including interpretations thereof have the potential to disrupt the business and result in operational changes and expenditures that could significantly impact the business and the operations and creditworthiness of the Company’s clients.
−Removed: Climate change has caused severe and abnormal weather patterns and events that could disrupt operations at one or more of the Company’s locations, which may disrupt its ability to provide financial products and services to clients.
−Removed: Climate change could also have a negative effect on the financial status and creditworthiness of clients, which may decrease revenues and business activities from those clients, increase the credit risk associated with loans and other credit exposures to such clients.
−Removed: The current and anticipated effects of climate change are creating an increasing level of concern for the state of the global environment.
−Removed: As a result, political and social attention to the issue of climate change has increased.
−Removed: In recent years, governments across the world have entered into international agreements to attempt to reduce global temperatures, in part by limiting greenhouse gas emissions.
−Removed: government has rejoined the Paris Climate Agreement, the most recent international climate change accord, while the U.S.
−Removed: Congress, state legislatures and federal and state regulatory agencies are likely to continue to propose and advance numerous legislative and regulatory initiatives seeking to mitigate the effects of climate change.
−Removed: These agreements and measures may result in the imposition of taxes and fees, the required purchase of emission credits, and the implementation of significant operational changes.
−Removed: In 2022, the federal banking agencies proposed guidance for large banking organizations (defined as those having more than $100 billion in total assets) to address climate-related issues through risk management practices, accounting for the effects of climate change in stress testing scenarios and systemic risk assessments, revising expectations for credit portfolio concentrations based on climate-related factors, and encouraging investment by banks in climate-related initiatives and lending to communities disproportionately impacted by the effects of climate change.
−Removed: Each of the above-described initiatives, including other similar initiatives and increasing supervisory expectations, may require the Company to expend significant capital and incur compliance, operating, maintenance and remediation costs.
−Removed: Given the lack of empirical data on the credit and other financial risks posed by climate change, it is impossible to predict how climate change may impact the financial condition and operations;
−Removed: however, as a banking organization, the physical effects of climate change may present certain unique risks.
−Removed: For example, weather disasters, shifts in local climates and other disruptions related to climate change may adversely affect the value of real properties securing loans, which could diminish the value of the loan portfolio.
−Removed: Such events may also cause reductions in regional and local economic activity that may have an adverse effect on customers, which could limit the Company’s ability to raise and invest capital in
−Removed: these areas and communities, each of which could have a material adverse effect on the financial condition, results of operations or profitability.
+Added: Furthermore, legislative and regulatory initiatives related to climate change have the potential to disrupt the business and result in operational changes and expenditures that could significantly impact the business and the operations and creditworthiness of the Company’s clients and also increase the compliance burden on the Company.
Negative public opinion could damage the Company’s reputation and adversely affect its earnings.
2 unchanged sentences
management of actual or potential conflicts of interest and ethical issues;
−Removed: and protection of confidential client information.
+Added: protection of confidential client information;
+Added: and public scrutiny related to environmental, social and governance issues.
The Company’s brand and reputation may also be harmed by actions taken by third parties that it contracts with to provide services to the extent such parties fail to meet their contractual, legal and regulatory obligations or act in a manner that is harmful to clients.
2 unchanged sentences
The Company takes steps to minimize reputation risk, but its efforts may not be sufficient.
−Removed: ESG risks could adversely affect the Company’s reputation and shareholder, employee, client, and third party relationships and may negatively affect the Company’s stock price.
−Removed: The Company faces increasing public scrutiny related to ESG activities and if the Company.
−Removed: fails to act responsibly in a number of areas, such as DEI, environmental stewardship, including with respect to climate change, human capital management, support for our local communities, corporate governance, and transparency, or fails to consider ESG factors in our business operations, the Company’s brand and reputation may be damaged.
−Removed: Furthermore, as a result of the Company’s diverse base of clients and business partners, the Company may face potential negative publicity based on the identity of its clients or business partners and the public’s (or certain segments of the public’s) view of those entities.
−Removed: Such publicity may arise from traditional media sources or from social media and may increase rapidly in size and scope.
−Removed: If the Company’s client or business partner relationships were to become intertwined in such negative publicity, the Company’s ability to attract and retain clients, business partners, and employees may be negatively impacted, and the Company’s stock price may also be negatively impacted.
−Removed: Additionally, the Company faces pressure to not do business in certain industries that are viewed as harmful to the environment or are otherwise negatively perceived, which could impact our growth.
−Removed: Additionally, investors and shareholder advocates are placing ever increasing emphasis on how corporations address ESG issues in their business strategy when making investment decisions and when developing their investment theses and proxy recommendations.
−Removed: The Company may incur meaningful costs with respect to its ESG efforts and if such efforts are negatively perceived, its reputation and stock price may suffer.
Risks Relating to Company Securities
13 unchanged sentences
• changes in government regulations and interpretation of those regulations, changes in practices requested or required by regulators and changes in regulatory enforcement focus;
−Removed: • impacts and disruptions resulting from the COVID-19 pandemic, variants or other pandemics;
−Removed: • environmental or ESG-related concerns or ratings;
• geopolitical conditions such as acts or threats of terrorism or military conflicts.
27 unchanged sentences
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.