What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2025-02-11 compared with 2024-02-13 · 233 added, 255 removed, 1127 unchanged (30% of the section changed)

11 unchanged sentences

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

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

(the Company) as of December 31, 2024, and 2023, the related consolidated statements of income and other comprehensive income , stockholders' equity and cash flows for each of the three years in the period ended December 31, 2024, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024, in conformity with U.S.

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

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

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

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February 11, 2025

PART I - FINANCIAL INFORMATION

FINANCIAL STATEMENTS

TEXAS CAPITAL BANCSHARES, INC.

CONSOLIDATED BALANCE SHEETS

CONSOLIDATED BALANCE SHEETS - AUDITED

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

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CONSOLIDATED STATEMENTS OF INCOME AND OTHER

COMPREHENSIVE INCOME/(LOSS)

COMPREHENSIVE INCOME - AUDITED

Year Ended December 31,

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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

7 unchanged sentences

Federal Deposit Insurance Corporation insurance assessment 23,351 36,775 14,344

Servicing-related expenses — — 27,765

Other 53,873 49,938 56,561

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Amounts reclassified into net income

253,277 67,752 9,905

Other comprehensive income/(loss) 221,722 72,075 ( 469,909 )

3 unchanged sentences

Basic earnings per common share

$ 1.29 $ 3.58 $ 6.25

Diluted earnings per common share

$ 1.28 $ 3.54 $ 6.18

See accompanying notes to consolidated financial statements.

8 unchanged sentences

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

Total comprehensive income 190,450

Total comprehensive loss

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

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

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

Preferred stock dividends

— — — — — ( 17,250 ) — — — ( 17,250 )

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

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

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

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

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

Total comprehensive loss

Total comprehensive income

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

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

Preferred stock dividends

— — — — — ( 17,250 ) — — — ( 17,250 )

Issuance of stock related to stock-based awards — — 275,681 2 ( 4,217 ) — — — — ( 4,215 )

6 unchanged sentences

Stock-based compensation expense recognized in earnings — — — — 20,212 — — — — 20,212

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

Preferred stock dividends

— — — — — ( 17,250 ) — — — ( 17,250 )

Issuance of stock related to stock-based awards — — 377,336 4 ( 9,069 ) — — — — ( 9,065 )

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Net income $ 77,508 $ 189,141 $ 332,478

Adjustments to reconcile net income to net cash provided by/(used in) operating activities:

Provision/(benefit) for credit losses 72,000 66,000 ( 30,000 )

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

Adjustments to reconcile net income to net cash provided by operating activities:

Provision for credit losses 67,000 72,000 66,000

Deferred tax benefit ( 16,086 ) ( 17,784 ) ( 17,395 )

Depreciation and amortization 54,228 40,473 45,284

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

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

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

Net (gain)/loss recognized on investment securities 173,995 ( 4,060 ) —

Stock-based compensation expense 24,693 24,200 21,432

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Proceeds from pay-offs of loans held for investment, mortgage finance 82,421,016 75,783,347 105,824,407

Proceeds from sale of mortgage servicing rights — — 115,891

Net (increase)/decrease in loans held for investment, excluding mortgage finance loans ( 1,342,840 ) ( 3,001,340 ) 7,076

Net increase in loans held for investment, excluding mortgage finance loans ( 928,967 ) ( 1,342,840 ) ( 3,001,340 )

Proceeds from sale of subsidiary — — 3,324,159

1 unchanged sentence

Net cash provided by/(used in) investing activities ( 2,479,100 ) ( 1,755,478 ) 3,308,567

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

Financing activities

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Issuance of stock related to stock-based awards ( 9,065 ) ( 4,215 ) ( 4,209 )

Net proceeds from issuance of preferred stock — — 289,723

Redemption of preferred stock — — ( 150,000 )

Preferred dividends paid ( 17,250 ) ( 17,250 ) ( 18,721 )

Preferred stock dividends paid ( 17,250 ) ( 17,250 ) ( 17,250 )

Repurchase of common stock ( 81,508 ) ( 105,024 ) ( 115,302 )

Net increase/(decrease) in short-term borrowings ( 615,000 ) 298,858 ( 1,001,690 )

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

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

Net cash used in financing activities

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

Net cash provided by/(used in) financing activities 1,943,937 ( 387,672 ) ( 6,390,936 )

Net decrease in cash and cash equivalents ( 54,042 ) ( 1,769,410 ) ( 2,934,399 )

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Texas Capital Bancshares, Inc.

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

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

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

(“TCBI” or the “Company”) is a registered bank holding company and a full-service financial services firm that delivers customized solutions to businesses, entrepreneurs and individual customers.

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

The Company’s business activities are conducted primarily through its wholly-owned bank subsidiary Texas Capital Bank (the “Bank”) and its wholly-owned non-bank subsidiary, TCBI Securities Inc.

(“TCBI Securities”).

The Bank is a Texas state-chartered bank.

TCBI Securities is a registered broker-dealer with the U.S.

Securities and Exchange Commission (“SEC”) and a member of the Financial Industry Regulatory Authority (“FINRA”) and Municipal Securities Rulemaking Board (“MSRB”).

The Company was incorporated as a Delaware corporation in 1996 and commenced banking operations in 1998.

Basis of Presentation

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

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

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

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Such amortization and accretion are included in interest income from investment securities.

Gains or losses realized upon the sale of debt securities is recorded in other non-interest income on the consolidated statements of income and other comprehensive income.

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

The cost of securities sold is based on the specific identification method.

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Loans Held for Sale

The Company transitioned its mortgage correspondent aggregation (“MCA”) program to a third party in 2021.

Prior to transition, the Company committed to purchase residential mortgage loans from independent correspondent lenders and delivered those loans into the secondary market via whole loan sales to independent third parties or in securitization transactions to third parties such as Ginnie Mae or to GSEs.

In some cases, the Company retained the mortgage servicing rights.

Once purchased, these loans were classified as held for sale and carried at fair value pursuant to the election of the fair value option in accordance with Accounting Standards Codification (“ASC”) 825, Financial Instruments .

At the commitment date, the Company entered into a corresponding forward sale commitment with a third party, typically Ginnie Mae or a GSE, to deliver the loans within a specified timeframe.

The estimated gain/(loss) for the entire transaction (from initial purchase commitment to final delivery of loans) was recorded as an asset or liability.

The fair value of loans held for sale is derived from observable current market prices, when available, and includes the fair value of the mortgage servicing rights.

Adjustments to reflect unrealized gains and losses resulting from changes in fair value and realized gains and losses upon ultimate sale of the loans are classified as gain/(loss) on sale of loans held for sale on the consolidated statements of income and other comprehensive income.

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

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

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

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

From time to time the Company holds for sale certain commercial loans and also the guaranteed portion of Small Business Administration 7(a) loans, which are carried at lower of cost or fair value.

Loans held for sale are carried at the lower of cost or fair value, unless, pursuant to the election of the fair value option in accordance with Accounting Standards Codification (“ASC”) 825, Financial Instruments , the Company elects to carry loans held for sale at fair value.

As of December 31, 2024 and December 31, 2023, the Company has no loans held for sale accounted for under the fair value option.

Loans Held for Investment

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A loan is placed back on accrual status when both principal and interest are current and it is probable that all amounts due will be collected (both principal and interest) according to the terms of the loan agreement.

Loans held for investment includes legal ownership interests in mortgage loans that the Company purchases through its mortgage finance division.

The ownership interests are purchased from unaffiliated mortgage originators who are seeking additional liquidity to facilitate their ability to originate loans.

Loans held for investment includes legal ownership interests in mortgage loans that the Company purchases from unaffiliated mortgage originators, either directly or through a special purpose entity (“SPE”) structure, who are seeking additional liquidity to facilitate their ability to originate loans.

In the case of an SPE structure, the unaffiliated mortgage originator is responsible for formation of the SPE and ongoing servicing of the underlying mortgage loans, and thus is the primary beneficiary of the SPE.

The mortgage originator has no obligation to offer and the Company has no obligation to purchase these interests.

The originator closes mortgage loans consistent with underwriting standards established by approved investors, and, at the time of the sale to the investor, the Company’s ownership interest and that of the originator are delivered to the investor selected by the originator and approved.

The Company typically purchases up to a 99% ownership interest in each mortgage with the originator owning the remaining percentage.

These mortgage ownership interests are generally held for a period of less than 30 days and more typically 10-20 days.

Because of conditions in agreements with originators designed to reduce transaction risks, under ASC 860, Transfers and Servicing of Financial Assets (“ASC 860”), the ownership interests do not qualify as participating interests.

Under ASC 860, the ownership interests are deemed to be loans to the originators and payments received from investors are deemed to be payments made by or on behalf of the originator to repay the loan.

Because the Company has an actual, legal ownership interest in the underlying residential mortgage loan, these interests are reported as extensions of credit to the originators that are secured by the mortgage loans as collateral.

Due to market conditions or events of default by the investor or the originator, the Company could be required to purchase the remaining interests in the mortgage loans and hold them beyond the expected 10-20 days.

Because of conditions in agreements with originators (or SPEs) designed to reduce transaction risks, under ASC 860, Transfers and Servicing of Financial Assets (“ASC 860”), the ownership interests do not qualify as participating interests.

Under ASC 860, the ownership interests are deemed to be loans to the originators (or SPEs) and payments received from investors are deemed to be payments made by or on behalf of the originators (or SPEs) to repay the loan.

Because the Company has an actual, legal ownership interest in the underlying residential mortgage loan, these interests are reported as extensions of credit to the originators (or SPEs) that are secured by the mortgage loans as collateral.

Due to market conditions or events of default by the investor or the originators (or SPEs), the Company could be required to purchase the remaining interests in the mortgage loans and hold them beyond the expected 10-20 days.

Mortgage loans acquired under these conditions would require mark-to-market adjustments to income and could require further allocations of the allowance for credit losses or be subject to charge-off in the event the loans become impaired.

Purchased loans are evaluated upon acquisition in order to determine if the loan, or pool of loans, has experienced more-than-insignificant deterioration in credit quality since origination or issuance (“PCD loans”).

PCD loans are recorded at fair value at the acquisition date along with an allowance for credit losses determined using the same methodology as originated loans.

The sum of the loan’s purchase price and allowance for credit losses becomes its initial amortized cost basis.

The difference between the initial amortized cost basis and the par value of the loan is a non-credit discount or premium, which is amortized into interest income over the life of the loan.

Subsequent changes to the allowance for credit losses are recorded through provision for credit losses.

Allowance for Credit Losses

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

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

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

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

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

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

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

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

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

and/or a Portfolio Segment Level Qualitative Factor (“SLQF”).

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

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Mortgage Finance.

Mortgage finance loans relate to mortgage warehouse lending operations in which the Company purchases mortgage loan ownership interests from unaffiliated mortgage originators that are generally held for a period of less than 30 days and more typically 10-20 days before they are sold to an approved investor.

Mortgage finance loans include legal ownership interests in mortgage loans that the Company purchases from unaffiliated mortgage originators, either directly or through a SPE structure, that are generally held for a period of less than 30 days and more typically 10-20 days before they are sold to an approved investor.

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 housing demand and tend to peak at the end of each month.

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

They are characterized by the distinct possibility that the

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

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

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

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The methodology used in the estimation of the allowance, which is performed at least quarterly, is designed to be dynamic and responsive to changes in portfolio credit quality and forecasted economic conditions.

Changes are reflected in the pool-basis allowance and in reserves assigned on an individual basis as the collectability of classified loans is evaluated with new information.

Changes are reflected in the pool-basis allowance and in reserves assigned on an individual basis as the collectability of classified loans is evaluated with new

As the Company’s portfolio has matured, historical loss ratios have been closely monitored.

The review of the appropriateness of the allowance is performed by executive management and presented to the audit and risk committees of the board of directors for their review.

The committees report to the board as part of the board's quarterly review of the Company’s consolidated financial statements.

The review of the appropriateness of the allowance is performed by executive management and presented to the Audit Committee and Risk Committee of the board of directors for their review.

The committees report to the board of directors as part of the board of directors’ quarterly review of the Company’s consolidated financial statements.

When management determines that foreclosure is probable, and for certain collateral-dependent loans where foreclosure is not considered probable, expected credit losses are based on the estimated fair value of the collateral adjusted for selling costs, when appropriate.

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

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

No amortization expense related to intangible assets was recorded during the years ended December 31, 2024 or December 31, 2023, as compared to $ 338,000 during the years ended December 31, 2022.

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

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

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

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

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

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

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These financial instruments include commitments to extend credit and standby letters of credit that involve varying degrees of credit risk in excess of the amount recognized on the consolidated balance sheets.

The Company’s exposure to credit loss in the event of non-performance by the other party to these financial instruments is represented by the contractual amount of the instruments.

The Company’s exposure to credit loss in the event of non-performance by the other party to these financial instruments is

represented by the contractual amount of the instruments.

The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments.

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

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

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

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

1 unchanged sentence

The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers.

In conjunction with the sale and securitization of loans held for sale and their related servicing rights, the Company may be exposed to liability resulting from recourse, repurchase and make-whole agreements.

If it is determined subsequent to the sale of a loan or its related servicing rights that a breach of the representations or warranties made in the applicable sale agreement has occurred, which may include guarantees that prepayments will not occur within a specified and customary time frame, the Company may have an obligation to either (a) repurchase the loan for the unpaid principal balance, accrued interest and related advances, (b) indemnify the purchaser against any loss it suffers or (c) make the purchaser whole for the economic benefits of the loan and its related servicing rights.

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

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

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

Right of use (“ROU”) assets represent the Company’s right to use an underlying asset during the lease term and lease liabilities represent its obligation to make lease payments arising from the lease.

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

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

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

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

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

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• Service charges on deposit accounts - these represent general service fees for monthly account maintenance and activity- or transaction-based fees and consist of transaction-based revenue, time-based revenue (service period), item-based revenue or some other individual attribute-based revenue.

Revenue is recognized when the performance obligation is completed, which is generally monthly for account maintenance services or when a transaction has been completed (such as a stop payment).

Revenue is recognized when the performance obligation is completed, which is generally monthly for account maintenance services or when a transaction has been

completed (such as a stop payment).

Payments for these activities are generally received at the time the performance obligations are satisfied.

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These fees are typically paid on a quarterly basis and recognized ratably throughout the quarter as the performance obligation is satisfied each month.

• Brokered loan fees - these represent fees for the administration and funding of purchased mortgage loan interests as well as facility renewal and application fees received from mortgage originator customers in the mortgage warehouse lending business.

Also included are fees received from independent correspondent mortgage lenders as consideration for the purchase of individual residential mortgage loans through the Company’s MCA business.

Revenue related to the mortgage warehouse lending business is recognized when the related loan interest is disposed (i.e., through sale or payoff) or upon receipt of the facility renewal or application.

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

• Investment banking and trading income - includes the following:

Year Ended December 31,

2023 2022 2021

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

Trading income 24,816 10,080 2,434

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

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

Revenue is recognized when the related mortgage loan interest is disposed (i.e., through sale or payoff) or upon receipt of the facility renewal or application.

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

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

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

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

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

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

1 unchanged sentence

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

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

transactions through card networks.

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

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

Stock-based Compensation

The Company accounts for all stock-based compensation transactions in accordance with ASC 718, Compensation — Stock Compensation (“ASC 718”), which requires that stock compensation transactions be recognized as compensation expense on the consolidated statements of income and other comprehensive income based on their fair values on the measurement date, which is generally the date of the grant.

The Company accounts for all stock-based compensation transactions in accordance with ASC 718, Compensation — Stock Compensation (“ASC 718”), which requires that stock compensation transactions be recognized as compensation expense over the requisite service period, with forfeitures recognized as they occur, on the consolidated statements of income and other comprehensive income based on their fair values on the measurement date, which is generally the date of the grant.

As compensation expense is recognized, a deferred tax asset is recorded that represents an estimate of the future tax deduction from exercise or release of restrictions.

At the time awards are exercised, cancelled, expire or restrictions are released, the Company recognizes an adjustment to income tax expense for the difference between the previously estimated tax deduction and the actual tax deduction realized.

The Company and its subsidiary file a consolidated federal income tax return.

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

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

as a result the effects become “stranded” in AOCI.

Stranded tax effects caused by the revaluation of deferred taxes are reclassified from AOCI to retained earnings in accordance with ASU 2018-02 “ Income Statement - Reporting Comprehensive Income (Topic 220):

Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.”

Unrecognized tax benefits for the uncertain portion of recorded tax benefits and related interest may result from the application of complex tax laws, rules, regulations and interpretations.

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Treasury, U.S.

government agency and residential mortgage-backed securities are based on prices obtained from independent pricing services.

government agency, residential mortgage-backed and commercial mortgage-backed securities are based on prices obtained from independent pricing services.

The Company’s U.S.

Treasury securities are valued based on quoted

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

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

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

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

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

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

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

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

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

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

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

term of the hedge if a cash flow hedge.

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

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Segment Reporting

The Company has determined that all of its banking divisions and subsidiaries meet the aggregation criteria of ASC 280, Segment Reporting , as its current operating model is structured whereby banking divisions and subsidiaries serve a similar base of primarily commercial clients utilizing a company-wide offering of similar products and services managed through similar processes and platforms that are collectively reviewed by the chief operating decision maker.

The Company adopted Accounting Standards Update 2023-07 “ Segment Reporting (Topic 280) - Improvement to Reportable Segment Disclosures” on January 1, 2024.

The CODM regularly assesses performance of the aggregated single operating and reporting segment and decides how to allocate resources based on net income calculated on the same basis as is net income reported in the Company’s consolidated statements of income and other comprehensive income.

The CODM is also regularly provided with expense information at a level consistent with that disclosed in the Company’s consolidated statements of income and other comprehensive income.

(2) Earnings Per Share

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(in thousands except share and per share data) 2024 2023 2022

Net income $ 189,141 $ 332,478 $ 253,939

$ 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—weighted average common shares 46,559,668 48,054,935 50,457,746

2 unchanged sentences

Basic earnings per common share

$ 1.29 $ 3.58 $ 6.25

Diluted earnings per common share

$ 1.28 $ 3.54 $ 6.18

Anti-dilutive outstanding stock-settled awards — 97,368 311,226

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Treasury securities $ 280,137 $ — $ ( 2,852 ) $ 277,285

government agency securities 125,000 — ( 18,408 ) 106,592

Residential mortgage-backed securities 3,195,145 7,200 ( 168,302 ) 3,034,043

Commercial mortgage-backed securities

206,830 — ( 5,398 ) 201,432

CRT securities 12,466 — ( 540 ) 11,926

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Debt Securities

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

During the third quarter of 2024, the Company sold available-for-sale debt securities with an amortized cost basis of $ 1.2 billion, realizing a loss of $ 179.6 million, and repositioned the proceeds into a purchase of available-for-sale residential mortgage-backed securities with an amortized cost basis of $ 1.1 billion.

In the first quarter of 2023, the Company sold available-for-sale U.S.

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

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The table below presents the weighted average yields for the Company’s available-for-sale debt securities for the year ended December 31, 2024.

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

Treasury securities

government agency securities Residential mortgage-backed securities CRT securities

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

Treasury securities Residential mortgage-backed securities Commercial mortgage-backed securities

CRT securities

Due within one year 3.14 % — % — % — %

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Residential mortgage-backed securities 1,338,801 ( 18,141 ) 1,323,180 ( 150,161 ) 2,661,981 ( 168,302 )

Commercial mortgage-backed securities

201,432 ( 5,398 ) — — 201,432 ( 5,398 )

CRT securities — — 11,926 ( 540 ) 11,926 ( 540 )

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At December 31, 2024, the Company had 60 available-for-sale debt securities in an unrealized loss position, comprised of 6 U.S.

Treasury securities, five U.S.

government agency securities, 90 residential mortgage-backed securities and two CRT securities.

Treasury securities, 46 residential mortgage-backed securities, 6 commercial mortgage-backed securities and two CRT securities.

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

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

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

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

Equity Securities

At December 31, 2024 and December 31, 2023, debt securities with carrying values of approximately $ 940,000 and $ 1.6 million, respectively, were pledged to secure certain customer deposits.

Equi ty Securities

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

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(4) Loans and Allowance for Credit Losses on Loans

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

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

Loans are summarized by portfolio segment as follows:

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(1) Excludes accrued interest receivable of $ 107.3 million and $ 118.1 million at December 31, 2024 and December 31, 2023, respectively, that is recorded in accrued interest receivable and other assets on the consolidated balance sheets.

During the third quarter of 2024, the Company purchased a $ 332.0 million commercial loan portfolio, which included certain PCD loans.

The following table provides a summary of PCD loans purchased and the associated credit loss reserve at acquisition date:

(in thousands) Total

Par value (unpaid principal balance) $ 20,139

Allowance for credit losses on loans at acquisition

Non-credit premium

Purchase price

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

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

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

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

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

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

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

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

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

Allowance established for acquired PCD loans 2,579 — — — 2,579

Provision for credit losses on loans 57,019 ( 1,418 ) 5,242 ( 813 ) 60,030

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The Company recorded a $ 60.0 million provision for credit losses on loans for the year ended December 31, 2024, compared to $ 47.4 million for the same period of 2023.

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

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

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

The $ 60.0 million provision for credit losses on loans resulted primarily from growth in loans held for investment and $ 40.9 million in net charge-offs during the year ended December 31, 2024 , compared to net charge-offs of $ 50.9 million during the same period of 2023.

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

A loan is considered collateral-dependent when the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral.

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

At December 31, 2024, the Company had $ 28.0 million in collateral-dependent commercial loans, collateralized by business assets, and $ 34.6 million and $ 1.0 million in collateral-dependent commercial real estate and consumer loans, respectively, both of which are collateralized by real estate.

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

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Total $ 14,508 $ 7,829 $ 4,265 $ 26,602 $ 111,165 $ 22,405,056 $ 22,542,823 $ 12,085

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

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

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

(1) As of December 31, 2024, $ 360,000 of non-accrual loans were earning interest income on a cash basis compared to $ 358,000 as of December 31, 2023.

Additionally, $ 287,000 of interest income was recognized on non-accrual loans for the year ended December 31, 2024 compared to $ 37,000 for the same period in 2023.

Accrued interest of $ 1.4 million and $ 3.0 million was reversed during the year ended December 31, 2024 and December 31, 2023, respectively.

Modifications to Borrowers Experiencing Financial Difficulty

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

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

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

The table below details gross loans held for investment as of December 31, 2024 and December 31, 2023 made to borrowers experiencing financial difficulty that were modified during the year ended December 31, 2024 and December 31, 2023, by type of modification granted and the financial effect of those modifications:

Financial Statement Impact

($ in thousands) Payment

2 unchanged sentences

Extension Interest Rate

Extension Total Percentage of

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

Commercial real estate

— 21,364 — — 21,364 0.10 %

Extension Total Percentage of Loans Held for Investment Interest Rate Reduction Term Extension (in months) Payment Deferrals

Year Ended December 31, 2024

Commercial $ 36,853 $ 9,583 $ 9,273 $ — $ 55,709 0.25 % — % 6 to 13

Commercial real estate 18,488 15,831 13,915 — 48,234 0.21 % — % 3 to 4

Total $ 55,341 $ 25,414 $ 23,188 $ — $ 103,943 0.46 %

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

Interest Rate

Reduction Term Extension

(in months) Total Payment

(in thousands)

Year Ended December 31, 2023

Commercial $ 30,873 $ 733 $ 5,458 $ 6,064 $ 43,128 0.21 % 0.70 % 4 to 36

Commercial real estate

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

Commercial real estate — 21,364 — — 21,364 0.10 % — % 4 to 6

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

The table below details gross loans held for investment as of December 31, 2024 and December 31, 2023 that experienced a default during the periods presented subsequent to being granted a modification in the prior twelve months.

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

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

(in thousands)

Deferral Term

Extension Interest Rate

Reduction and

Term Extension Total

Year Ended December 31, 2024

Commercial $ 2,729 $ — $ — $ 2,729

Total $ 2,729 $ — $ — $ 2,729

Year Ended December 31, 2023

Commercial $ — $ 240 $ 6,064 $ 6,304

The table below provides an age analysis of gross loans held for investment as of December 31, 2024 made to borrowers experiencing financial difficulty that were modified in the prior twelve months, and as of December 31, 2023 for loans that were modified since January 1, 2023, the date of adoption of Accounting Standards Update 2022-02:

(in thousands) 30-89 Days

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Total $ 7,350 $ — $ 51,165 $ 45,428 $ 103,943

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

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

Extended Maturity Adjusted Payment Schedule Total

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

Year Ended December 31, 2022

December 31, 2023

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

Commercial real estate

4,141 — — 17,223 21,364

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

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

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

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

The following table presents ROU assets and lease liabilities:

8 unchanged sentences

Total $ 225,207 $ 111,073

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

As of December 31, 2024, operating leases had remaining lease terms of approximately 1 year to 15 years, while finance leases had remaining terms of less than 1 year.

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

7 unchanged sentences

Variable lease cost 6,069 7,168

Sublease income — ( 18 )

Net lease cost $ 29,021 $ 23,434

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Present value of lease liabilities $ 234 $ 224,973 $ 225,207

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

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

As of December 31, 2024, the Company had $ 5.4 million of future payments for banking center leases that have not yet commenced.

These leases are expected to commence during 2026, with lease terms of approximately 11 years.

(6) Premises & Equipment

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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.

1 unchanged sentence

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.

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

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

7 unchanged sentences

Total long-term debt $ 660,346 $ 859,147

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

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

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

12 unchanged sentences

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

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

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

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

(in thousands) Commercial Mortgage

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The Company’s and the Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.

The Basel III regulatory capital framework (the “Basel III Capital Rules”) adopted by U.S.

federal regulatory authorities, among other things, (i) establishes the capital measure called “Common Equity Tier 1” (“CET1”), (ii) specifies that Tier 1 capital consist of CET1 and “Additional Tier 1 Capital” instruments meeting stated requirements, (iii) requires that most deductions/adjustments to regulatory capital measures be made to CET1 and not to other components of capital and (iv) defines the scope of the deductions/adjustments to the capital measures.

Additionally, the Basel III Capital Rules require that the Company maintains a 2.5 % capital conservation buffer with respect to each of CET1, Tier 1 and total capital to risk-weighted assets, which provides for capital levels that exceed the minimum risk-based capital adequacy requirements.

The Basel III Capital Rules adopted by U.S.

federal banking agencies, among other things, (i) establish the capital measure called “Common Equity Tier 1” (“CET1”), (ii) specify that Tier 1 capital consists of CET1 and “Additional Tier 1 Capital” instruments meeting stated requirements, (iii) require that most deductions/adjustments to regulatory capital measures be made to CET1 and not to other components of capital and (iv) define the scope of the deductions/adjustments to the capital measures.

Additionally, the Basel III Capital Rules require that the Company maintain a 2.5 % capital conservation buffer comprised of CET1, with respect to each of CET1, Tier 1 and total capital to risk-weighted asset ratios.

A financial institution with a conservation buffer of less than the required amount is subject to limitations on capital distributions, including dividend payments and stock repurchases, and certain discretionary bonus payments to executive officers.

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

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

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

No dividends were declared or paid on the Company’s common stock during the year ended December 31, 2024 or during 2023.

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.

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

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

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.

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The 2019 CECL Rule included a transition option that allows banking organizations to phase in, over a three-year period, the day-one adverse effects of adopting the new accounting standard related to the measurement of current expected credit losses on their regulatory capital ratios (three-year transition option).

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

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

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

Quantitative measures established by regulation to ensure capital adequacy require the Company and the Bank to maintain minimum amounts and ratios of CET1, Tier 1 and total capital to risk-weighted assets, and of Tier 1 capital to average assets, each as defined in the regulations.

Management believes, as of December 31, 2023, that the Company and the Bank meet all capital adequacy requirements to which they are subject.

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

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

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

Any such change could reduce one or more capital ratios below well capitalized status.

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

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

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

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

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

1 unchanged sentence

In 2024, the amount of the notes that qualify as Tier 2 capital has been reduced by 80%.

The table below summarizes the Company’s and the Bank’s actual and required capital ratios under the Basel III Capital Rules.

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

Actual Minimum Capital Required(2) Capital Required to be Well Capitalized

(dollars in thousands) Capital Amount Ratio Capital Amount Ratio Capital Amount Ratio

December 31, 2023

Company $ 3,264,609 12.65 % $ 1,806,644 7.00 % N/A N/A

Bank 3,599,919 14.01 % 1,798,495 7.00 % 1,670,031 6.50 %

Total capital (to risk-weighted assets)

Company 4,405,575 17.07 % 2,709,965 10.50 % 2,580,919 10.00 %

Bank 3,959,100 15.41 % 2,697,742 10.50 % 2,569,278 10.00 %

The table below summarizes the Company’s and the Bank’s actual and required capital ratios under the Basel III Capital Rules and other standards.

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

December 31, 2024 December 31, 2023

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

CET1 capital (to risk-weighted assets) 7.00 % N/A $ 3,251,979 11.38 % $ 3,264,609 12.65 %

Tier 1 capital (to risk-weighted assets) 8.50 % 6.00 % 3,661,979 12.82 % 3,674,609 14.24 %

Company 3,674,609 14.24 % 2,193,781 8.50 % 1,548,552 6.00 %

Bank 3,599,919 14.01 % 2,183,886 8.50 % 2,055,422 8.00 %

Tier 1 capital (to average assets)(1)

Company 3,674,609 12.21 % 1,204,192 4.00 % N/A N/A

Bank 3,599,919 12.00 % 1,200,091 4.00 % 1,500,113 5.00 %

December 31, 2022

Company $ 3,180,208 13.00 % $ 1,712,608 7.00 % N/A N/A

Bank 3,408,178 13.95 % 1,710,056 7.00 % 1,587,909 6.50 %

Total capital (to risk-weighted assets) 10.50 % 10.00 % 4,390,656 15.37 % 4,405,575 17.07 %

Company 4,331,098 17.70 % 2,568,912 10.50 % 2,446,583 10.00 %

Bank 3,987,720 16.32 % 2,565,083 10.50 % 2,442,937 10.00 %

Tier 1 capital (to average assets)(1) 4.00 % N/A 3,661,979 11.33 % 3,674,609 12.21 %

CET1 capital (to risk-weighted assets) 7.00 % 6.50 % $ 3,611,714 12.75 % $ 3,599,919 14.01 %

Tier 1 capital (to risk-weighted assets) 8.50 % 8.00 % 3,611,714 12.75 % 3,599,919 14.01 %

Company 3,590,208 14.67 % 2,079,595 8.50 % 1,467,950 6.00 %

Bank 3,568,178 14.61 % 2,076,496 8.50 % 1,954,349 8.00 %

Total capital (to risk-weighted assets) 10.50 % 10.00 % 3,968,168 14.00 % 3,959,100 15.41 %

Tier 1 capital (to average assets)(1) 4.00 % 5.00 % 3,611,714 11.27 % 3,599,919 12.00 %

Company 3,590,208 11.54 % 1,244,494 4.00 % N/A N/A

Bank 3,568,178 11.48 % 1,243,232 4.00 % 1,554,039 5.00 %

(1) The Tier 1 capital ratio (to average assets) is not impacted by the Basel III Capital Rules;

1 unchanged sentence

(2) Percentages represent the minimum capital ratios plus, as applicable, the fully phased-in 2.5% CET1 capital buffer under the Basel III Capital Rules.

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

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

(11) Stock-Based Compensation

8 unchanged sentences

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

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

The Company did not make any matching contributions in 2024, 2023, or 2022.

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

8 unchanged sentences

Under the plans, the Company may grant, among other things, non-qualified stock options, incentive stock options, restricted stock, restricted stock units (“RSUs”), stock appreciation rights (“SARs”), performance awards or any combination thereof to employees and non-employee directors.

The Company has historically issued new shares to satisfy share unit conversions.

A total of 1,400,000 shares are authorized for grant under the current plan.

13 unchanged sentences

Intrinsic value of exercised $ — $ — $ 64,000

A summary of the Company’s RSU activity and related information is as follows.

Grants of RSUs include time-based vesting conditions that generally vest ratably over a period of three to five years .

Additionally, from time to time, grants of RSUs with both time-based and performance-based vesting conditions are made that generally vest at the end of a three or four year period.

A summary of the Company’s stock-settled RSU activity and related information is as follows.

Grants of stock-settled RSUs include time-based vesting conditions that generally vest ratably over a period of three years .

Additionally, from time to time, grants of stock-settled RSUs with both time-based and performance-based vesting conditions are made that generally vest at the end of a three year period.

December 31, 2024 December 31, 2023 December 31, 2022

14 unchanged sentences

$ 32,049,000 $ 20,125,000 $ 18,640,000

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

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

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

Total compensation cost for grants of stock-settled units was $ 24.2 million, $ 21.2 million and $ 30.1 million for the years ended December 31, 2023, 2022 and 2021, respectively.

The Company did not have cash-settled RSUs outstanding at December 31, 2023.

No grants of cash-settled RSUs were made in 2023, 2022 or 2021.

The grant date fair value of stock-settled RSUs and performance awards that do not contain market conditions is equal to the market price of common stock on the grant date.

The value of performance awards that include a market condition is estimated on the date of grant using a Monte Carlo simulation model with the following weighted average assumptions:

December 31, 2024 December 31, 2023 December 31, 2022

Risk-free interest rate

4.41 % 4.14 % 1.56 %

Expected stock price volatility

38.3 % 50.2 % 57.1 %

Simulation period

2.87 years 2.89 years 2.89 years

A summary of the Company’s cash-settled RSU activity and related information is as follows.

Grants of stock-settled RSUs include time-based vesting conditions that generally vest ratably over a period of three years .

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

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

December 31, 2024 December 31, 2023 December 31, 2022

RSUs outstanding at beginning of year

Granted 226,864 — —

Vested ( 55 ) — ( 12,655 )

Forfeited ( 31,998 ) — ( 476 )

RSUs outstanding at year-end

Compensation expense $ 4,481,000 $ — $ 186,000

Weighted average years over which unrecognized compensation expense is expected to be recognized 2.19 0.00 0.00

(12) Income Taxes

23 unchanged sentences

Disallowed compensation 2,022 2 % 1,176 — % 2,771 1 %

Uncertain tax positions recognized 2,688 3 % 155 — % 167 — %

Other 868 1 % 742 — % ( 1,454 ) ( 1 ) %

Total $ 29,553 28 % $ 57,454 23 % $ 99,277 23 %

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

At December 31, 2024, 2023 and 2022, the Company had unrecognized tax benefits of $ 4.3 million, $ 1.0 million and $ 889,000 , respectively.

If the income tax impacts from these tax positions are ultimately realized, such realization would not have a material impact on the income tax provision or effective tax rate.

The Company is no longer subject to U.S.

federal income tax examinations for years before 2021 or state and local income tax examinations for years before 2020.

The table below summarizes significant components of deferred tax assets and liabilities utilizing the federal corporate income tax rate of 21%.

The table below summarizes significant components of deferred tax assets and liabilities utilizing the applicable federal and state corporate income tax rates.

Management believes it is more likely than not that all of the deferred tax assets will be realized.

3 unchanged sentences

Lease liabilities 50,852 25,080

Loan origination fees 14,928 14,385

Loan origination fees, net

14,765 13,377

Stock compensation 6,518 6,216

Non-accrual interest 2,707 1,672

Non-qualified deferred compensation 4,603 4,782

Deferred compensation

Net unrealized losses in AOCI 53,404 96,229

2 unchanged sentences

Deferred tax liabilities:

Loan origination costs ( 1,551 ) ( 3,217 )

Leases ( 9,741 ) ( 12,863 )

Lease financing transactions

( 15,262 ) ( 9,741 )

Lease ROU assets ( 37,527 ) ( 21,225 )

4 unchanged sentences

(13) Fair Value Disclosures

The Company determines the fair market values of its assets and liabilities measured at fair value on a recurring and nonrecurring basis using the fair value hierarchy as prescribed in ASC 820.

The Company determines the fair market values of its assets and liabilities measured at fair value on a recurring and nonrecurring basis using the fair value hierarchy as prescribed in Accounting Standards Codification 820, Fair Value Measurements and Disclosures.

See Note 1 - Operations and Summary of Significant Accounting Policies for information regarding the fair value hierarchy and a description of the methods and significant assumptions used by the Company in estimating its fair value disclosures for financial statements.

5 unchanged sentences

Treasury securities $ 277,285 $ — $ —

government agency securities — 106,592 —

Residential mortgage-backed securities — 3,034,043 —

Commercial mortgage-backed securities

CRT securities — — 11,926

Equity securities(1)(2) 59,235 16,026 —

Mortgage loans held for sale(3) — 706 —

Loans held for investment(4)

10 unchanged sentences

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

Mortgage loans held for sale(3) — 706 —

Loans held for investment(4) — — 38,341

Derivative assets(5)

Securities sold not yet purchased(6)

Derivative liabilities(5)

Non-qualified deferred compensation plan liabilities(7)

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

(1) Available-for-sale debt securities and equity securities are measured at fair value on a recurring basis, generally monthly.

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

14 unchanged sentences

Available-for-sale debt securities:(1)

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

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

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

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

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

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

CRT securities

The fair value of CRT securities is based on a discounted cash flow model, which utilizes Level 3, or unobservable, inputs, the most significant of which were a discount rate and weighted-average life.

The fair value of CRT securities is based on a discounted cash flow model, which utilizes Level 3 inputs, the most significant of which were a discount rate and weighted-average life.

At December 31, 2024, the discount rates utilized ranged from 5.02 % to 6.58 % and the weighted-average life ranged from 4.51 years to 6.66 years.

4 unchanged sentences

The $ 35.3 million fair value of loans held for investment at December 31, 2024 reported above includes impaired loans with a carrying value of $ 63.6 million that were reduced by specific allowance allocations totaling $ 28.3 million based on collateral valuations utilizing Level 3 inputs.

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

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

Fair Value of Financial Instruments

8 unchanged sentences

Equity securities 75,261 75,261 59,235 16,026 —

Loans held for sale 44,105 44,105 15,000 29,105 —

Loans held for investment, net 22,178,357 22,115,585 — — 22,115,585

19 unchanged sentences

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

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

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

39 unchanged sentences

Based on current market conditions, the Company estimates that during the next 12 months, an additional $ 22.5 million related to active and terminated hedges will be reclassified from AOCI as a decrease to interest income.

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

As of December 31, 2024, the maximum length of time over which forecasted transactions are hedged is 1.17 years.

(15) Accumulated Other Comprehensive Income

18 unchanged sentences

(16) Related Party Transactions

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

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

The Bank had approximately $ 35.8 million in deposits from related parties, including directors, stockholders and their affiliates at December 31, 2023 and $ 23.1 million at December 31, 2022.

During 2024 and 2023, the Company had transactions with its directors, executive officers and their affiliates.

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

(17) Parent Company Only

47 unchanged sentences

Equity in undistributed income of subsidiary ( 97,495 ) ( 201,189 ) ( 337,946 )

Amortization expense 437 438 2,469

Depreciation and amortization

Net (gain)/loss recognized on equity securities

( 4,395 ) ( 508 ) —

Changes in operating assets and liabilities:

1 unchanged sentence

Accrued interest payable and other liabilities 26,355 16,941 3,086

Net cash used in operating activities 40,721 ( 6,223 ) ( 3,717 )

Net cash provided by/(used in) operating activities

28,971 40,721 ( 6,223 )

Investing Activities

Sales/(purchases) of equity securities, net ( 15,443 ) ( 18,337 ) —

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

Repayments of investments in/(advances to) subsidiaries

3 unchanged sentences

Issuance of stock related to stock-based awards ( 9,065 ) ( 4,215 ) ( 4,209 )

Net proceeds from issuance of preferred stock — — 289,723

Redemption of preferred stock — — ( 150,000 )

Preferred stock dividends paid ( 17,250 ) ( 17,250 ) ( 17,250 )

Repurchase of common stock ( 81,508 ) ( 105,024 ) ( 115,302 )

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

Net proceeds from Issuance of long-term debt — — 370,625

Net cash provided by/(used in) financing activities ( 126,489 ) ( 136,761 ) 377,506

Net cash used in financing activities

( 107,823 ) ( 126,489 ) ( 136,761 )

Net increase/(decrease) in cash and cash equivalents ( 96,295 ) 55,895 ( 192,984 )

2 unchanged sentences

(18) New Accounting Standards

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

ASU 2023-09 is effective January 1, 2025 and is not expected to have a significant impact on the Company’s financial statement disclosures.

Accounting Standards Update 2024-01 “Compensation - Stock Compensation (Topic 718) - Scope Application of Profits Interest and Similar Awards” (“ASU 2024-01”) clarifies how an entity determines whether a profits interest or similar award is within the scope of Topic 718 or is not a share-based payment arrangement and therefore within the scope of other guidance.

ASU 2024-01 provides an illustrative example with multiple fact patterns and also amends certain language in the “Scope” and “Scope Exceptions” sections of Topic 718 to improve its clarity and operability without changing the guidance.

Entities can apply the amendments either retrospectively to all prior periods presented in the financial statements or prospectively to profits interest and similar awards granted or modified on or after the date of adoption.

If prospective application is elected, an entity must disclose the nature of and reason for the change in accounting principle.

ASU 2024-01 is effective January 1, 2025, including interim periods, and is not expected to have a significant impact on the Company’s financial statements.

Accounting Standards Update 2024-02 “Codification Improvements” (“ASU 2024-02”) amends the Codification to remove references to various concepts statements and impacts a variety of topics in the Codification.

The amendments apply to all reporting entities within the scope of the affected accounting guidance, but in most instances the references removed are extraneous and not required to understand or apply the guidance.

Generally, the amendments in ASU 2024-02 are not intended to result in significant accounting changes for most entities.

ASU 2024-02 is effective January 1, 2025 and is not expected to have a significant impact on the Company’s financial statements.

Accounting Standards Update 2024-03 “Income Statement Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40):

Disaggregation of Income Statement Expenses” (“ASU 2024-03”) improves financial reporting by requiring that public business entities disclose additional information about specific expense categories (certain costs and expenses) in the notes to the financial statements.

ASU 2024-03 is effective January 1, 2026 and is not expected to have a significant impact on the Company’s financial statements.

Accounting Standards Update 2024-04 “Debt - Debt with Conversion and Other Options (Subtopic 470-20)” (“ASU 2024-04”) clarifies wither the settlement of convertible debt, including debt containing cash conversion features at terms that are different from the terms included in the existing debt instrument, should be accounted for as an induced conversion or a debt extinguishment.

ASU 2024-04 is effective for public business entities January 1, 2025 and is not expected to have a significant impact on the Company’s financial statements.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES

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

What changed 10-K

Item 8. Financial Statements and Supplementary Data