Item 2. Management’s Discussion and Analysis
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of the Company’s financial condition and results of operations for the three and nine months ended September 30, 2026 and 2025 should be read in conjunction with its audited consolidated financial statements and the related notes to the consolidated financial statements included in the 2025 Form 10-K. Operating results for the three and nine months ended September 30, 2026 are not necessarily indicative of the results for the year ending December 31, 2026 or any future period.
Forward-Looking Statements
This report contains “forward-looking statements” within the meaning of and pursuant to the Private Securities Litigation Reform Act of 1995 regarding, among other things, the Company’s financial condition, results of operations, business plans and future performance. These statements are not historical in nature and may often be identified by the use of words such as “believes,” “projects,” “expects,” “may,” “estimates,” “should,” “plans,” “targets,” “intends,” “could,” “would,” “anticipates,” “potential,” “confident,” “optimistic” or the negative thereof, or other variations thereon, or comparable terminology, or by discussions of strategy, objectives, estimates, trends, guidance, expectations and future plans.
Because forward-looking statements relate to future results and occurrences, they are subject to inherent and various uncertainties, risks, and changes in circumstances that are difficult to predict, may change over time, are based on management’s expectations and assumptions at the time the statements are made and are not guarantees of future results. Numerous risks and other factors, many of which are beyond management’s control, could cause actual results to differ materially from future results expressed or implied by such forward-looking statements. While there can be no assurance that any list of risks is complete, important risks and other factors that could cause actual results to differ materially from those contemplated by forward-looking statements include, but are not limited to: economic or business conditions in Texas, the United States or globally that impact TCBI or its customers; negative credit quality developments arising from the foregoing or other factors, including trade policies, geopolitical conflicts, inflation, including increased energy costs, unemployment rates and interest rates; TCBI’s ability to innovate, to anticipate the needs of our current and future customers and to manage increased or expanded competition from banks and other financial service providers in TCBI’s markets; TCBI’s ability to effectively manage its liquidity and maintain adequate regulatory capital to support its businesses; TCBI’s ability to pursue and execute upon growth plans, whether as a function of capital, liquidity or other limitations; TCBI’s ability to successfully execute its business strategy, including its strategic plan and developing and executing new lines of business, products and services; risks related to potential strategic acquisitions, including the risk that TCBI may not be able to consummate acquisitions on favorable terms, if at all, and the risk that TCBI may not realize the anticipated benefits from acquisitions; the extensive regulations to which TCBI is subject and its ability to comply with applicable governmental regulations, including legislative and regulatory changes; TCBI’s ability to effectively manage information technology systems, including third-party vendors, cyber or data privacy incidents or other failures, outages, disruptions or security breaches; TCBI’s ability to use technology to provide products and services to its customers; risks related to the development and use of artificial intelligence; changes in interest rates, including the impact of interest rates on TCBI’s securities portfolio and funding costs, as well as related balance sheet implications stemming from the fair value of our assets and liabilities; the effectiveness of TCBI’s risk management processes, strategies and monitoring; fluctuations in commercial and residential real estate values, especially as they relate to the value of collateral supporting TCBI’s loans; TCBI’s ability to manage any unexpected outflows of uninsured deposits and avoid selling investment securities or other assets at an unfavorable time or at a loss; adverse developments in the banking industry and the potential impact of such developments on customer confidence, liquidity and regulatory responses to these developments, including in the context of regulatory examinations and related findings and actions; negative press and social media attention with respect to the banking industry or TCBI, in particular; claims, litigation or regulatory investigations and actions that TCBI may become subject to; the failure to identify, attract and retain key personnel and other employees and to engage in adequate succession planning; the transfer of the listing of TCBI’s securities to TXSE, a newly operational exchange, and its effect on the trading market, liquidity and price of TCBI’s securities; severe weather, natural disasters, climate change, acts of war, terrorism, global or other geopolitical conflicts, or other external events, as well as related legislative and regulatory initiatives; and the risks and factors more fully described in TCBI’s most recent Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and other documents and filings with the SEC. The information contained in this report speaks only as of its date. Except to the extent required by applicable law or regulation, we disclaim any obligation to update such factors or to publicly announce the results of any revisions to any of the forward-looking statements included herein to reflect future events or developments.
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Results of Operations
Selected income statement data and key performance indicators are presented in the table below:
Three Months Ended September 30, Nine Months Ended September 30,
($ in thousands except per share data) 2026 2025 2026 2025
Net interest income $ 274,983 $ 271,771 $ 790,079 $ 761,200
Provision for credit losses 17,000 12,000 51,000 44,000
Non-interest income 81,643 68,583 226,027 167,096
Non-interest expense 203,924 190,575 622,985 583,871
Income before income taxes
135,702 137,779 342,121 300,425
Income tax expense
31,997 32,569 79,680 70,840
Net income
103,705 105,210 262,441 229,585
Preferred stock dividends 4,313 4,313 12,938 12,938
Net income available to common stockholders
$ 99,392 $ 100,897 $ 249,503 $ 216,647
Basic earnings per common share
$ 2.30 $ 2.21 $ 5.72 $ 4.72
Diluted earnings per common share
$ 2.28 $ 2.18 $ 5.66 $ 4.67
Net interest margin 3.44 % 3.47 % 3.38 % 3.34 %
Return on average assets (“ROA”) 1.25 % 1.30 % 1.08 % 0.97 %
Return on average common equity (“ROE”) 11.57 % 12.04 % 9.84 % 9.02 %
Efficiency ratio(1) 57.2 % 56.0 % 61.3 % 62.9 %
Non-interest income to average earning assets 1.02 % 0.88 % 0.97 % 0.73 %
Non-interest expense to average earning assets 2.55 % 2.44 % 2.66 % 2.57 %
(1) Non-interest expense divided by the sum of net interest income and non-interest income.
Three months ended September 30, 2026 compared to three months ended September 30, 2025
The Company reported net income of $103.7 million and net income available to common stockholders of $99.4 million for the third quarter of 2026, compared to net income of $105.2 million and net income available to common stockholders of $100.9 million for the third quarter of 2025. On a fully diluted basis, earnings per common share was $2.28 for the third quarter of 2026, compared to $2.18 for the same period in 2025. ROE was 11.57% and ROA was 1.25% for the third quarter of 2026, compared to 12.04% and 1.30%, respectively, for the same period in 2025. The decrease in net income for the three months ended September 30, 2026 compared to the same period in 2025 resulted primarily from an increase in non-interest expense, partially offset by an increase in non-interest income.
Nine months ended September 30, 2026 compared to nine months ended September 30, 2025
The Company reported net income of $262.4 million and net income available to common stockholders of $249.5 million for the nine months ended September 30, 2026, compared to net income of $229.6 million and net income available to common stockholders of $216.6 million for the same period in 2025. On a fully diluted basis, earnings per common share was $5.66 for the nine months ended September 30, 2026, compared to $4.67 for the same period in 2025. ROE was 9.84% and ROA was 1.08% for the nine months ended September 30, 2026, compared to 9.02% and 0.97%, respectively, for the same period in 2025. The increase in net income for the nine months ended September 30, 2026 compared to the same period in 2025 resulted primarily from increases in net interest income and non-interest income, partially offset by increases in provision for credit losses and non-interest expense.
Details of the changes in the various components of net income are discussed below.
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Taxable Equivalent Net Interest Income Analysis - Quarterly(1)
Three Months Ended September 30, 2026 Three Months Ended September 30, 2025
($ in thousands) Average
Balance Income/
Expense Yield/
Rate Average
Balance Income/
Expense Yield/
Rate
Assets
Debt and equity securities(2)
$ 4,582,191 $ 50,936 4.31 % $ 4,635,066 $ 49,401 4.14 %
Interest bearing cash and cash equivalents
2,905,372 26,936 3.68 % 2,920,102 32,202 4.38 %
Loans held for sale(3) 11,434 213 7.39 % — — — %
Loans held for investment, mortgage finance 5,769,930 60,493 4.16 % 5,472,467 59,604 4.32 %
Loans held for investment(3) 18,759,118 319,511 6.76 % 18,253,451 319,921 6.95 %
Less: Allowance for credit losses on loans 267,448 — — 277,385 — —
Loans held for investment, net 24,261,600 380,004 6.21 % 23,448,533 379,525 6.42 %
Total earning assets 31,760,597 458,089 5.70 % 31,003,701 461,128 5.88 %
Cash and other assets 1,171,805 1,159,008
Total assets $ 32,932,402 $ 32,162,709
Liabilities and Stockholders’ Equity
Transaction deposits $ 3,830,036 $ 27,428 2.84 % $ 2,251,217 $ 13,987 2.46 %
Savings deposits 14,159,289 123,103 3.45 % 14,650,152 143,327 3.88 %
Time deposits 2,396,968 23,986 3.97 % 2,158,228 23,465 4.31 %
Total interest bearing deposits 20,386,293 174,517 3.40 % 19,059,597 180,779 3.76 %
Short-term borrowings 8,804 84 3.75 % 44,022 534 4.82 %
Long-term debt 497,635 7,576 6.04 % 620,348 7,531 4.82 %
Total interest bearing liabilities 20,892,732 182,177 3.46 % 19,723,967 188,844 3.80 %
Non-interest bearing deposits 7,875,652 8,351,524
Other liabilities 454,891 463,034
Stockholders’ equity 3,709,127 3,624,184
Total liabilities and stockholders’ equity $ 32,932,402 $ 32,162,709
Net interest income $ 275,912 $ 272,284
Net interest margin 3.44 % 3.47 %
(1) Taxable equivalent rates used where applicable.
(2) Yields are calculated using available-for-sale debt securities at amortized cost.
(3) Average balances include non-accrual loans.
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Taxable Equivalent Net Interest Income Analysis - Year to Date(1)
Nine Months Ended September 30, 2026 Nine Months Ended September 30, 2025
($ in thousands) Average
Balance Revenue /
Expense Yield /
Rate Average
Balance Revenue /
Expense Yield /
Rate
Assets
Debt and equity securities(2)
$ 4,587,108 $ 146,851 4.22 % $ 4,557,996 $ 141,965 4.05 %
Interest bearing cash and cash equivalents 2,702,628 73,627 3.64 % 3,274,086 107,994 4.41 %
Loans held for sale(3)
5,901 217 4.92 % 110 2 2.97 %
Loans held for investment, mortgage finance
5,774,820 175,928 4.07 % 4,929,539 156,838 4.25 %
Loans held for investment(3)
18,476,249 922,266 6.67 % 17,935,710 922,154 6.87 %
Less: Allowance for credit losses on loans 269,261 — — % 276,076 — — %
Loans held for investment, net
23,981,808 1,098,194 6.12 % 22,589,173 1,078,992 6.39 %
Total earning assets 31,277,445 1,318,889 5.63 % 30,421,365 1,328,953 5.82 %
Cash and other assets 1,178,643 1,144,443
Total assets $ 32,456,088 $ 31,565,808
Liabilities and Stockholders’ Equity
Transaction deposits $ 3,070,779 $ 59,273 2.58 % $ 2,209,490 $ 41,626 2.52 %
Savings deposits 14,070,148 360,390 3.42 % 13,916,232 411,176 3.95 %
Time deposits 2,531,404 75,785 4.00 % 2,282,419 77,711 4.55 %
Total interest bearing deposits 19,672,331 495,448 3.37 % 18,408,141 530,513 3.85 %
Short-term borrowings 214,026 5,996 3.75 % 364,641 12,224 4.48 %
Long-term debt 604,715 24,661 5.45 % 643,274 23,534 4.89 %
Total interest bearing liabilities 20,491,072 526,105 3.43 % 19,416,056 566,271 3.90 %
Non-interest bearing deposits 7,809,264 8,141,135
Other liabilities 466,648 496,644
Stockholders’ equity 3,689,104 3,511,973
Total liabilities and stockholders’ equity $ 32,456,088 $ 31,565,808
Net interest income $ 792,784 $ 762,682
Net interest margin 3.38 % 3.34 %
(1) Taxable equivalent rates used where applicable.
(2) Yields are calculated using available-for-sale debt securities at amortized cost.
(3) Average balances include non-accrual loans.
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Volume/Rate Analysis
The following table presents the changes in taxable equivalent net interest income and identifies the changes due to differences in the average volume of earning assets and interest bearing liabilities and the changes due to differences in the average interest rate on those assets and liabilities.
Three Months Ended September 30, Nine Months Ended September 30,
2026/2025 2026/2025
Net
Change Change Due To(1) Net
Change Change Due To(1)
(in thousands) Volume Yield/Rate(2) Volume Yield/Rate(2)
Interest income
Debt and equity securities
$ 1,535 $ (552) $ 2,087 $ 4,886 $ 882 $ 4,004
Interest bearing cash and cash equivalents (5,266) (163) (5,103) (34,367) (18,849) (15,518)
Loans held for sale 213 — 213 215 129 86
Loans held for investment, mortgage finance 889 3,239 (2,350) 19,090 26,870 (7,780)
Loans held for investment (410) 8,858 (9,268) 112 27,775 (27,663)
Total interest income (3,039) 11,382 (14,421) (10,064) 36,807 (46,871)
Interest expense
Transaction deposits 13,441 9,790 3,651 17,647 16,234 1,413
Savings deposits (20,224) (4,801) (15,423) (50,786) 4,547 (55,333)
Time deposits 521 2,594 (2,073) (1,926) 8,473 (10,399)
Short-term borrowings (450) (428) (22) (6,228) (5,047) (1,181)
Long-term debt 45 (1,491) 1,536 1,127 (1,410) 2,537
Total interest expense (6,667) 5,664 (12,331) (40,166) 22,797 (62,963)
Net interest income $ 3,628 $ 5,718 $ (2,090) $ 30,102 $ 14,010 $ 16,092
(1) Yield/rate and volume variances are allocated to yield/rate.
(2) Taxable equivalent rates used where applicable assuming a 21% tax rate.
Net Interest Income
Net interest income was $275.0 million for the three months ended September 30, 2026, compared to $271.8 million for the same period in 2025. The increase was primarily due to an increase in average earning assets and a decrease in funding costs, partially offset by a decrease in earning asset yields and an increase in average interest bearing deposits.
Average earning assets for the three months ended September 30, 2026 increased $756.9 million compared to the same period in 2025, which included increases of $803.1 million in average total loans held for investment and $11.4 million in average loans held for sale, partially offset by decreases of $14.7 million in average interest bearing cash and cash equivalents and $52.9 million in average investment securities. Average interest bearing liabilities increased $1.2 billion for the three months ended September 30, 2026 compared to the same period in 2025, primarily due to an increase of $1.3 billion in average interest bearing deposits, partially offset by a $35.2 million decrease in average short-term borrowings and a decrease of $122.7 million in average long-term debt. Average non-interest bearing deposits for the three months ended September 30, 2026 decreased to $7.9 billion from $8.4 billion for the same period in 2025.
Net interest margin for the three months ended September 30, 2026 was 3.44%, compared to 3.47% for the same period in 2025. The decrease in net interest margin was primarily due to lower average earning asset yields, partially offset by a decrease in the cost of interest bearing deposits.
The yield on total loans held for investment decreased to 6.21% for the three months ended September 30, 2026, compared to 6.42% for the same period in 2025, and the yield on earning assets decreased to 5.70% for the three months ended September 30, 2026, compared to 5.88% for the same period in 2025. Total cost of deposits decreased to 2.45% for the three months ended September 30, 2026 from 2.62% for the same period in 2025, and total funding costs, including non-interest bearing deposits and stockholders' equity, decreased to 2.23% for the three months ended September 30, 2026, compared to 2.36% for the same period in 2025.
Net interest income was $790.1 million for the nine months ended September 30, 2026, compared to $761.2 million for the same period in 2025. The increase was primarily due to an increase in average earning assets and a decrease in funding costs, partially offset by a decrease in earning asset yields and an increase in average interest bearing deposits.
Average earning assets increased $856.1 million for the nine months ended September 30, 2026, compared to the same period in 2025, which included increases of $1.4 billion in average total loans held for investment and $29.1 million in average debt and equity securities, partially offset by a $571.5 million decrease in average interest bearing cash and cash equivalents.
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Average interest bearing liabilities increased $1.1 billion for the nine months ended September 30, 2026, compared to the same period in 2025, primarily due to an increase of $1.3 billion in average interest bearing deposits, partially offset by decreases of $150.6 million in average short-term borrowings and $38.6 million in average long-term debt. Average non-interest bearing deposits for the nine months ended September 30, 2026 decreased to $7.8 billion from $8.1 billion for the same period in 2025.
Net interest margin for the nine months ended September 30, 2026 was 3.38%, compared to 3.34% for the same period of 2025. The increase in net interest margin was primarily due to a decrease in the cost of interest bearing deposits, partially offset by lower earning asset yields.
The yield on total loans held for investment decreased to 6.12% for the nine months ended September 30, 2026, compared to 6.39% for the same period in 2025, and the yield on earning assets decreased to 5.63% for the nine months ended September 30, 2026, compared to 5.82% for the same period in 2025. Total cost of deposits decreased to 2.41% for the nine months ended September 30, 2026 from 2.67% for the same period in 2025 and total funding costs, including non-interest bearing deposits and stockholders' equity, decreased to 2.20% for the nine months ended September 30, 2026, compared to 2.44% for the same period in 2025.
Non-interest Income
Three Months Ended September 30, Nine Months Ended September 30,
(in thousands) 2026 2025 2026 2025
Service charges on deposit accounts $ 9,418 $ 8,111 $ 27,494 $ 24,133
Wealth management and trust fee income 4,562 3,989 14,086 11,683
Brokered loan fees 2,075 2,419 6,184 6,766
Investment banking and advisory fees 35,294 33,985 98,832 74,572
Trading income 11,417 7,238 32,981 21,073
Available-for-sale debt securities losses — — — (1,886)
Other 18,877 12,841 46,450 30,755
Total non-interest income $ 81,643 $ 68,583 $ 226,027 $ 167,096
Non-interest income increased $13.1 million during the three months ended September 30, 2026, compared to the same period in 2025, primarily due to increases in service charges on deposit accounts, investment banking and advisory fees, trading income and other non-interest income.
Non-interest income was $226.0 million for the nine months ended September 30, 2026, a $58.9 million increase as compared to the same period in 2025, primarily due to increases in investment banking and advisory fees, trading income and other non-interest income.
Non-interest Expense
Three Months Ended September 30, Nine Months Ended September 30,
(in thousands) 2026 2025 2026 2025
Salaries and benefits $ 121,625 $ 119,856 $ 384,311 $ 371,651
Occupancy expense 13,230 11,828 37,994 34,816
Marketing 4,266 3,412 14,024 12,045
Legal and professional 12,000 12,474 38,680 38,532
Communications and technology 32,029 24,594 87,695 72,550
Federal Deposit Insurance Corporation insurance assessment 5,234 5,198 14,697 15,635
Other 15,540 13,213 45,584 38,642
Total non-interest expense $ 203,924 $ 190,575 $ 622,985 $ 583,871
Non-interest expense increased $13.3 million during the three months ended September 30, 2026, compared to the same period in 2025. The increase was primarily due to increases in salaries and benefits, occupancy and communications and technology expense, primarily as a result of restructuring expenses recognized in the third quarter of 2026, as well as an increase in other non-interest expense.
Non-interest expense was $623.0 million for the nine months ended September 30, 2026, an increase of $39.1 million as compared to the same period in 2025, primarily as a result of increases in salaries and benefits, communications and technology and other non-interest expense.
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Analysis of Financial Condition
Loans Held for Investment
The following table summarizes the Company’s loans held for investment by portfolio segment. See Note 1 - Operations and Summary of Significant Accounting Policies in the 2025 Form 10-K for details of these portfolio segments.
(in thousands) September 30, 2026 December 31, 2025
Commercial $ 13,428,328 $ 12,163,545
Mortgage finance 5,441,689 6,064,019
Commercial real estate 4,786,513 5,378,712
Consumer
426,460 433,926
Total loans held for investment $ 24,082,990 $ 24,040,202
Total loans held for investment were $24.1 billion at September 30, 2026, an increase of $42.8 million from December 31, 2025, as an increase in commercial loans was partially offset by decreases in mortgage finance, commercial real estate and consumer loans. 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 25% of loans held for investment at September 30, 2026 and December 31, 2025, 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.
The Company originates a substantial majority of all loans held for investment. The Company also participates in shared national credits, both as a participant and as an agent. As of September 30, 2026, the Company had $7.1 billion in shared national credits, $1.4 billion of which the Company administered as agent. All syndicated loans, whether the Company acts as agent or participant, are underwritten to substantially the same standards as all other loans the Company originates. As of September 30, 2026, approximately $26.3 million of the Company’s shared national credits were on non-accrual.
Portfolio Concentrations
Although more than 50% of the Company’s total loan exposure is outside of Texas and more than 50% of deposits are sourced outside of Texas, Texas concentration remains significant. As of September 30, 2026, a majority of the loans held for investment, excluding mortgage finance and other national lines of business, were to businesses with headquarters or operations in Texas. This geographic concentration subjects the Company’s loan portfolio to the general economic conditions within Texas. The risks created by this concentration have been considered by management in determining the appropriateness of the allowance for credit losses.
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Non-performing Assets
Non-performing assets include non-accrual loans and leases, and repossessed assets. The table below summarizes non-accrual loans by portfolio segment and by type of property securing the credit.
($ in thousands) September 30, 2026 December 31, 2025
Non-accrual loans held for investment
Commercial:
Business assets $ 82,420 $ 92,725
Accounts receivable and inventory 306 1,177
Unsecured 119 2,244
Total commercial 82,845 96,146
Commercial real estate:
Industrial buildings
18,202 19,200
Commercial building
2,721 1,534
Apartment building
18,500 —
Total commercial real estate 39,423 20,734
Total non-accrual loans held for investment 122,337 116,880
Non-accrual loans held for sale(1)
— 4,361
Other real estate owned (“OREO”) — —
Total non-performing assets $ 122,337 $ 121,241
Non-accrual loans held for investment to total loans held for investment 0.51 % 0.49 %
Total non-performing assets to total assets 0.38 % 0.38 %
Allowance for credit losses on loans to non-accrual loans held for investment 2.2x 2.3x
Loans held for investment past due 90 days and accruing $ 53,207 $ 19,353
Loans held for investment past due 90 days to total loans held for investment 0.22 % 0.08 %
Loans held for sale past due 90 days and accruing $ — $ —
(1) Non-accrual loans held for sale at December 31, 2025 include non-accrual loans previously reported in loans held for investment that were transferred at fair value to held for sale as of December 31, 2025.
Summary of Credit Loss Experience
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.
The Company recorded a provision for credit losses of $51.0 million for the nine months ended September 30, 2026, compared to a provision of $44.0 million for the nine months ended September 30, 2025. The provision for credit losses for the nine months ended September 30, 2026 reflects an increase in criticized loans and $48.0 million in net charge-offs recorded during the nine months ended September 30, 2026. Criticized loans totaled $782.4 million at September 30, 2026, compared to $634.9 million at December 31, 2025.
The table below presents key metrics related to the Company’s credit loss experience:
September 30, 2026 September 30, 2025
Allowance for credit losses on loans to total loans held for investment 1.12 % 1.13 %
Allowance for credit losses on loans to average total loans held for investment(1)
1.10 % 1.20 %
Total allowance for credit losses to total loans held for investment 1.39 % 1.37 %
Total provision for credit losses to average total loans held for investment(1)(2)
0.28 % 0.26 %
(1) Ratios are calculated using average balance for the nine months ended September 30, 2026 and 2025, respectively.
(2) Ratios are annualized utilizing provision for credit losses for the nine months ended September 30, 2026 and 2025, respectively.
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The table below details net charge-offs/(recoveries) as a percentage of average total loans by portfolio segment:
Nine Months Ended September 30,
2026 2025
($ in thousands) Net
Charge-offs Net Charge-offs
to Average
Loans(1) Net
Charge-offs Net Charge-offs
to Average
Loans(1)
Commercial $ 41,072 0.43 % $ 35,992 0.41 %
Mortgage finance — — % — — %
Commercial real estate 6,914 0.18 % 518 0.01 %
Consumer (7) — % (8) — %
Total $ 47,979 0.26 % $ 36,502 0.21 %
(1) Ratios are annualized utilizing net charge-offs for the nine months ended September 30, 2026 and 2025, respectively.
Liquidity and Capital Resources
Liquidity
In general terms, liquidity is a measurement of the Company’s ability to meet its cash needs. The Company’s objectives in managing its liquidity are to maintain the ability to meet loan commitments, repurchase investment securities and repay deposits and other liabilities in accordance with their terms, without an adverse impact on current or future earnings. The Company’s liquidity strategy is guided by policies, formulated and monitored by senior management and the Asset and Liability Management Committee (“ALCO”), which take into account the demonstrated marketability of the Company’s assets, the sources and stability of its funding and the level of unfunded commitments. 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 FHLB borrowings, brokered deposits 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 loans.
The following table summarizes the Company’s interest bearing cash and cash equivalents:
($ in thousands) September 30, 2026 December 31, 2025
Interest bearing cash and cash equivalents $ 2,479,073 $ 1,897,803
Interest bearing cash and cash equivalents as a percent of:
Total loans held for investment 10.3 % 7.9 %
Total earning assets 8.0 % 6.2 %
Total deposits 8.9 % 7.2 %
The Company aims to obtain as much of its funding 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. The following table summarizes period-end total deposits:
September 30, 2026 December 31, 2025
($ in thousands) Balance % of Total Balance % of Total
Customer deposits $ 25,992,734 93.8 % $ 25,719,595 97.2 %
Brokered deposits 1,722,921 6.2 % 729,172 2.8 %
Total deposits $ 27,715,655 100.0 % $ 26,448,767 100.0 %
Estimated uninsured deposits, including accrued interest, were 42% of assessable deposits, including accrued interest, at both September 30, 2026 and December 31, 2025. The uninsured amounts are estimated based on the methodologies and assumptions used for the Bank’s regulatory reporting requirements.
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The Company has short-term borrowing sources available to supplement deposits and meet its funding needs. Such borrowings are generally used to fund mortgage finance loans, due to their liquidity, short duration and interest spreads available. These borrowing sources include federal funds purchased from downstream correspondent bank relationships (which consist of banks that are smaller than the Bank) and from upstream correspondent bank relationships (which consist of banks that are larger than the Bank) and advances from the FHLB and the Federal Reserve. The following table summarizes short-term borrowings, all of which mature within one year:
(in thousands)
September 30, 2026 December 31, 2025
Federal funds purchased $ — $ 30,000
FHLB borrowings — 300,000
Total short-term borrowings
$ — $ 330,000
The following table summarizes the Company’s short-term borrowing capacities net of balances outstanding:
(in thousands) September 30, 2026 December 31, 2025
FHLB borrowing capacity relating to loans and pledged securities $ 2,695,451 $ 2,570,596
FHLB borrowing capacity relating to unencumbered securities 4,660,300 4,594,553
Total FHLB borrowing capacity(1) $ 7,355,751 $ 7,165,149
Unused federal funds lines available from commercial banks $ 1,557,000 $ 1,520,000
Unused Federal Reserve borrowings capacity $ 11,472,274 $ 9,174,238
Unused revolving line of credit(2)
$ 75,000 $ 75,000
(1) FHLB borrowings are collateralized by a blanket floating lien on certain real estate secured loans and certain pledged securities.
(2) Unsecured revolving, non-amortizing line of credit with maturity date of February 8, 2027. Proceeds may be used for general corporate purposes, including funding regulatory capital infusions into the Bank. The loan agreement contains customary financial covenants and restrictions. No borrowings were made against this line of credit during the nine months ended September 30, 2026 or 2025.
The Company has long-term debt outstanding of $487.3 million as of September 30, 2026, comprised of trust preferred securities and senior notes with maturity dates ranging from February 2032 to December 2036. See Note 5 - Short-Term Borrowings and Long-Term Debt in the accompanying notes to the consolidated financial statements included elsewhere in this report for additional information. The Company may consider raising additional capital, if needed, in public or private offerings of debt or equity securities to supplement deposits and meet its long-term funding needs.
As the Company is a holding company and is a separate operating entity from the Bank, the Company’s primary sources of liquidity are dividends received from the Bank and borrowings from outside sources. Banking regulations may limit the amount of dividends that may be paid by the Bank. See Note 7 - 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. Risk Factors of the 2025 Form 10-K.
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. For example, the Company periodically evaluates and may engage in liability management transactions, including repurchases or redemptions of outstanding long-term debt, which may be funded by the issuance of, or exchanges of, newly issued unsecured borrowings to actively manage the debt maturity profile and interest cost.
Capital Resources
The Company’s equity capital averaged $3.7 billion for the nine months ended September 30, 2026 compared to $3.5 billion for the same period in 2025. The Company declared and paid common stock dividends of $17.3 million, representing $0.40 per common share, during the nine months ended September 30, 2026. No common stock dividends were paid in 2025. On October 21, 2026, the Company’s board of directors declared a cash dividend of $0.20 per common share payable on December 15, 2026, to holders of record at the close of business on December 1, 2026.
During the nine months ended September 30, 2026, the Company repurchased, under the authorized share repurchase programs, 2,061,431 shares of its common stock for an aggregate purchase price, including excise tax expense, of $201.7 million, at a weighted average price of $97.00 per share.
For additional information on the Company’s capital and stockholders’ equity, see Note 7 - Regulatory Ratios and Capital, in the accompanying notes to the consolidated financial statements included elsewhere in this report.
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Critical Accounting Estimates
SEC guidance requires disclosure of “critical accounting estimates.” The SEC defines “critical accounting estimates” as those estimates made in accordance with generally accepted accounting principles that involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on the financial condition or results of operations of the registrant.
The Company follows financial accounting and reporting policies that are in accordance with accounting principles generally accepted in the United States. The more significant of these policies are summarized in Note 1 - Operations and Summary of Significant Accounting Policies in the notes to the consolidated financial statements included in the 2025 Form 10-K. 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 estimate.
Allowance for Credit Losses
Management considers the policies related to the allowance for credit losses as the most critical to the financial statement presentation. The total allowance for credit losses includes activity related to allowances calculated in accordance with Accounting Standards Codification 326, Credit Losses . The allowance for credit losses is established through a provision for credit losses charged to current earnings. The amount maintained in the allowance reflects management’s continuing evaluation of the credit losses expected to be recognized over the life of the loans in the Company’s portfolio. The allowance for credit losses on loans is a valuation account that is deducted from the loans' amortized cost basis to present the net amount expected to be collected on the loans. The allowance for credit losses on off-balance sheet financial instruments is recorded in other liabilities on the consolidated balance sheets. For purposes of determining the allowance for credit losses, the loan portfolio is segregated into pools first by portfolio segment and then by past due status or credit grade. 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. Loans that do not share risk characteristics are evaluated on an individual basis and are not included in the collective (pool) evaluation. Management estimates the allowance balance using relevant available information from internal and external sources relating to past events, current conditions and reasonable and supportable forecasts. Modifications to loss estimates are made 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”). A similar process is employed to calculate a reserve assigned to off-balance sheet financial instruments, specifically unfunded loan commitments and letters of credit. Modified loss estimates are assigned based on the balance of the commitments estimated to be outstanding at the time of default. The PLQF and SLQF are utilized to address factors that are not present in historical loss rates and are otherwise unaccounted for in the quantitative process. A reserve is recorded upon origination or purchase of a loan. See “Summary of Credit Loss Experience” above and Note 4 - Loans and Allowance for Credit Losses on Loans in the accompanying notes to the consolidated financial statements included elsewhere in this report for further discussion of the risk factors considered by management in establishing the allowance for credit losses.
Management considers a range of macroeconomic scenarios in connection with the allowance estimation process. Within the various economic scenarios considered as of September 30, 2026, the quantitative estimate of the allowance for credit loss would increase by approximately $94.6 million under sole consideration of the most severe downside scenario. The quoted sensitivity calculation reflects the sensitivity of the modeled allowance estimate to macroeconomic forecast data, but is absent of qualitative overlays and other qualitative adjustments that are part of the quarterly reserving process and does not necessarily reflect the nature and extent of future changes in the allowance for reasons including increases or decreases in qualitative adjustments, changes in the risk profile and size of the portfolio, changes in the severity of the macroeconomic scenario and the range of scenarios under management consideration.
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