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Item 7. Management’s Discussion and Analysis

2025-02-11 compared with 2024-02-13 · 86 added, 84 removed, 388 unchanged (30% of the section changed)

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Recent Industry Developments

During 2023, the banking industry experienced significant volatility with multiple high-profile bank failures and industry wide concerns related to liquidity, deposit outflows, unrealized securities losses, eroding consumer confidence and increased regulatory scrutiny.

Despite these negative industry developments, the Company’s liquidity position and balance sheet remains robust.

Furthermore, the Company’s capital remains at historically high levels with CET1 and total capital ratios of 12.6% and 17.1%, respectively, as of December 31, 2023.

The Company’s total deposits decreased by 2% as compared to December 31, 2022, to $22.4 billion at December 31, 2023.

In response to the industry-wide concerns, the Company took a number of preemptive actions, which included pro-active outreach to clients and an enhanced review of its borrowing and liquidity positions to ensure that the Company’s liquidity and capital positions remain strong and that the Company is positioned to best serve its clients.

Results of Operations

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Income before income taxes

107,061 246,595 431,755

Income tax expense

Net income 189,141 332,478 253,939

29,553 57,454 99,277

77,508 189,141 332,478

Preferred stock dividends 17,250 17,250 17,250

Net income available to common stockholders

$ 60,258 $ 171,891 $ 315,228

Basic earnings per common share

$ 1.29 $ 3.58 $ 6.25

Diluted earnings per common share

$ 1.28 $ 3.54 $ 6.18

Net interest margin 3.03 % 3.17 % 2.79 %

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The Company reported net income of $77.5 million and net income available to common stockholders of $60.3 million for the year ended December 31, 2024, compared to net income of $189.1 million and net income available to common stockholders of $171.9 million for the same period in 2023.

On a fully diluted basis, earnings per common share were $3.54 for the year ended December 31, 2023, compared to $6.18 for the same period in 2022.

ROE was 6.15% and ROA was 0.64% for the twelve months ended December 31, 2023, compared to 11.33% and 1.04%, respectively, for the same period in 2022.

The decrease in net income for the year ended December 31, 2023 compared to the same period in 2022 resulted primarily from a decrease in non-interest income.

On a fully diluted basis, earnings per common share was $1.28 for the year ended December 31, 2024, compared to $3.54 for the same period in 2023.

ROE was 2.04% and ROA was 0.25% for the year ended December 31, 2024, compared to 6.15% and 0.64%, respectively, for the same period in 2023.

The decrease in net income for the year ended December 31, 2024 compared to the same period in 2023 resulted primarily from a decrease in non-interest income, primarily as a result of the $179.6 million loss on sale of available-for-sale debt securities recognized during the third quarter of 2024 in connection with strategic balance sheet repositioning undertaken by the Company.

Details of the changes in the various components of net income are discussed below.

Taxable Equivalent Net Interest Income Analysis - Year to Date(1)

Year ended December 31,

2023 2022 2021

Year Ended December 31, 2024 Year Ended December 31, 2023 Year Ended December 31, 2022

(dollars in thousands) Average

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Loan interest income includes loan fees totaling $54.6 million, $47.2 million and $37.2 million for the years ended December 31, 2024, 2023 and 2022, respectively.

(4) In the first quarter of 2024, enhancements were made to the Company’s methodology for applying relationship pricing credits to mortgage client loans.

To conform to the current period presentation, certain prior period interest income amounts have been reclassified from loans held for investment, mortgage finance to loans held for investment and related yields have been adjusted accordingly.

Volume/Rate Analysis

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(1) Yield/rate and volume variances are allocated to yield/rate.

(2) Taxable equivalent rates used where applicable assuming a 21% tax rate.

(2) Taxable equivalent rates used where applicable.

Net Interest Income

Net interest income was $901.3 million for the year ended December 31, 2024 compared to $914.1 million for 2023.

The increase was primarily due to an increase in yields on average earning assets, partially offset by an increase in funding costs and a decrease in average earning assets.

Average earning assets for the year ended December 31, 2023 decreased $2.7 billion compared to the same period in 2022, which included a $1.6 billion decrease in average interest bearing cash and cash equivalents and a $1.7 billion decrease in average total loans, partially offset by a $636.9 million increase in investment securities.

Average interest bearing liabilities increased $453.0 million for the year ended December 31, 2023 compared to the same period in 2022, primarily due to a $1.0 billion increase in average interest bearing deposits, partially offset by a $506.7 million decrease in average short-term borrowings and a $44.9 million decrease in average long-term debt.

The decrease was primarily due to increases in average interest bearing liabilities and deposit costs, partially offset by increases in average earning assets and yields on average earning assets.

Average earning assets for the year ended December 31, 2024 increased $1.0 billion compared to the same period in 2023, which included increases of $1.2 billion in average total loans and $223.5 million in average investment securities, partially offset by a $413.3 million decrease in average interest bearing cash and cash equivalents.

Average interest bearing liabilities increased $1.6 billion for the year ended December 31, 2024 compared to the same period in 2023, primarily due to a $2.2 billion increase in average interest bearing deposits, partially offset by decreases of $389.1 million in average short-term borrowings and $143.8 million in average long-term debt.

Average non-interest bearing deposits for the year ended December 31, 2024 decreased to $9.0 billion from $9.8 billion for the same period in 2023.

Net interest margin for the year ended December 31, 2024 was 3.03% compared to 3.17% for 2023.

The increase was primarily due to the effect of rising interest rates on earning asset yields and a shift in earning asset composition, partially offset by higher funding costs, also as a result of rising interest rates, compared to the same period in 2022.

The yield on total loans held for investment, net, increased to 6.52% for the year ended December 31, 2023 compared to 4.55% for the same period in 2022 and the yield on earning assets increased to 5.65% for the year ended December 31, 2023 compared to 3.65% for the same period in 2022.

The decrease was primarily due to an increase in interest bearing deposit yields, partially offset by higher yields on investment securities compared to the same period in 2023.

The yield on total loans held for investment, net, of 6.52% for the year ended December 31, 2024 was unchanged compared to the same period in 2023 and the yield on earning assets increased to 5.82% for the year ended December 31, 2024 compared to 5.65% for the same period in 2023.

The average cost of total deposits increased to 2.93% for 2024 from 2.47% for the same period in 2023 and total funding costs, including all deposits, long-term debt and stockholders' equity, increased to 2.75% for 2024 compared to 2.46% for the same period 2023.

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Brokered loan fees 8,961 8,918 14,159

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

Investment banking and advisory fees 104,965 63,670 24,974

Trading income 21,635 22,512 10,080

Gain on disposal of subsidiary — — 248,526

Available-for-sale debt securities gains/(losses), net

(179,581) 489 —

Other 34,205 31,001 13,481

Total non-interest income $ 31,046 $ 161,419 $ 349,522

Non-interest income decreased by $188.1 million during the year ended December 31, 2023 to $161.4 million, compared to $349.5 million for the same period in 2022.

The decrease was primarily due to a non-recurring $248.5 million gain related to the sale of our premium finance subsidiary recorded in 2022, partially offset by increases in investment banking and trading income and other non-interest income.

Non-interest income was $31.0 million for the year ended December 31, 2024, a $130.4 million decrease as compared to the same period in 2023, primarily due to the $179.6 million loss on sale of available-for-sale debt securities recognized during the third quarter of 2024, partially offset by an increase in investment banking and advisory fees.

Non-interest Expense

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Federal Deposit Insurance Corporation (“FDIC”) insurance assessment 23,351 36,775 14,344

Servicing-related expenses — — 27,765

Other 53,873 49,938 56,561

Total non-interest expense $ 758,285 $ 756,947 $ 727,532

Non-interest expense for the year ended December 31, 2023 increased $29.4 million compared to the same period in 2022 primarily due to an increase in salaries and benefits, communications and technology and FDIC insurance assessment, which included $19.9 million in special assessment expense in 2023, partially offset by a decrease in legal and professional expense.

Full-year 2022 legal and professional expense included $15.9 million in expenses related to the sale of our premium finance subsidiary.

Non-interest expense was $758.3 million for the year ended December 31, 2024, an increase of $1.3 million as compared to the same period in 2023, primarily due to increases in salaries and benefits, occupancy expense and communications and technology expense, partially offset by decreases in legal and professional expense and FDIC insurance assessment.

Non-interest expense for the year ended December 31, 2024 included restructuring expenses of $4.4 million recorded in salaries and benefits, $476,000 recorded in occupancy expense and $3.1 million recorded in communications and technology expense.

The decrease in legal and professional expense for the year ended December 31, 2024 resulted primarily from declines in professional services, partially offset by a $5.0 million legal settlement expense recognized in the first quarter of 2024.

FDIC insurance assessment included a $2.8 million special assessment expense in 2024, as compared to a $19.9 million special assessment expense in 2023.

Analysis of Financial Condition

Loans Held for Investment

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

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

The following table summarizes the Company’s loans held for investment by portfolio segment.

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Commercial real estate 5,616,282 5,500,774

Consumer 530,948 552,848

565,376 530,948

Gross loans held for investment

22,542,823 20,420,816

Unearned income (net of direct origination costs)

( 92,757 ) ( 80,258 )

Total loans held for investment $ 22,450,066 $ 20,340,558

Total loans held for investment were $22.5 billion at December 31, 2024, an increase of $2.1 billion from December 31, 2023.

The Company experienced loan growth in the commercial and commercial real estate categories as it has continued to execute on its long-term strategy.

Mortgage finance loans relate to the mortgage warehouse lending operations in which the Company purchases mortgage loan ownership interests that are typically sold within 10 to 20 days and represent 19% and 21% of gross loans held for investment at December 31, 2023 and December 31, 2022, respectively.

The Company experienced loan growth in all loan categories as it has continued to execute on its long-term strategy.

Commercial loan growth includes the impact of the acquisition of a $332.0 million loan portfolio completed during the third

quarter of 2024.

Mortgage finance loans include legal ownership interests in mortgage loans that the Company purchases from unaffiliated mortgage originators, either directly or through a special purpose entity structure, that are typically sold within 10 to 20 days and represent 23% and 19% of gross loans held for investment at December 31, 2024 and December 31, 2023, respectively.

Volumes fluctuate based on the level of market demand for the product and the number of days between purchase and sale of the loans, which can be affected by changes in overall market interest rates, and tend to peak at the end of each month.

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This geographic concentration subjects the Company’s loan portfolio to the general economic conditions within this state.

The risks created by this concentration have been considered by management in the determination of the appropriateness of the allowance for credit losses.

The risks created by this concentration have been considered by management in determining the appropriateness of the allowance for credit losses.

The table below summarizes the industry concentrations of loans held for investment on a gross basis at December 31, 2024:

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Financials (excluding banks) $ 3,991,253 17.7 %

Oil and gas and pipelines 1,205,100 5.9 %

Energy 1,226,290 5.4 %

Technology, telecom and media 1,141,324 5.1 %

Real estate related services (not secured by real estate) 960,319 4.3 %

Healthcare and pharmaceuticals 651,417 2.9 %

Commercial services 584,910 2.6 %

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Entertainment and recreation 283,499 1.3 %

Transportation services 236,100 1.2 %

Healthcare and pharmaceuticals 217,558 1.1 %

Government and education 226,498 1.0 %

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Materials and commodities 180,240 0.8 %

Utilities 146,923 0.7 %

Transportation services 172,949 0.8 %

Consumer services 139,321 0.6 %

Utilities 77,780 0.3 %

Diversified or miscellaneous 574,885 2.6 %

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Business assets $ 9,733,194 43.2 %

Other assets 337,444 1.7 %

Highly liquid assets 320,950 1.4 %

Other assets 174,560 0.8 %

Municipal tax- and revenue-secured 99,844 0.4 %

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

Commercial real estate net charge-offs totaled $5.5 million in 2023, primarily related to a single hospitality loan that was significantly impacted by the COVID-19 pandemic, as compared to $350,000 in 2022.

The table below summarizes the commercial real estate loan portfolio, by property type as of December 31, 2023:

The table below summarizes the commercial real estate loan portfolio on a gross basis, by property type as of December 31, 2024:

(dollars in thousands) Amount Percent of Total

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Industrial buildings 1,092,380 19.5 %

Office buildings 451,660 8.2 %

1-4 Family dwellings (other than condominium) 390,235 6.9 %

Shopping center/mall buildings 265,938 4.8 %

Office buildings 361,941 6.4 %

Senior housing buildings 318,580 5.7 %

Self-storage buildings 212,571 3.9 %

Shopping center/mall buildings 285,257 5.1 %

Commercial buildings 210,702 3.8 %

Hotel/motel buildings 136,767 2.4 %

Residential lots 92,037 1.7 %

Self-storage buildings 113,861 2.0 %

Student housing 72,695 1.3 %

Commercial lots 67,705 1.2 %

Residential lots 46,265 0.8 %

Other 172,011 3.1 %

Total commercial real estate loans $ 5,616,282 100.0 %

The table below summarizes the Company’s commercial real estate portfolio at December 31, 2023 as segregated by the geographic region in which the property is located.

The table below summarizes the Company’s commercial real estate portfolio on a gross basis at December 31, 2024 as segregated by the geographic region in which the property is located.

Approximately 55% of the commercial real estate collateral is located in Texas.

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Loan Maturities and Interest Rate Sensitivity

December 31, 2023

(in thousands) Total Within 1 Year 1-5 Years 5-15 Years After 15 Years

Loan maturity:

The following table shows the contractual maturity distribution of loans held for investment on a gross basis as of December 31, 2024:

(in thousands) Within 1 Year 1-5 Years 5-15 Years After 15 Years Total

Commercial $ 1,945,669 $ 8,854,449 $ 332,219 $ 13,254 $ 11,145,591

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Total loans held for investment $ 9,325,586 $ 12,273,219 $ 561,790 $ 382,228 $ 22,542,823

Interest rate sensitivity for selected loans with:

Fixed interest rates $ 1,133,129 $ 72,272 $ 506,292 $ 536,237 $ 18,328

Floating or adjustable interest rates 19,287,687 7,527,276 11,026,912 406,942 326,557

The following table shows the interest rate composition of loans held for investment on a gross basis with a maturity date over one year as of December 31, 2024:

(in thousands) Fixed Interest Rate Floating Interest Rate Total

Commercial $ 667,754 $ 8,532,168 $ 9,199,922

Mortgage finance — — —

Commercial real estate 270,721 3,403,759 3,674,480

Consumer 13,498 329,337 342,835

Total loans held for investment $ 951,973 $ 12,265,264 $ 13,217,237

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Oil and gas properties — 2,543

Machinery and equipment

Accounts receivable and inventory 6,315 —

Machinery and equipment

Unsecured 60 79

Highly liquid assets 1,340 —

Total commercial 75,564 69,048

Commercial real estate:

Hotel/motel 12,350 —

Commercial property — 1,263

Industrial buildings

Office buildings

Hotel/motel buildings

Total commercial real estate 34,637 12,350

Single family residences 964 —

Total consumer 964 —

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The provision for credit losses, comprised of a provision for loans and off-balance sheet credit losses, is a charge to earnings to maintain the allowance for credit losses at a level consistent with management’s assessment of expected losses at each balance sheet date.

Below is a discussion of provision for credit losses on loans.

The changes made to the Company’s current expected credit loss model, as discussed in Note 1 - Operations and Summary of Significant Accounting Policies in the accompanying notes to the consolidated financial statements included elsewhere in this report, resulted in a reallocation of the allowance for credit losses between loan portfolio segments and allowance balances allocated to off-balance sheet financial instruments.

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

See Note 9 - Financial Instruments with Off-Balance Sheet Risk in the accompanying notes to the consolidated financial statements included elsewhere in this report for presentation of the activity in the allowance for credit losses for off-balance asset credit losses.

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

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

The Company recorded $50.9 million in net charge-offs during the year ended December 31, 2023 compared to $19.9 million in net charge-offs during the same period in 2022.

The Company recorded a provision for credit losses of $67.0 million for the year ended December 31, 2024, compared to a provision of $72.0 million for the year ended December 31, 2023.

The provision for credit losses for the year ended December 31, 2024 reflects growth in loans held for investment and $40.9 million in net charge-offs recorded during the year ended December 31, 2024, compared to $50.9 million in net charge-offs during the same period in 2023.

Criticized loans totaled $714.0 million at December 31, 2024, compared to $738.2 million at December 31, 2023.

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The table below details net charge-offs/(recoveries) as a percentage of average total loans by portfolio segment:

Year Ended December 31,

(dollars in thousands) Net

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The Company offers banking centers, courier services and online and mobile banking.

Bask Bank, the Company’s online banking division, serves customers on a 24 hours-a-day, 7 days-a-week basis solely through online banking.

Average total deposits for the year ended December 31, 2023 decreased $2.1 billion compared to 2022.

Average non-interest bearing deposits for the year ended December 31, 2023 decreased $3.1 billion compared to 2022 and average interest bearing deposits increased $1.0 billion.

The average cost of total deposits increased to 2.47% in 2023 from 0.74% in 2022 primarily due to rising interest rates.

Bask Bank, the Bank’s digital-only online banking division, serves customers on a 24 hours-a-day, 7 days-a-week basis solely through online banking.

Average total deposits for the year ended December 31, 2024 increased $1.4 billion compared to 2023.

Average non-interest bearing deposits for the year ended December 31, 2024 decreased $801.5 million compared to 2023 and average interest bearing deposits increased $2.2 billion compared to 2023.

The average cost of total deposits increased to 2.93% in 2024 from 2.47% in 2023.

The following table discloses average deposits and weighted-average cost of deposits by type:

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Total $ 25,152,638 2.93 % $ 23,775,658 2.47 %

Estimated uninsured deposits at December 31, 2023 were $9.7 billion (43% of total deposits), compared to $12.4 billion (54% of total deposits) at December 31, 2022.

The uninsured amounts are estimated based on the methodologies and assumptions used for the Bank’s regulatory reporting requirements.

The following table shows scheduled maturities of time deposits greater than $250,000:

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The Company regularly evaluates all of its various funding sources with an emphasis on accessibility, stability, reliability and cost-effectiveness.

The Company’s principal source of funding is customer deposits, supplemented by short-term borrowings, primarily from federal funds purchased and Federal Home Loan Bank (“FHLB”) borrowings, which are generally used to fund mortgage finance assets, and long-term debt.

The Company also relies on the availability of the mortgage secondary market provided by Ginnie Mae and government sponsored entities to support the liquidity of mortgage finance assets.

The Company also relies on the availability of the mortgage secondary market provided by Ginnie Mae and government sponsored entities to support the liquidity of mortgage finance loans.

The following table summarizes the Company’s interest bearing cash and cash equivalents:

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Total deposits 11.9 % 13.6 %

The Company’s goal is to obtain as much of its funding for loans held for investment and other earning assets as possible from customer deposits, which are generated principally through development of long-term customer relationships, with a significant focus on treasury management products.

The Company’s goal is to obtain as much of its funding for loans held for investment and other earning assets as possible from customer deposits, which are generated through digital acquisition or as a result of development of long-term customer relationships, with a significant focus on treasury management products.

In addition, the Company also has access to deposits through brokered channels.

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Total deposits $ 25,238,599 100.0 % $ 22,371,839 100.0 %

Estimated uninsured deposits, including accrued interest, were 41% of total deposits at December 31, 2024, compared to 43% of total deposits at December 31, 2023.

The uninsured amounts are estimated based on the methodologies and assumptions used for the Bank’s regulatory reporting requirements.

The Company has short-term borrowing sources available to supplement deposits and meet its funding needs.

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

Repurchase agreements $ — $ 1,142

FHLB borrowings $ 885,000 $ 1,500,000

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

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

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

(2) Unsecured revolving, non-amortizing line of credit with maturity date of February 8, 2026.

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The loan agreement contains customary financial covenants and restrictions.

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

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

The Company has long-term debt outstanding of $859.1 million as of December 31, 2023, comprised of trust preferred securities, subordinated notes and senior unsecured credit linked notes with maturity dates ranging from September 2024 to December 2036.

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

No borrowings were made against this line of credit during the year ended months ended December 31, 2024 or 2023.

The Company has long-term debt outstanding of $660.3 million as of December 31, 2024, comprised of trust preferred securities and subordinated notes with maturity dates ranging from January 2026 to December 2036.

See Note 8 - Short-Term Borrowings and Long-Term Debt in the accompanying notes to the consolidated financial statements included elsewhere in this report for additional information.

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Banking regulations may limit the amount of dividends that may be paid by the Bank.

See Note 10 - Regulatory Ratios and Capital in the accompanying notes to the consolidated financial statements included elsewhere in this report for additional information regarding dividend restrictions and “Liquidity Risks” included in Part I, Item 1A of the 2022 Form 10-K.

Risk Factors.

Periodically, based on market conditions and other factors, and subject to compliance with applicable laws and regulations and the terms of its existing indebtedness, the Company may repay, repurchase, exchange or redeem outstanding indebtedness, or otherwise enter into transactions regarding debt or capital structure.

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The Company has not paid any cash dividends on common stock since operations commenced and has no plans to do so in the foreseeable future.

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

In January 2023, the Company repurchased 564,206 shares of common stock at a weighted average price of $61.50, completing the full $150.0 million of repurchases authorized under this plan.

A new share repurchase program was approved on January 18, 2023 under which the Company could repurchase up to $150.0 million in shares of outstanding common stock.

From March 2023 through December 2023, the Company repurchased 1,257,326 shares of its common stock for an aggregate purchase price of $69.4 million, at a weighted average price of $55.22 per share under this plan.

The aggregate purchase price and weighted average price per share does not include the effect of excise tax expense incurred on net stock repurchases.

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

Any repurchases under the repurchase program will be made in accordance with applicable securities laws from time to time in open market or private transactions.

The extent to which the Company repurchases shares, and the timing of such repurchases, will be at management’s discretion and will depend upon a variety of factors, including market conditions, our capital position and amount of retained earnings, regulatory requirements and other considerations.

The share repurchase program is set to expire on January 31, 2025, and the program may be suspended or discontinued at any time.

On January 17, 2024, the Company’s board of directors authorized a share repurchase program under which the Company could repurchase up to $150.0 million in shares of its outstanding common stock, excluding the effect of excise tax expense incurred on net stock repurchases.

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

During the year ended December 31, 2024, the Company repurchased 1,381,436 shares of its common stock for an aggregate purchase price, including excise tax expense, of $81.5 million, at a weighted average price of $58.57 per share.

On January 22, 2025, the Company’s board of directors authorized a new share repurchase program under which the Company may repurchase up to $200.0 million in shares of its outstanding common stock, excluding the effect of excise tax expense incurred on net stock repurchases.

The share repurchase program expires on January 31, 2026, but may be suspended or discontinued at any time.

Remaining repurchase authorization under the January 17, 2024 share repurchase program was terminated upon authorization of this new program.

Any repurchases under the Company’s repurchase program will be made in accordance with applicable securities laws from time to time in open market or private transactions.

The extent to which the Company repurchases shares, and the timing of such repurchases, will be at management’s discretion and will depend upon a variety of factors, including market conditions, the Company’s capital position and amount of retained earnings, regulatory requirements and other considerations.

For additional information on the Company’s capital and stockholders’ equity, see Note 10 - Regulatory Ratios and Capital, in the accompanying notes to the consolidated financial statements included elsewhere in this report.

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Not all significant accounting policies require management to make difficult, subjective or complex judgments.

However, the policy noted below could be deemed to meet the SEC’s definition of a critical accounting policy.

However, the policy noted below could be deemed to meet the SEC’s definition of a critical accounting estimate.

Allowance for Credit Losses

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

What changed 10-K

Item 7. Management’s Discussion and Analysis