TEXAS CAPITAL BANCSHARES INC/TX - Quarter Report: 2023 September (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☒			Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

For the quarterly period ended September 30, 2023


☐			Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

For the transition period from to

Commission file number 001-34657

TEXAS CAPITAL BANCSHARES, INC.

(Exact Name of Registrant as Specified in Its Charter)


Delaware						75-2679109
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification Number)

2000 McKinney Avenue

Suite 700

Dallas

USA

75201

(Address of principal executive offices)

(Zip Code)

214/932-6600

(Registrant’s telephone number, including area code)

Securities registered under Section 12(b) of the Exchange Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.01 per share

TCBI

Nasdaq Stock Market

5.75% Non-Cumulative Perpetual Preferred Stock Series B, par value $0.01 per share

TCBIO

Nasdaq Stock Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer

Accelerated Filer

☐

Non-Accelerated Filer

☐

Smaller Reporting Company

☐

Emerging Growth Company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act. Yes ☐ No ý

On October 18, 2023, the number of shares set forth below was outstanding with respect to each of the issuer’s classes of common stock:

Common Stock, par value $0.01 per share 48,020,448

Table of Contents

Texas Capital Bancshares, Inc.

Form 10-Q

Quarter Ended September 30, 2023

Index


Part I.—Financial Information
	Item 1.	Financial Statements - Unaudited	3
		Consolidated Balance Sheets	3
		Consolidated Statements of Income and Other Comprehensive Income/(Loss)	4
		Consolidated Statements of Stockholders' Equity	5
		Consolidated Statements of Cash Flows	7
		Notes to Consolidated Financial Statements	8
	Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	25
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	36
	Item 4.	Controls and Procedures	39

Part II.—Other Information
	Item 1.	Legal Proceedings	40
	Item 1A.	Risk Factors	40
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	40
	Item 6.	Exhibits	41

Signatures			42

Table of Contents

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

TEXAS CAPITAL BANCSHARES, INC.

CONSOLIDATED BALANCE SHEETS - UNAUDITED



(in thousands except share data)	September 30, 2023		December 31, 2022
Assets
Cash and due from banks	$	216,916	$	233,637
Interest bearing cash and cash equivalents	3,975,860		4,778,623
Available-for-sale debt securities	3,147,865		2,615,644
Held-to-maturity debt securities	881,352		935,514
Equity securities	40,500		33,956
Investment securities	4,069,717		3,585,114
Loans held for sale	155,073		36,357
Loans held for investment, mortgage finance	4,429,489		4,090,033
Loans held for investment	16,183,882		15,197,307
Less: Allowance for credit losses on loans	244,902		253,469
Loans held for investment, net	20,368,469		19,033,871

Premises and equipment, net	31,050		26,382
Accrued interest receivable and other assets	809,668		719,162
Goodwill and intangibles, net	1,496		1,496
Total assets	$	29,628,249	$	28,414,642
Liabilities and Stockholders’ Equity
Liabilities:
Non-interest bearing deposits	$	9,352,883	$	9,618,081
Interest bearing deposits	14,526,095		13,238,799
Total deposits	23,878,978		22,856,880
Accrued interest payable	31,149		24,000
Other liabilities	381,951		345,827
Short-term borrowings	1,400,000		1,201,142
Long-term debt	858,471		931,442
Total liabilities	26,550,549		25,359,291
Stockholders’ equity:
Preferred stock, $0.01 par value, $1,000 liquidation value:
Authorized shares - 10,000,000
Issued shares - 300,000 at September 30, 2023 and December 31, 2022	300,000		300,000
Common stock, $0.01 par value:
Authorized shares - 100,000,000
Issued shares - 51,110,447 and 50,867,298 at September 30, 2023 and December 31, 2022, respectively	511		509
Additional paid-in capital	1,039,074		1,025,593
Retained earnings	2,419,555		2,263,502
Treasury stock - 3,095,444 and 2,083,535 shares at cost at September 30, 2023 and December 31, 2022, respectively	(175,528)		(115,310)
Accumulated other comprehensive loss, net of taxes	(505,912)		(418,943)
Total stockholders’ equity	3,077,700		3,055,351
Total liabilities and stockholders’ equity	$	29,628,249	$	28,414,642

See accompanying notes to consolidated financial statements.

Table of Contents

TEXAS CAPITAL BANCSHARES, INC.

CONSOLIDATED STATEMENTS OF INCOME AND OTHER

COMPREHENSIVE INCOME/(LOSS) - UNAUDITED



	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands except per share data)	2023		2022		2023		2022
Interest income
Interest and fees on loans	$	345,138	$	282,474	$	975,443	$	688,422
Investment securities	27,070		15,002		79,840		46,969
Interest bearing cash and cash equivalents	53,561		24,596		157,568		37,561
Total interest income	425,769		322,072		1,212,851		772,952
Interest expense
Deposits	160,117		60,317		417,602		94,513
Short-term borrowings	19,576		10,011		52,573		15,628
Long-term debt	14,005		12,663		43,270		34,651

Total interest expense	193,698		82,991		513,445		144,792
Net interest income	232,071		239,081		699,406		628,160
Provision for credit losses	18,000		12,000		53,000		32,000
Net interest income after provision for credit losses	214,071		227,081		646,406		596,160
Non-interest income
Service charges on deposit accounts	5,297		5,797		15,477		18,014
Wealth management and trust fee income	3,509		3,631		10,653		11,594
Brokered loan fees	2,532		3,401		6,842		11,504

Investment banking and trading income	29,191		7,812		75,457		23,117


Other	6,343		4,691		21,857		7,626
Total non-interest income	46,872		25,332		130,286		71,855
Non-interest expense
Salaries and benefits	110,010		128,764		351,730		331,981
Occupancy expense	9,910		9,433		29,011		27,192
Marketing	4,757		8,282		20,168		21,765
Legal and professional	17,614		16,775		47,797		38,365
Communications and technology	19,607		18,470		57,655		48,819
Federal Deposit Insurance Corporation insurance assessment	5,769		3,953		11,632		11,252


Other	12,224		11,370		37,569		35,068
Total non-interest expense	179,891		197,047		555,562		514,442
Income before income taxes	81,052		55,366		221,130		153,573
Income tax expense	19,373		13,948		52,139		38,346
Net income	61,679		41,418		168,991		115,227
Preferred stock dividends	4,313		4,313		12,938		12,938
Net income available to common stockholders	$	57,366	$	37,105	$	156,053	$	102,289
Other comprehensive income/(loss):
Change in unrealized gain/(loss)	$	(102,330)	$	(207,204)	$	(159,108)	$	(494,261)
Amounts reclassified into net income	19,285		609		49,020		3,498
Other comprehensive income/(loss)	(83,045)		(206,595)		(110,088)		(490,763)
Income tax expense/(benefit)	(17,441)		(43,384)		(23,119)		(103,059)
Other comprehensive income/(loss), net of tax	(65,604)		(163,211)		(86,969)		(387,704)
Comprehensive income/(loss)	$	(3,925)	$	(121,793)	$	82,022	$	(272,477)
Basic earnings per common share	$	1.19	$	0.74	$	3.24	$	2.03
Diluted earnings per common share	$	1.18	$	0.74	$	3.20	$	2.00

See accompanying notes to consolidated financial statements.

Table of Contents

TEXAS CAPITAL BANCSHARES, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY - UNAUDITED


	Preferred Stock			Common Stock			Additional				Treasury Stock			Accumulated Other
							Paid-in		Retained					Comprehensive
(in thousands except share data)	Shares	Amount		Shares	Amount		Capital		Earnings		Shares	Amount		Income/(Loss)		Total
Balance at June 30, 2022	300,000	$	300,000	50,820,337	$	508	$	1,015,105	$	2,013,458	(942,296)	$	(50,031)	$	(272,208)	$	3,006,832

Comprehensive income/(loss):
Net income	—	—		—	—		—		41,418		—	—		—		41,418
Change in other comprehensive income/(loss), net of taxes	—	—		—	—		—		—		—	—		(163,211)		(163,211)
Total comprehensive loss																(121,793)

Stock-based compensation expense recognized in earnings	—	—		—	—		5,376		—		—	—		—		5,376

Preferred stock dividend	—	—		—	—		—		(4,313)		—	—		—		(4,313)
Issuance of stock related to stock-based awards	—	—		19,685	1		(328)		—		—	—		—		(327)




Balance at September 30, 2022	300,000	$	300,000	50,840,022	$	509	$	1,020,153	$	2,050,563	(942,296)	$	(50,031)	$	(435,419)	$	2,885,775

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

Comprehensive income/(loss):
Net income	—	—		—	—		—		61,679		—	—		—		61,679
Change in other comprehensive income/(loss), net of taxes	—	—		—	—		—		—		—	—		(65,604)		(65,604)
Total comprehensive income																(3,925)

Stock-based compensation expense recognized in earnings	—	—		—	—		4,441		—		—	—		—		4,441

Preferred stock dividend	—	—		—	—		—		(4,313)		—	—		—		(4,313)
Issuance of stock related to stock-based awards	—	—		22,482	—		(430)		—		—	—		—		(430)




Balance at September 30, 2023	300,000	$	300,000	51,110,447	$	511	$	1,039,074	$	2,419,555	(3,095,444)	$	(175,528)	$	(505,912)	$	3,077,700

See accompanying notes to consolidated financial statements.

Table of Contents

TEXAS CAPITAL BANCSHARES, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY - UNAUDITED


	Preferred Stock			Common Stock			Additional				Treasury Stock			Accumulated Other
							Paid-in		Retained					Comprehensive
(in thousands except share data)	Shares	Amount		Shares	Amount		Capital		Earnings		Shares	Amount		Income/(Loss)		Total
Balance at December 31, 2021 (audited)	300,000	$	300,000	50,618,911	$	506	$	1,008,559	$	1,948,274	(417)	$	(8)	$	(47,715)	$	3,209,616

Comprehensive income/(loss):
Net income	—	—		—	—		—		115,227		—	—		—		115,227
Change in other comprehensive income/(loss), net of taxes	—	—		—	—		—		—		—	—		(387,704)		(387,704)
Total comprehensive loss																(272,477)

Stock-based compensation expense recognized in earnings	—	—		—	—		15,805		—		—	—		—		15,805

Preferred stock dividend	—	—		—	—		—		(12,938)		—	—		—		(12,938)
Issuance of stock related to stock-based awards	—	—		221,111	3		(4,211)		—		—	—		—		(4,208)



Repurchase of common stock	—	—		—	—		—		—		(941,879)	(50,023)		—		(50,023)
Balance at September 30, 2022	300,000	$	300,000	50,840,022	$	509	$	1,020,153	$	2,050,563	(942,296)	$	(50,031)	$	(435,419)	$	2,885,775

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

Comprehensive income/(loss):
Net income	—	—		—	—		—		168,991		—	—		—		168,991
Change in other comprehensive income/(loss), net of taxes	—	—		—	—		—		—		—	—		(86,969)		(86,969)
Total comprehensive income																82,022

Stock-based compensation expense recognized in earnings	—	—		—	—		17,948		—		—	—		—		17,948

Preferred stock dividend	—	—		—	—		—		(12,938)		—	—		—		(12,938)
Issuance of stock related to stock-based awards	—	—		243,149	2		(4,467)		—		—	—		—		(4,465)
Repurchase of common stock	—	—		—	—		—		—		(1,011,909)	(60,218)		—		(60,218)



Balance at September 30, 2023	300,000	$	300,000	51,110,447	$	511	$	1,039,074	$	2,419,555	(3,095,444)	$	(175,528)	$	(505,912)	$	3,077,700

See accompanying notes to consolidated financial statements.

Table of Contents

TEXAS CAPITAL BANCSHARES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED



	Nine Months Ended September 30,
(in thousands)	2023		2022
Operating activities
Net income	$	168,991	$	115,227
Adjustments to reconcile net income to net cash provided by/(used in) operating activities:
Provision for credit losses	53,000		32,000

Depreciation and amortization	30,870		35,360

Net gain recognized on investment securities	(1,423)		—



Stock-based compensation expense	17,948		15,991

Purchases and originations of loans held for sale	(706)		(1,642)
Proceeds from sales and repayments of loans held for sale	8,980		5,050



Changes in operating assets and liabilities:
Accrued interest receivable and other assets	(76,697)		(2,152)
Accrued interest payable and other liabilities	(14,890)		14,266
Net cash provided by operating activities	186,073		214,100
Investing activities
Purchases of available-for-sale securities	(849,392)		(665,388)
Proceeds from sales of available-for-sale debt securities	56,923		—
Proceeds from maturities, redemptions and pay-downs of available-for-sale debt securities	169,938		388,223
Proceeds from maturities, redemptions and pay-downs of held-to-maturity debt securities	57,009		66,500
Sales/(purchases) of equity securities, net	(5,610)		3,421
Originations of loans held for investment, mortgage finance	(59,161,293)		(77,518,608)
Proceeds from pay-offs of loans held for investment, mortgage finance	58,821,837		80,085,283

Net increase in loans held for investment, excluding mortgage finance loans	(1,150,655)		(2,690,164)

Purchase of premises and equipment, net	(12,649)		(10,456)


Net cash used in investing activities	(2,073,892)		(341,189)
Financing activities
Net increase/(decrease) in deposits	1,022,098		(3,610,802)
Issuance of stock related to stock-based awards	(4,465)		(4,208)



Preferred dividends paid	(12,938)		(12,938)
Repurchase of common stock	(60,218)		(50,023)
Net increase/(decrease) in short-term borrowings	198,858		(501,352)


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

Net cash provided by/(used in) financing activities	1,068,335		(4,179,323)
Net decrease in cash and cash equivalents	(819,484)		(4,306,412)
Cash and cash equivalents at beginning of period	5,012,260		7,946,659
Cash and cash equivalents at end of period	$	4,192,776	$	3,640,247
Supplemental disclosures of cash flow information:
Cash paid during the period for interest	$	506,296	$	134,026
Cash paid during the period for income taxes	56,161		48,569
Transfers of loans from held for investment to held for sale	126,990		3,137,732
Transfers of debt securities from available-for-sale to held-to-maturity	—		1,019,365

See accompanying notes to consolidated financial statements.

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED

(1) Operations and Summary of Significant Accounting Policies

Organization and Nature of Business

Texas Capital Bancshares, Inc. (“TCBI” or the “Company”), a Delaware corporation, was incorporated in November 1996 and commenced banking operations in December 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 offices in Austin, Houston, San Antonio, and Fort Worth, and has built a network of clients across the country.

Basis of Presentation

The Company’s accounting and reporting policies conform to accounting principles generally accepted in the United States (“GAAP”) and to generally accepted practices within the banking industry. Certain prior period balances have been reclassified to conform to the current period presentation.

The consolidated interim financial statements are unaudited, and certain information and disclosures in the notes to consolidated unaudited financial statements that are presented in accordance with GAAP have been condensed or omitted. In the opinion of management, the interim financial statements include all normal and recurring adjustments and the disclosures made present a fair presentation of the Company’s financial position and results of operations. The consolidated financial statements have been prepared in accordance with GAAP for interim financial information and the instructions to Form 10-Q adopted by the U.S. Securities and Exchange Commission (“SEC”). Accordingly, the financial statements and the notes to the consolidated unaudited financial statements required by GAAP for complete annual financial statements do not include all of the information and should be read in conjunction with the consolidated financial statements, and notes thereto, for the year ended December 31, 2022, included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 (the “2022 Form 10-K”). Operating results for the interim periods disclosed herein are not necessarily indicative of the results that may be expected for a full year or any future period.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. Actual results could differ from those estimates. The allowance for credit losses, the fair value of financial instruments and the status of contingencies are particularly susceptible to significant change.

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. 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.

The below accounting policy from the Company’s 2022 Form 10-K has been updated to incorporate these changes.

Allowance for Credit Losses

The Company’s allowance for credit losses is determined using a current expected credit loss (“CECL”) model. 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.

The following is a discussion of the allowance for credit losses on loans held for investment and off-balance sheet credit exposures. See Note 1 - Operations and Summary of Significant Accounting Policies - Investment Securities - Debt Securities in the Company’s 2022 Form 10-K for discussion of the allowance for credit losses on available-for-sale and held-to-maturity debt securities.

The CECL methodology recognizes lifetime expected credit losses immediately when a financial asset is originated or purchased. The allowance for credit losses on loans is a valuation account that is deducted from the amortized cost basis of loans to present the net amount expected to be collected on the loans. Loans, or portions thereof, are charged off against the allowance when they are deemed uncollectible. Expected recoveries do not exceed the aggregate of amounts previously charged-off and expected to be charged-off. The allowance for credit losses on off-balance sheet financial instruments is recorded in other liabilities on the consolidated balance sheets,

Table of Contents

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. Historical credit loss experience provides the basis for the estimation of expected credit losses. 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. Loans that do not share risk characteristics are assigned a reserve based on an individual evaluation and are not included in the collective (pool) evaluation. For purposes of determining the collective (pool) 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. 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”). A similar process is employed to calculate a reserve assigned to off-balance 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. The PLQF is used to apply a qualitative adjustment across the entire portfolio of loans, while the SLQF is designed to apply a qualitative adjustment across a single portfolio segment. Even though portions of the allowance may be allocated to specific loans, the entire allowance is available for any credit that, in management’s judgment, should be charged off.

The Company generally uses a two-year forecast period, based on a single forecast scenario or a blend of multiple forecast scenarios, using variables management believes are most relevant to each portfolio segment. For periods beyond which management is able to develop reasonable and supportable forecasts, the Company reverts to the average historical loss rate, reflecting historical default probabilities and loss severities, using a reversion speed that approximates 1 to 2 years. The forecast period and scenario(s) used are reviewed on a quarterly basis and may be adjusted based on management's view of the current economic conditions and level of predictability the forecast can provide.

Portfolio segments are used to pool loans with similar risk characteristics and align with the Company’s methodology for measuring expected credit losses. A summary of the primary portfolio segments is as follows:

Commercial. The commercial loan portfolio is comprised of lines of credit for working capital, term loans, reserve-based loans to energy exploration and production companies, and leases to finance equipment and other business assets across a variety of industries. These loans are used for general corporate purposes including financing working capital, internal growth, and acquisitions and are generally secured by accounts receivable, inventory, oil and gas reserves, equipment and other assets of clients’ businesses.

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. 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. Mortgage finance loans are consistently underwritten based on standards established by the approved investors. Market conditions or events of default by an investor or originator could require that the Company repurchases the remaining interests in the mortgage loans and hold them beyond the expected 10-20 days.

Commercial Real Estate (“CRE”). The CRE portfolio is comprised of construction/development financing and limited term financing provided to professional real estate developers, owners/managers of commercial real estate projects and properties, and residential builders/developers. Collateral properties include office buildings, warehouse/distribution buildings, shopping centers, hotels/motels, senior living, apartment buildings, residential and commercial tract developments, and raw land or lots to be developed into single-family homes. The primary source of repayment on these loans is expected to come from the sale, permanent financing or lease of the real property collateral. The performance of these loans is impacted by fluctuations in collateral values, the ability of the borrower to obtain permanent financing, and, in the case of loans to residential builder/developers, volatility in consumer demand.

Consumer. This category of loans is comprised of loans made to consumers for personal expenditures, first and second lien mortgages made for the purpose of purchasing or constructing 1-4 family residential dwellings and home equity revolving lines of credit.

The Company has several pass credit grades that are assigned to loans based on varying levels of risk, ranging from credits that are secured by cash or marketable securities, to watch credits which have all the characteristics of an acceptable credit risk but warrant more than the normal level of monitoring. Within the criticized/classified credit grades are special mention, substandard and doubtful. Special mention loans are those that are currently protected by the sound worth and paying capacity of the borrower, but that are potentially weak and constitute an additional credit risk. These loans have the potential to deteriorate to a substandard grade due to the existence of financial or administrative deficiencies. Substandard loans have a well-defined weakness or weaknesses that

Table of Contents

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. 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. Substandard loans can be accruing or can be on non-accrual depending on the circumstances of the individual loans. Loans classified as doubtful have all the weaknesses inherent in substandard loans with the added characteristics that the weaknesses make collection in full highly questionable and improbable. The possibility of loss is extremely high. All doubtful loans are on non-accrual.

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. 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.

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. 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.

Expected credit losses are estimated over the contractual term of the loans, adjusted for expected prepayments when appropriate. The contractual term excludes expected extensions, renewals and modifications unless either of the following applies: management has a reasonable expectation that a loan will be restructured or the extension or renewal options are included in the borrower contract and are not unconditionally cancellable.

The Company does not measure an allowance for credit losses on accrued interest receivable balances because these balances are written off in a timely manner as a reduction to interest income when loans are placed on non-accrual status as discussed above.

(2) Earnings Per Share

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



	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands except share and per share data)	2023		2022		2023		2022
Numerator:
Net income	$	61,679	$	41,418	$	168,991	$	115,227
Preferred stock dividends	4,313		4,313		12,938		12,938
Net income available to common stockholders	$	57,366	$	37,105	$	156,053	$	102,289
Denominator:
Basic earnings per common share—weighted average common shares	48,007,466		49,891,727		48,168,486		50,506,364
Effect of dilutive outstanding stock-settled awards	521,232		526,157		555,542		584,151
Dilutive earnings per common share—weighted average diluted common shares	48,528,698		50,417,884		48,724,028		51,090,515
Basic earnings per common share	$	1.19	$	0.74	$	3.24	$	2.03
Diluted earnings per common share	$	1.18	$	0.74	$	3.20	$	2.00
Anti-dilutive outstanding stock-settled awards	87,738		174,706		319,021		315,499

Table of Contents

(3) Investment Securities

The following is a summary of the Company’s investment securities:


(in thousands)	Amortized Cost(1)		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
September 30, 2023
Available-for-sale debt securities:
U.S. Treasury securities	$	648,951	$	—	$	(25,503)	$	623,448
U.S. government agency securities	125,000		—		(24,026)		100,974
Residential mortgage-backed securities	2,838,238		—		(426,886)		2,411,352


CRT securities	13,885		—		(1,794)		12,091
Total available-for-sale debt securities	3,626,074		—		(478,209)		3,147,865
Held-to-maturity debt securities:
Residential mortgage-backed securities	881,352		—		(150,094)		731,258
Total held-to-maturity debt securities	881,352		—		(150,094)		731,258
Equity securities							40,500
Total investment securities(2)							$	4,069,717
December 31, 2022
Available-for-sale debt securities:
U.S. Treasury securities	$	698,769	$	—	$	(28,187)	$	670,582
U.S. government agency securities	125,000		—		(22,846)		102,154
Residential mortgage-backed securities	2,162,364		3		(331,320)		1,831,047


CRT securities	14,713		—		(2,852)		11,861
Total available-for-sale debt securities	3,000,846		3		(385,205)		2,615,644
Held-to-maturity securities:
Residential mortgage-backed securities	935,514		—		(118,600)		816,914
Total held-to-maturity securities	935,514		—		(118,600)		816,914
Equity securities							33,956
Total investment securities(2)							$	3,585,114

(1) Excludes accrued interest receivable of $8.1 million and $6.6 million at September 30, 2023 and December 31, 2022, respectively, related to available-for-sale debt securities and $1.4 million and $1.5 million at September 30, 2023 and December 31, 2022, respectively, related to held-to-maturity debt securities that is recorded in accrued interest receivable and other assets on the consolidated balance sheets.

(2) Includes available-for-sale debt securities and equity securities at estimated fair value and held-to-maturity debt securities at amortized cost.

Debt Securities

In the first quarter of 2023, the Company sold U.S. Treasury securities with an amortized cost of $56.4 million and realized a gain of $489,000.

The amortized cost and estimated fair value as of September 30, 2023, excluding accrued interest receivable, of available-for-sale and held-to-maturity debt securities are presented below by contractual maturity. Actual maturities may differ from contractual maturities of mortgage-backed securities because borrowers may have the right to call or prepay obligations with or without prepayment penalties.


	Available-for-sale				Held-to-maturity
(in thousands)	Amortized Cost		Fair Value		Amortized Cost		Fair Value

Due within one year	$	251,258	$	247,758	$	—	$	—
Due after one year through five years	447,693		417,962		—		—
Due after five years through ten years	105,800		84,708		—		—
Due after ten years	2,821,323		2,397,437		881,352		731,258
Total	$	3,626,074	$	3,147,865	$	881,352	$	731,258

Table of Contents

The following table discloses the Company’s available-for-sale debt securities that have been in a continuous unrealized loss position for less than 12 months and those that have been in a continuous unrealized loss position for 12 or more months:


	Less Than 12 Months				12 Months or Longer				Total
(in thousands)	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
September 30, 2023
U.S. Treasury securities	$	—	$	—	$	623,448	$	(25,503)	$	623,448	$	(25,503)
U.S. government agency securities	—		—		100,974		(24,026)		100,974		(24,026)
Residential mortgage-backed securities	981,628		(51,475)		1,429,522		(375,411)		2,411,150		(426,886)
CRT securities	—		—		12,091		(1,794)		12,091		(1,794)
Total	$	981,628	$	(51,475)	$	2,166,035	$	(426,734)	$	3,147,663	$	(478,209)
December 31, 2022
U.S. Treasury securities	$	670,582	$	(28,187)	$	—	$	—	$	670,582	$	(28,187)
U.S. government agency securities	—		—		102,154		(22,846)		102,154		(22,846)
Residential mortgage-backed securities	261,502		(9,481)		1,569,107		(321,839)		1,830,609		(331,320)
CRT securities	—		—		11,861		(2,852)		11,861		(2,852)
Total	$	932,084	$	(37,668)	$	1,683,122	$	(347,537)	$	2,615,206	$	(385,205)

At September 30, 2023, the Company had 111 available-for-sale debt securities in an unrealized loss position, comprised of 11 U.S. Treasury securities, five U.S. government agency securities, 93 residential 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. The Company does not currently intend to sell and based on current conditions it does not believe it is likely that the Company will be required to sell these available-for-sale debt securities before recovery of the amortized cost of such securities in an unrealized loss position and has, therefore recorded the unrealized losses related to this portfolio in accumulated other comprehensive income/(loss), net (“AOCI”). Held-to-maturity securities consist of government guaranteed securities for which no loss is expected. At September 30, 2023 and December 31, 2022, no allowance for credit losses was established for available-for-sale or held-to-maturity debt securities.

At September 30, 2023, debt securities with carrying values of approximately $1.5 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

Equity securities consist of investments that qualify for consideration under the regulations implementing the Community Reinvestment Act and investments in exchange traded funds, primarily related to the Company’s non-qualified deferred compensation plan. The following is a summary of unrealized and realized gains/(losses) recognized on equity securities included in other non-interest income on the consolidated statements of income and other comprehensive income:


	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	2023		2022		2023		2022
Net gains/(losses) recognized during the period	$	(1,262)	$	(1,165)	$	934	$	(9,801)
Less: Realized net gains/(losses) recognized on securities sold	(70)		(587)		(676)		(589)
Unrealized net gains/(losses) recognized on securities still held	$	(1,192)	$	(578)	$	1,610	$	(9,212)

Table of Contents

(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:



(in thousands)	September 30, 2023		December 31, 2022

Loans held for investment(1):
Commercial	$	10,365,650	$	9,832,676
Mortgage finance	4,429,489		4,090,033
Commercial real estate	5,358,770		4,875,363
Consumer	537,229		552,848



Gross loans held for investment	20,691,138		19,350,920
Unearned income (net of direct origination costs)	(77,767)		(63,580)
Total loans held for investment	20,613,371		19,287,340
Allowance for credit losses on loans	(244,902)		(253,469)
Total loans held for investment, net	$	20,368,469	$	19,033,871
Loans held for sale:
Mortgage loans, at fair value	$	706	$	—
Non-mortgage loans, at lower of cost or fair value	154,367		36,357
Total loans held for sale	$	155,073	$	36,357

(1) Excludes accrued interest receivable of $117.1 million and $100.4 million at September 30, 2023 and December 31, 2022, respectively, that is recorded in accrued interest receivable and other assets on the consolidated balance sheets.

Table of Contents

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


(in thousands)	2023		2022		2021		2020		2019		2018 and prior		Revolving lines of credit		Revolving lines of credit converted to term loans		Total
September 30, 2023
Commercial
(1-7) Pass	$	1,408,491	$	1,855,308	$	320,579	$	164,080	$	214,498	$	280,472	$	5,656,437	$	17,150	$	9,917,015
(8) Special mention	8,271		134,200		36,559		20,403		844		23,873		33,521		115		257,786
(9) Substandard - accruing	14,485		48,383		28,226		2,482		—		746		33,398		—		127,720
(9+) Non-accrual	89		37,028		340		436		15,114		10,122		—		—		63,129
Total commercial	$	1,431,336	$	2,074,919	$	385,704	$	187,401	$	230,456	$	315,213	$	5,723,356	$	17,265	$	10,365,650
Mortgage finance
(1-7) Pass	$	199,971	$	35,432	$	655,827	$	214,615	$	273,517	$	3,050,127	$	—	$	—	$	4,429,489
(8) Special mention	—		—		—		—		—		—		—		—		—
(9) Substandard - accruing	—		—		—		—		—		—		—		—		—
(9+) Non-accrual	—		—		—		—		—		—		—		—		—
Total mortgage finance	$	199,971	$	35,432	$	655,827	$	214,615	$	273,517	$	3,050,127	$	—	$	—	$	4,429,489
Commercial real estate
(1-7) Pass	$	452,034	$	1,630,276	$	1,097,474	$	537,154	$	362,540	$	565,190	$	458,171	$	28,690	$	5,131,529
(8) Special mention	—		68,028		33,492		24,047		11,974		34,909		—		—		172,450
(9) Substandard - accruing	—		3,686		21,451		—		—		29,654		—		—		54,791
(9+) Non-accrual	—		—		—		—		—		—		—		—		—
Total commercial real estate	$	452,034	$	1,701,990	$	1,152,417	$	561,201	$	374,514	$	629,753	$	458,171	$	28,690	$	5,358,770
Consumer
(1-7) Pass	$	28,726	$	59,235	$	88,373	$	54,266	$	14,359	$	103,734	$	186,987	$	—	$	535,680
(8) Special mention	—		—		500		—		—		984		—		65		1,549
(9) Substandard - accruing	—		—		—		—		—		—		—		—		—
(9+) Non-accrual	—		—		—		—		—		—		—		—		—
Total consumer	$	28,726	$	59,235	$	88,873	$	54,266	$	14,359	$	104,718	$	186,987	$	65	$	537,229
Total	$	2,112,067	$	3,871,576	$	2,282,821	$	1,017,483	$	892,846	$	4,099,811	$	6,368,514	$	46,020	$	20,691,138
Gross charge-offs	$	7	$	5,090	$	20,079	$	—	$	15,243	$	883	$	698	$	871	$	42,871


(in thousands)	2022		2021		2020		2019		2018		2017 and prior		Revolving lines of credit		Revolving lines of credit converted to term loans		Total
December 31, 2022
Commercial
(1-7) Pass	$	2,022,950	$	678,473	$	240,511	$	254,985	$	322,099	$	227,853	$	5,694,352	$	20,933	$	9,462,156
(8) Special mention	9,141		7,740		3,628		37,794		11,998		4,975		95,310		2,250		172,836
(9) Substandard - accruing	18,670		71,147		514		1,666		14,933		6,305		37,407		—		150,642
(9+) Non-accrual	376		512		751		30,392		6,226		2,520		6,265		—		47,042
Total commercial	$	2,051,137	$	757,872	$	245,404	$	324,837	$	355,256	$	241,653	$	5,833,334	$	23,183	$	9,832,676
Mortgage finance
(1-7) Pass	$	30,485	$	482,477	$	197,045	$	267,758	$	464,753	$	2,647,515	$	—	$	—	$	4,090,033
(8) Special mention	—		—		—		—		—		—		—		—		—
(9) Substandard - accruing	—		—		—		—		—		—		—		—		—
(9+) Non-accrual	—		—		—		—		—		—		—		—		—
Total mortgage finance	$	30,485	$	482,477	$	197,045	$	267,758	$	464,753	$	2,647,515	$	—	$	—	$	4,090,033
Commercial real estate
(1-7) Pass	$	1,362,160	$	958,669	$	670,113	$	520,970	$	263,240	$	448,536	$	465,834	$	43,237	$	4,732,759
(8) Special mention	3,494		6,524		46,512		5,295		19,350		4,038		—		—		85,213
(9) Substandard - accruing	7,840		17,850		—		247		11,458		18,733		—		—		56,128
(9+) Non-accrual	—		—		1,081		—		—		182		—		—		1,263
Total commercial real estate	$	1,373,494	$	983,043	$	717,706	$	526,512	$	294,048	$	471,489	$	465,834	$	43,237	$	4,875,363
Consumer
(1-7) Pass	$	69,320	$	95,470	$	57,060	$	24,773	$	20,055	$	89,919	$	196,088	$	130	$	552,815
(8) Special mention	—		—		—		—		—		—		—		—		—
(9) Substandard - accruing	—		—		—		—		—		—		—		—		—
(9+) Non-accrual	—		—		—		33		—		—		—		—		33
Total Consumer	$	69,320	$	95,470	$	57,060	$	24,806	$	20,055	$	89,919	$	196,088	$	130	$	552,848
Total	$	3,524,436	$	2,318,862	$	1,217,215	$	1,143,913	$	1,134,112	$	3,450,576	$	6,495,256	$	66,550	$	19,350,920

Table of Contents

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 6 - 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.


(in thousands)	Commercial		Mortgage Finance		Commercial Real Estate		Consumer		Total
Nine Months Ended September 30, 2023
Beginning balance	$	185,303	$	10,745	$	54,268	$	3,153	$	253,469
Provision for credit losses on loans	20,569		(4,438)		12,935		(543)		28,523
Charge-offs	42,830		—		—		41		42,871
Recoveries	5,776		—		—		5		5,781
Net charge-offs (recoveries)	37,054		—		—		36		37,090
Ending balance	$	168,818	$	6,307	$	67,203	$	2,574	$	244,902
Nine Months Ended September 30, 2022
Beginning balance	$	154,360	$	6,083	$	48,247	$	3,176	$	211,866
Provision for credit losses on loans	12,642		4,073		11,094		(192)		27,617
Charge-offs	6,113		—		350		—		6,463
Recoveries	1,572		—		—		21		1,593
Net charge-offs (recoveries)	4,541		—		350		(21)		4,870
Ending balance	$	162,461	$	10,156	$	58,991	$	3,005	$	234,613

The Company recorded a $28.5 million provision for credit losses on loans for the nine months ended September 30, 2023, compared to $27.6 million for the same period of 2022. The $28.5 million provision for credit losses on loans resulted primarily from increases in criticized loans and total loans held for investment during the nine months ended September 30, 2023. Net charge-offs of $37.1 million were recorded during the nine months ended September 30, 2023, compared to net charge-offs of $4.9 million during the same period of 2022. Criticized loans totaled $677.4 million at September 30, 2023, $513.2 million at December 31, 2022 and $484.0 million at September 30, 2022.

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 September 30, 2023, the Company had $50.4 million in collateral-dependent commercial loans, collateralized by business assets.

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


(in thousands)	30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		Total Past Due		Non-accrual(1)		Current		Total		Non-accrual With No Allowance
September 30, 2023
Commercial	$	12,450	$	2,242	$	4,511	$	19,203	$	63,129	$	10,283,318	$	10,365,650	$	12,058
Mortgage finance	—		—		—		—		—		4,429,489		4,429,489		—
Commercial real estate	899		—		91		990		—		5,357,780		5,358,770		—
Consumer	2,009		—		—		2,009		—		535,220		537,229		—
Total	$	15,358	$	2,242	$	4,602	$	22,202	$	63,129	$	20,605,807	$	20,691,138	$	12,058

(1)As of September 30, 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 of interest income was recognized on non-accrual loans for the nine months ended September 30, 2023 compared to $801,000 for the same period in 2022. Accrued interest of $1.7 million and $100,000 was reversed during the nine months ended September 30, 2023 and September 30, 2022, 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.

Table of Contents

The table below details gross loans held for investment as of September 30, 2023 made to borrowers experiencing financial difficulty that were modified during the three and nine months ended September 30, 2023:


(in thousands)	Payment Deferral		Term Extension		Payment Deferral and Term Extension		Interest Rate Reduction and Term Extension		Total		Percentage of Total Loans Held for Investment
Three Months Ended September 30, 2023
Commercial	$	271	$	6,372	$	—	$	—	$	6,643	0.03	%




Total	$	271	$	6,372	$	—	$	—	$	6,643	0.03	%
Nine Months Ended September 30, 2023
Commercial	$	31,327	$	7,065	$	5,893	$	14,332	$	58,617	0.28	%




Total	$	31,327	$	7,065	$	5,893	$	14,332	$	58,617	0.28	%

The following table summarizes the financial impacts of loan modifications made to borrowers experiencing financial difficulty during the three and nine months ended September 30, 2023:


	Interest Rate Reduction	Term Extension (in months)	Total Payment Deferrals (in thousands)
Three Months Ended September 30, 2023
Commercial	—%	1 to 1	$	59



Nine Months Ended September 30, 2023
Commercial	0.70%	1 to 36	$	5,139

For the three months ended September 30, 2023 there were no loans that experienced a default subsequent to being modified in the prior twelve months. During the nine months ended September 30, 2023, commercial loans totaling $161,000 experienced a default subsequent to being granted a term extension 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 September 30, 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)	30-89 Days Past Due		90+ Days Past Due		Non-Accrual		Current		Total
September 30, 2023
Commercial	$	—	$	—	$	5,893	$	52,724	$	58,617



Total	$	—	$	—	$	5,893	$	52,724	$	58,617

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

The following table details the recorded investments of loans restructured during the nine months ended September 30, 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
Nine months ended September 30, 2022
Commercial loans	—	$	—	1	$	604	1	$	604

Total	—	$	—	1	$	604	1	$	604

As of December 31, 2022 and September 30, 2022, the Company did not have any loans considered restructured that were not on non-accrual. Of the non-accrual loans at December 31, 2022 and September 30, 2022, $531,000 and $2.2 million, respectively, met the criteria for restructured. These loans had no unfunded commitments at their respective balance sheet dates.

(5) Short-Term Borrowings and Long-Term Debt

The table below presents a summary of short-term borrowings:


(in thousands)	September 30, 2023		December 31, 2022

Customer repurchase agreements	$	—	$	1,142
Federal Home Loan Bank borrowings	1,400,000		1,200,000
Total short-term borrowings	$	1,400,000	$	1,201,142

Table of Contents

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



(in thousands)	September 30, 2023		December 31, 2022

Bank-issued floating rate senior unsecured credit-linked notes due 2024	$	198,997	$	272,492
Bank-issued 5.25% fixed rate subordinated notes due 2026	174,392		174,196
Company-issued 4.00% fixed rate subordinated notes due 2031	371,676		371,348
Trust preferred floating rate subordinated debentures due 2032 to 2036	113,406		113,406
Total long-term debt	$	858,471	$	931,442

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.

(6) Financial Instruments with Off-Balance Sheet Risk

The table below presents the Company’s financial instruments with off-balance sheet risk, as well as the activity in the allowance for off-balance sheet credit losses related to those financial instruments. 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 Finance		Commercial Real Estate		Consumer		Total
Nine Months Ended September 30, 2023
Beginning balance	$	16,550	$	—	$	5,222	$	21	$	21,793
Provision for off-balance sheet credit losses	15,799		13		8,533		132		24,477
Ending balance	$	32,349	$	13	$	13,755	$	153	$	46,270
Nine Months Ended September 30, 2022
Beginning balance	$	15,107	$	—	$	2,136	$	22	$	17,265
Provision for off-balance sheet credit losses	760		—		3,621		2		4,383
Ending balance	$	15,867	$	—	$	5,757	$	24	$	21,648


(in thousands)							September 30, 2023		December 31, 2022

Commitments to extend credit - period end balance							$	9,704,070	$	9,673,082
Standby letters of credit - period end balance							515,651		417,896

(7) Regulatory Ratios and Capital

The Company and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory (and possibly additional discretionary) actions by regulators that, if undertaken, could have a direct material adverse effect on the Company’s and the Bank’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and the Bank must meet specific capital guidelines that involve quantitative measures of the Company’s and the Bank’s assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. 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. A financial institution with a conservation buffer of less than the required amount is subject to limitations on capital distributions, including dividend payments and stock repurchases, and certain discretionary bonus payments to executive officers. No dividends were declared or paid on the Company’s common stock during the nine months ended September 30, 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 may repurchase up to $150.0 million in shares of its outstanding common stock. During the nine months ended September 30, 2023, the Company repurchased 1,011,909 shares of its common stock for an

Table of Contents

aggregate price of $59.7 million, at a weighted average price of $58.98 per share. The aggregate purchase price and weighted average price per share does not include the effect of excise tax incurred on net stock repurchases.

In February 2019, the federal bank regulatory agencies issued a final rule (the “2019 CECL Rule”) that revised certain capital regulations to account for changes to credit loss accounting under GAAP. 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 September 30, 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 September 30, 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.

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.

At the beginning of each of the last five years of the life of the Bank-issued fixed rate subordinated notes due 2026, the amount that is eligible to be included in Tier 2 capital is reduced by 20% of the original amount of the notes (net of redemptions). In 2023, the amount of the notes that qualify as Tier 2 capital has been reduced by 60%.

Table of Contents

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
September 30, 2023
CET1
Company	$	3,287,021	12.70	%	$	1,811,941	7.00	%	N/A	N/A
Bank	3,570,990		13.85	%	1,805,139		7.00	%	1,676,200	6.50	%
Total capital (to risk-weighted assets)
Company	4,422,650		17.09	%	2,717,911		10.50	%	2,588,487	10.00	%
Bank	3,924,943		15.22	%	2,707,708		10.50	%	2,578,769	10.00	%
Tier 1 capital (to risk-weighted assets)
Company	3,697,021		14.28	%	2,200,214		8.50	%	1,553,092	6.00	%
Bank	3,570,990		13.85	%	2,191,954		8.50	%	2,063,015	8.00	%
Tier 1 capital (to average assets)(1)
Company	3,697,021		12.14	%	1,218,163		4.00	%	N/A	N/A
Bank	3,570,990		11.76	%	1,214,985		4.00	%	1,518,731	5.00	%
December 31, 2022
CET1
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)
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 risk-weighted assets)
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	%
Tier 1 capital (to average assets)(1)
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; however, the Federal Reserve Board and the FDIC may require the Company and the Bank, respectively, to maintain a Tier 1 capital ratio (to average assets) above the required minimum.

(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 September 30, 2023 and December 31, 2022.

(8) Stock-Based Compensation

The Company has long-term incentive plans under which stock-based compensation awards are granted to employees and directors by the Company’s board of directors or its designated committee. Grants are subject to vesting requirements and may include, among other things, nonqualified stock options, stock appreciation rights, restricted stock units (“RSUs”), restricted stock and performance units, or any combination thereof.

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


	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	2023		2022		2023		2022
Stock-settled awards:

RSUs	$	4,441	$	5,376	$	17,948	$	15,805

Cash-settled units	—		3		—		186
Total	$	4,441	$	5,379	$	17,948	$	15,991

Table of Contents


(in thousands except period data)	September 30, 2023
Unrecognized compensation expense related to unvested stock-settled awards	$	33,773
Weighted average period over which expense is expected to be recognized, in years	2.1

(9) 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. See Note 1 - Operations and Summary of Significant Accounting Policies in the Company’s 2022 Form 10-K 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.

Assets and liabilities measured at fair value are as follows:


	Fair Value Measurements Using
(in thousands)	Level 1		Level 2		Level 3
September 30, 2023
Available-for-sale debt securities:(1)
U.S. Treasury securities	$	623,448	$	—	$	—
U.S. government agency securities	—		100,974		—
Residential mortgage-backed securities	—		2,411,352		—


CRT securities	—		—		12,091
Equity securities(1)(2)	29,689		10,811		—
Mortgage loans held for sale(3)	—		706		—
Loans held for investment(4)	—		—		32,847

Derivative assets(5)	—		12,347		—
Securities sold not yet purchased(6)	9,532		—		—
Derivative liabilities(5)	—		119,481		—
Non-qualified deferred compensation plan liabilities(7)	18,488		—		—
December 31, 2022
Available-for-sale debt securities:(1)
U.S. Treasury securities	$	670,582	$	—	$	—
U.S. government agency securities	—		102,154		—
Residential mortgage-backed securities	—		1,831,047		—


CRT securities	—		—		11,861
Equity securities(1)(2)	22,879		11,077		—


Derivative assets(5)	—		13,504		—
Derivative liabilities(5)	—		91,758		—
Non-qualified deferred compensation plan liabilities(7)	21,177		—		—

(1)Investment 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, primarily related to the Company’s non-qualified deferred compensation plan.

(3)Loans held for sale are measured at fair value on a recurring basis, generally monthly.

(4)Includes certain collateral-dependent loans held for investment for which a specific allocation of the allowance for credit losses is based upon the fair value of the loan’s underlying collateral. These loans held for investment are measured on a nonrecurring basis, generally annually or more often as warranted by market and economic conditions.

(5)Derivative assets and liabilities are measured at fair value on a recurring basis, generally quarterly.

(6)Securities sold not yet purchased are measured at fair value on a recurring basis, generally monthly.

(7)Non-qualified deferred compensation plan liabilities represent the fair value of the obligation to the employee, which generally corresponds to the fair value of the invested assets, and are measured at fair value on a recurring basis, generally monthly.

Table of Contents

Level 3 Valuations

The following table presents a reconciliation of the level 3 fair value category measured at fair value on a recurring basis:


							Net Gains/(Losses)
(in thousands)	Balance at Beginning of Period		Purchases / Additions		Sales / Reductions		Realized		Unrealized		Balance at End of Period
Three Months Ended September 30, 2023
Available-for-sale debt securities:(1)

CRT securities	$	11,756	$	—	$	(341)	$	—	$	676	$	12,091

Three Months Ended September 30, 2022
Available-for-sale debt securities:(1)

CRT securities	$	11,670	$	—	$	—	$	—	$	32	$	11,702
Loans held for sale(2)	4,266		571		(450)		—		—		4,387

Nine Months Ended September 30, 2023
Available-for-sale debt securities:(1)

CRT securities	$	11,861	$	—	$	(828)	$	—	$	1,058	$	12,091

Nine Months Ended September 30, 2022
Available-for-sale debt securities:(1)
Tax-exempt asset-backed securities	$	180,033	$	—	$	(170,626)	$	—	$	(9,407)	$	—
CRT securities	11,846		—		—		—		(144)		11,702
Loans held for sale(2)	7,658		1,898		(5,050)		—		(119)		4,387

(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. At September 30, 2023, the discount rates utilized ranged from 6.89% to 10.61% and the weighted-average life ranged from 5.14 years to 7.92 years. On a combined amortized cost weighted-average basis a discount rate of 8.20% and a weighted-average life of 6.12 years were utilized to determine the fair value of these securities at September 30, 2023. At December 31, 2022, the combined weighted-average discount rate and weighted-average life utilized were 8.24% and 6.26 years, respectively.

Loans held for investment

Certain collateral-dependent loans held for investment are reported at fair value when, based upon an individual evaluation, the specific allocation of the allowance for credit losses that is deducted from the loan's amortized cost is based upon the fair value of the loan's underlying collateral. The $32.8 million fair value of loans held for investment at September 30, 2023 reported above includes impaired loans with a carrying value of $50.4 million that were reduced by specific allowance allocations totaling $17.5 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.

Table of Contents

Fair Value of Financial Instruments

A summary of the carrying amounts and estimated fair values of financial instruments is as follows:


	Carrying Amount		Estimated Fair Value
(in thousands)			Total		Level 1		Level 2		Level 3
September 30, 2023
Financial assets:
Cash and cash equivalents	$	4,192,776	$	4,192,776	$	4,192,776	$	—	$	—
Available-for-sale debt securities	3,147,865		3,147,865		623,448		2,512,326		12,091
Held-to-maturity debt securities	881,352		731,258		—		731,258		—
Equity securities	40,500		40,500		29,689		10,811		—
Loans held for sale	155,073		155,073		126,990		28,083		—
Loans held for investment, net	20,368,469		20,312,747		—		—		20,308,632
Derivative assets	12,347		12,347		—		12,347		—
Financial liabilities:
Total deposits	23,878,978		23,891,910		—		—		23,891,910
Short-term borrowings	1,400,000		1,400,000		—		1,400,000		—
Long-term debt	858,471		788,776		—		788,776		—
Securities sold not yet purchased	9,532		9,532		9,532		—		—
Derivative liabilities	119,481		119,481		—		119,481		—
December 31, 2022
Financial assets:
Cash and cash equivalents	$	5,012,260	$	5,012,260	$	5,012,260	$	—	$	—
Available-for-sale debt securities	2,615,644		2,615,644		670,582		1,933,201		11,861
Held-to-maturity debt securities	935,514		816,914		—		816,914		—
Equity securities	33,956		33,956		22,879		11,077		—
Loans held for sale	36,357		36,357		—		—		36,357
Loans held for investment, net	19,033,871		18,969,922		—		—		18,969,922
Derivative assets	13,504		13,504		—		13,504		—
Financial liabilities:
Total deposits	22,856,880		22,857,949		—		—		22,857,949
Short-term borrowings	1,201,142		1,201,142		—		1,201,142		—
Long-term debt	931,442		881,716		—		881,716		—
Derivative liabilities	91,758		91,758		—		91,758		—

Table of Contents

(10) Derivative Financial Instruments

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


	September 30, 2023						December 31, 2022
			Estimated Fair Value						Estimated Fair Value
(in thousands)	Notional Amount		Asset Derivative		Liability Derivative		Notional Amount		Asset Derivative		Liability Derivative
Derivatives designated as hedges
Cash flow hedges:
Interest rate contracts:
Swaps hedging loans	$	3,100,000	$	—	$	111,760	$	3,000,000	$	—	$	86,378
Non-hedging derivatives
Customer-initiated and other derivatives:
Foreign currency forward contracts	3,192		36		21		—		—		—
Interest rate contracts:
Swaps	5,224,649		100,796		100,794		4,396,367		83,529		83,529
Caps and floors written	587,252		7		6,194		220,142		—		2,583
Caps and floors purchased	587,252		6,186		7		220,142		2,583		—
Forward contracts	8,518,091		30,308		29,509		1,569,326		4,431		4,053
Gross derivatives			137,333		248,285				90,543		176,543
Netting adjustment - offsetting derivative assets/liabilities			(47,683)		(47,683)				(5,164)		(5,164)
Netting adjustment - cash collateral received/posted			(77,303)		(81,121)				(71,875)		(79,621)
Net derivatives included on the consolidated balance sheets			$	12,347	$	119,481			$	13,504	$	91,758

The Company’s credit exposure on derivative instruments is limited to the net favorable value and interest payments by each counterparty. In some cases, collateral may be required from the counterparties involved if the net value of the derivative instruments exceeds a nominal amount. The Company’s credit exposure associated with these instruments, net of any collateral pledged, was approximately $12.3 million at September 30, 2023 and approximately $13.5 million at December 31, 2022. Collateral levels are monitored and adjusted on a regular basis for changes in the value of derivative instruments. At September 30, 2023, the Company had $148.1 million in cash collateral pledged to counterparties included in interest bearing cash and cash equivalents on the consolidated balance sheet and $81.5 million in cash collateral received from counterparties included in interest bearing deposits on the consolidated balance sheet. The comparative amounts at December 31, 2022, were $89.2 million in cash collateral pledged to counterparties and $72.5 million cash collateral received from counterparties.

The Company also enters into credit risk participation agreements with financial institution counterparties for interest rate swaps related to loans in which the Company is either a participant or a lead bank. The risk participation agreements entered into by the Company as a participant bank provide credit protection to the financial institution counterparty should the borrower fail to perform on its interest rate derivative contract with that financial institution. The Company is party to 16 risk participation agreements where it acts as a participant bank with a notional amount of $261.7 million at September 30, 2023, compared to 19 risk participation agreements with a notional amount of $291.2 million at December 31, 2022. The maximum estimated exposure to these agreements, assuming 100% default by all obligors, was approximately $10.4 million at September 30, 2023 and $8.9 million at December 31, 2022. The fair value of these exposures was insignificant to the consolidated financial statements at both September 30, 2023 and December 31, 2022. Risk participation agreements entered into by the Company as the lead bank provide credit protection should the borrower fail to perform on its interest rate derivative contract. The Company is party to 13 risk participation agreements where the Company acts as the lead bank having a notional amount of $197.7 million at September 30, 2023, compared to 18 agreements having a notional amount of $222.0 million at December 31, 2022.

Derivatives Designated as Cash Flow Hedges

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

During the nine months ended September 30, 2023, the Company recorded $66.1 million in unrealized losses to adjust its cash flow hedges to fair value, which was recorded net of tax to AOCI, and reclassified $43.4 million from AOCI as a decrease to interest income on loans. Based on current market conditions, the Company estimates that during the next 12 months, an additional $70.9 million will be reclassified from AOCI as a decrease to interest income. As of September 30, 2023, the maximum length of time over which forecasted transactions are hedged is 3.00 years.

Table of Contents

(11) Accumulated Other Comprehensive Income

The following table provides the change in AOCI by component:


(in thousands)	Cash Flow Hedges		Available-for-Sale Securities		Held-to-Maturity Securities		Total
Three Months Ended September 30, 2023
Beginning balance	$	(81,785)	$	(313,196)	$	(45,327)	$	(440,308)
Change in unrealized gain/(loss)	(20,572)		(81,758)		—		(102,330)
Amounts reclassified into net income	17,378		—		1,907		19,285
Total other comprehensive income/(loss)	(3,194)		(81,758)		1,907		(83,045)
Income tax expense/(benefit)	(671)		(17,170)		400		(17,441)
Total other comprehensive income/(loss), net of tax	(2,523)		(64,588)		1,507		(65,604)
Ending balance	$	(84,308)	$	(377,784)	$	(43,820)	$	(505,912)
Three Months Ended September 30, 2022
Beginning balance	$	(316)	$	(220,090)	$	(51,802)	$	(272,208)
Change in unrealized gain/(loss)	(78,177)		(129,027)		—		(207,204)
Amounts reclassified into net income	(1,760)		—		2,369		609
Total other comprehensive income/(loss)	(79,937)		(129,027)		2,369		(206,595)
Income tax expense/(benefit)	(16,786)		(27,095)		497		(43,384)
Total other comprehensive income/(loss), net of tax	(63,151)		(101,932)		1,872		(163,211)
Ending balance	$	(63,467)	$	(322,022)	$	(49,930)	$	(435,419)

Nine Months Ended September 30, 2023
Beginning balance	$	(66,394)	$	(304,309)	$	(48,240)	$	(418,943)
Change in unrealized gain/(loss)	(66,101)		(93,007)		—		(159,108)
Amounts reclassified into net income	43,426		—		5,594		49,020
Total other comprehensive income/(loss)	(22,675)		(93,007)		5,594		(110,088)
Income tax expense/(benefit)	(4,761)		(19,532)		1,174		(23,119)
Total other comprehensive income/(loss), net of tax	(17,914)		(73,475)		4,420		(86,969)
Ending balance	$	(84,308)	$	(377,784)	$	(43,820)	$	(505,912)
Nine Months Ended September 30, 2022
Beginning balance	$	—	$	(47,715)	$	—	$	(47,715)
Change in unrealized gain/(loss)	(77,873)		(347,223)		(69,165)		(494,261)
Amounts reclassified into net income	(2,464)		—		5,962		3,498
Total other comprehensive income/(loss)	(80,337)		(347,223)		(63,203)		(490,763)
Income tax expense/(benefit)	(16,870)		(72,916)		(13,273)		(103,059)
Total other comprehensive income/(loss), net of tax	(63,467)		(274,307)		(49,930)		(387,704)
Ending balance	$	(63,467)	$	(322,022)	$	(49,930)	$	(435,419)

(12) New Accounting Standards

ASU 2023-05 “Business Combinations - Joint Venture Formations (Subtopic 805-60) – Recognition and Initial Measurement” (“ASU 2023-05”) addresses the accounting for contributions made to a joint venture, upon formation, in a joint venture’s separate financial statements. ASU 2023-05 requires certain joint ventures to apply a new basis of accounting upon formation by recognizing and initially measuring most of their assets and liabilities at fair value. The objectives of the amendments are to provide decision-useful information to investors and other allocators of capital in a joint venture’s financial statements and also to reduce diversity in practice. ASU 2023-05 is effective prospectively for all joint venture formations with a formation date on or after January 1, 2025 and is not expected to have an impact on our financial statements.

Table of Contents

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 nine months ended September 30, 2023 and 2022 should be read in conjunction with its audited consolidated financial statements and the related notes to the consolidated financial statements included in its Annual Report on Form 10-K for the year ended December 31, 2022 (the “2022 Form 10-K”). Operating results for the three and nine months ended September 30, 2023 are not necessarily indicative of the results for the year ending December 31, 2023 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, strategies, future performance and business and industry outlook. 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 risk 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; recent adverse developments in the banking industry highlighted by high-profile bank failures 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; TCBI’s ability to effectively manage its liquidity risk; TCBI’s ability to pursue and execute upon growth plans, whether as a function of capital, liquidity, or other limitations; TCBI’s ability to effectively manage information technology systems, including third party vendors, cyber or data privacy incidents, or other failures, disruptions or security breaches; elevated or further 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 successfully execute its business strategy, including developing and executing new lines of business and new products and services; the failure to identify, attract, and retain key personnel and other employees; increased or expanded competition from banks and other financial service providers in TCBI’s markets; negative press and social media attention with respect to the banking industry or TCBI, in particular; the transition away from the London Interbank Offered Rate (LIBOR); legislative and regulatory changes; severe weather, natural disasters, climate change, acts of war, terrorism, global conflict (including those already reported by the media, as well as others that may arise), 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 communication 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.

Overview

Recent Industry Developments

During the first nine months of 2023, the banking industry experienced significant volatility with multiple high-profile bank failures and industry wide concerns related to liquidity, deposit outflows, unrealized securities losses, eroding consumer confidence and increased regulatory scrutiny. Despite these negative industry developments, the Company’s liquidity position and balance sheet remains robust. Furthermore, the Company’s capital remains at historically high levels with CET1 and total capital ratios of 12.7% and 17.1%, respectively, as of September 30, 2023. The Company’s total deposits increased by 4% as compared to December 31, 2022, to $23.9 billion at September 30, 2023. In response to the industry-wide concerns, the Company took a number of preemptive actions, which included pro-active outreach to clients and a robust review of its borrowing and liquidity positions to ensure that the Company’s liquidity and capital positions remain strong and that the Company is positioned to best serve its clients.

Table of Contents

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,
(dollars in thousands except per share data)	2023			2022			2023			2022
Net interest income	$	232,071		$	239,081		$	699,406		$	628,160
Provision for credit losses	18,000			12,000			53,000			32,000
Non-interest income	46,872			25,332			130,286			71,855
Non-interest expense	179,891			197,047			555,562			514,442
Income before income taxes	81,052			55,366			221,130			153,573
Income tax expense	19,373			13,948			52,139			38,346
Net income	61,679			41,418			168,991			115,227
Preferred stock dividends	4,313			4,313			12,938			12,938
Net income available to common stockholders	$	57,366		$	37,105		$	156,053		$	102,289
Basic earnings per common share	$	1.19		$	0.74		$	3.24		$	2.03
Diluted earnings per common share	$	1.18		$	0.74		$	3.20		$	2.00
Net interest margin	3.13		%	3.05		%	3.25		%	2.64		%
Return on average assets (“ROA”)	0.81		%	0.52		%	0.77		%	0.47		%
Return on average common equity (“ROE”)	8.08		%	5.36		%	7.46		%	4.90		%
Efficiency ratio(1)	64.5		%	74.5		%	67.0		%	73.5		%
Non-interest income to average earning assets	0.64		%	0.33		%	0.61		%	0.30		%
Non-interest expense to average earning assets	2.46		%	2.53		%	2.61		%	2.18		%

(1) Non-interest expense divided by the sum of net interest income and non-interest income.

Three months ended September 30, 2023 compared to three months ended September 30, 2022

The Company reported net income of $61.7 million and net income available to common stockholders of $57.4 million for the third quarter of 2023, compared to net income of $41.4 million and net income available to common stockholders of $37.1 million for the third quarter of 2022. On a fully diluted basis, earnings per common share were $1.18 for the third quarter of 2023, compared to $0.74 for the same period in 2022. ROE was 8.08% and ROA was 0.81% for the third quarter of 2023, compared to 5.36% and 0.52%, respectively, for the same period in 2022. The increase in net income for the third quarter of 2023 compared to the third quarter of 2022 resulted primarily from an increase in non-interest income and a decrease in non-interest expense, partially offset by a decrease in net interest income and an increase in the provision for credit losses.

Nine months ended September 30, 2023 compared to nine months ended September 30, 2022

The Company reported net income of $169.0 million and net income available to common stockholders of $156.1 million for the nine months ended September 30, 2023, compared to net income of $115.2 million and net income available to common stockholders of $102.3 million for the same period in 2022. On a fully diluted basis, earnings per common share were $3.20 for the nine months ended September 30, 2023, compared to $2.00 for the same period in 2022. ROE was 7.46% and ROA was 0.77% for the nine months ended September 30, 2023, compared to 4.90% and 0.47%, respectively, for the same period in 2022. The increase in net income for the nine months ended September 30, 2023 compared to the same period in 2022 resulted primarily from increases in net interest income and non-interest income, partially offset by increases in the provision for credit losses and non-interest expense.

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

Table of Contents

Taxable Equivalent Net Interest Income Analysis - Quarterly(1)


	Three Months Ended September 30, 2023						Three Months Ended September 30, 2022
(in thousands except percentages)	Average Balance		Income/ Expense		Yield/ Rate		Average Balance		Income/ Expense		Yield/ Rate
Assets
Investment securities(2)	$	4,204,749	$	27,070	2.33	%	$	3,509,044	$	15,002	1.58	%
Interest-bearing cash and cash equivalents	3,965,045		53,561		5.36	%	4,453,806		24,596		2.19	%
Loans held for sale	31,878		647		8.06	%	1,029,983		11,316		4.36	%
Loans held for investment, mortgage finance	4,697,702		31,217		2.64	%	5,287,531		52,756		3.96	%
Loans held for investment(3)	16,317,324		313,346		7.62	%	16,843,922		218,513		5.15	%
Less: Allowance for credit losses on loans	238,883		—		—		229,005		—		—
Loans held for investment, net	20,776,143		344,563		6.58	%	21,902,448		271,269		4.91	%
Total earning assets	28,977,815		425,841		5.75	%	30,895,281		322,183		4.10	%
Cash and other assets	1,106,031						918,630
Total assets	$	30,083,846					$	31,813,911
Liabilities and Stockholders’ Equity
Transaction deposits	$	1,755,451	$	13,627	3.08	%	$	1,444,964	$	5,239	1.44	%
Savings deposits	10,858,306		127,323		4.65	%	10,249,387		46,555		1.80	%
Time deposits	1,610,235		19,167		4.72	%	1,701,238		8,523		1.99	%

Total interest bearing deposits	14,223,992		160,117		4.47	%	13,395,589		60,317		1.79	%
Short-term borrowings	1,393,478		19,576		5.57	%	1,931,537		10,011		2.06	%
Long-term debt	858,167		14,005		6.47	%	921,707		12,663		5.45	%
Total interest bearing liabilities	16,475,637		193,698		4.66	%	16,248,833		82,991		2.03	%
Non-interest bearing deposits	10,016,579						12,214,531
Other liabilities	474,869						305,554
Stockholders’ equity	3,116,761						3,044,993
Total liabilities and stockholders’ equity	$	30,083,846					$	31,813,911

Net interest income			$	232,143					$	239,192
Net interest margin					3.13	%					3.05	%

(1)Taxable equivalent rates used where applicable.

(2)Yields on investment securities are calculated using available-for-sale securities at amortized cost.

(3)Average balances included non-accrual loans.

Table of Contents

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



	Nine Months Ended September 30, 2023						Nine Months Ended September 30, 2022
(dollars in thousands)	Average Balance		Revenue / Expense		Yield / Rate		Average Balance		Revenue / Expense		Yield / Rate
Assets
Investment securities(2)	$	4,191,224	$	79,840	2.33	%	$	3,573,372	$	47,810	1.69	%
Interest bearing cash and cash equivalents	4,258,385		157,568		4.95	%	5,902,815		37,561		0.85	%
Loans held for sale	34,546		2,184		8.45	%	352,325		11,491		4.36	%
Loans held for investment, mortgage finance	4,125,415		95,943		3.11	%	5,624,712		146,136		3.47	%
Loans held for investment(3)	16,047,129		877,660		7.31	%	16,386,399		531,055		4.33	%
Less: Allowance for credit losses on loans	250,828		—		—		217,728		—		—
Loans held for investment, net	19,921,716		973,603		6.53	%	21,793,383		677,191		4.15	%
Total earning assets	28,405,871		1,213,195		5.63	%	31,621,895		774,053		3.25	%
Cash and other assets	1,065,875						869,867
Total assets	$	29,471,746					$	32,491,762
Liabilities and Stockholders’ Equity
Transaction deposits	$	1,296,150	$	26,948	2.78	%	$	1,846,175	$	13,122	0.95	%
Savings deposits	10,880,187		347,305		4.27	%	9,788,290		70,599		0.96	%
Time deposits	1,524,929		43,349		3.80	%	1,208,213		10,792		1.19	%

Total interest bearing deposits	13,701,266		417,602		4.08	%	12,842,678		94,513		0.98	%
Short-term borrowings	1,345,089		52,573		5.23	%	1,978,735		15,628		1.06	%
Long-term debt	891,008		43,270		6.49	%	926,749		34,651		5.00	%
Total interest bearing liabilities	15,937,363		513,445		4.31	%	15,748,162		144,792		1.23	%
Non-interest bearing deposits	10,005,603						13,391,981
Other liabilities	433,689						259,028
Stockholders’ equity	3,095,091						3,092,591
Total liabilities and stockholders’ equity	$	29,471,746					$	32,491,762

Net interest income			$	699,750					$	629,261
Net interest margin					3.25	%					2.64	%

(1)Taxable equivalent rates used where applicable.

(2)Yields on investment securities are calculated using available-for-sale securities at amortized cost.

(3)Average balances include non-accrual loans.

Table of Contents

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, 2023/2022						Nine Months Ended September 30, 2023/2022

	Net Change		Change Due To(1)				Net Change		Change Due To(1)
(in thousands)			Volume		Yield/Rate(2)				Volume		Yield/Rate(2)
Interest income
Investment securities	$	12,068	$	2,771	$	9,297	$	32,030	$	7,658	$	24,372
Interest bearing cash and cash equivalents	28,965		(2,713)		31,678		120,007		(6,856)		126,863
Loans held for sale	(10,669)		(10,969)		300		(9,307)		(10,283)		976
Loans held for investment, mortgage finance	(21,539)		(5,887)		(15,652)		(50,193)		(37,043)		(13,150)
Loans held for investment	94,833		(6,836)		101,669		346,605		(11,688)		358,293
Total interest income	103,658		(23,634)		127,292		439,142		(58,212)		497,354
Interest expense
Transaction deposits	8,388		1,127		7,261		13,826		(2,332)		16,158
Savings deposits	80,768		2,763		78,005		276,706		6,746		269,960
Time deposits	10,644		(456)		11,100		32,557		831		31,726
Short-term borrowings	9,565		(2,794)		12,359		36,945		(4,826)		41,771
Long-term debt	1,342		(873)		2,215		8,619		(1,402)		10,021
Total interest expense	110,707		(233)		110,940		368,653		(983)		369,636
Net interest income	$	(7,049)	$	(23,401)	$	16,352	$	70,489	$	(57,229)	$	127,718

(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 $232.1 million for the three months ended September 30, 2023, compared to $239.1 million for the same period in 2022. The decrease was primarily due to an increase in funding costs and a decrease in average earning assets, partially offset by an increase in yields on average earning assets.

Average earning assets for the three months ended September 30, 2023 decreased $1.9 billion compared to the same period in 2022, which included a $2.1 billion decrease in average total loans and a $488.8 million decrease in average interest-bearing cash and cash equivalents, partially offset by a $695.7 million increase in average investment securities. Average interest-bearing liabilities increased $226.8 million for the three months ended September 30, 2023 compared to the same period in 2022, primarily due to an $828.4 million increase in average interest-bearing deposits, partially offset by a $538.1 million decrease in average short-term borrowings. Average non-interest bearing deposits for the three months ended September 30, 2023 decreased to $10.0 billion from $12.2 billion to the same period in 2022.

Net interest margin for the three months ended September 30, 2023 was 3.13%, compared to 3.05% for the same period in 2022. The increase in net interest margin was primarily due to an increase in yields on average earnings assets and a shift in earning asset composition, partially offset by an increase in funding costs. The increases in yields on earnings assets and cost of funds are attributed to the impact of rising interest rates.

The yield on total loans held for investment increased to 6.58% for the three months ended September 30, 2023, compared to 4.91% for the same period in 2022, and the yield on earning assets increased to 5.75% for the three months ended September 30, 2023, compared to 4.10% for the same period in 2022. Total cost of deposits increased to 2.62% for the three months ended September 30, 2023 from 0.93% for the same period in 2022, and total funding costs, including non-interest bearing deposits and stockholders' equity, increased to 2.60% for the three months ended September 30, 2023, compared to 1.04% for the same period in 2022.

Net interest income was $699.4 million for the nine months ended September 30, 2023, compared to $628.2 million for the same period in 2022. The increase was primarily due to an increase in yields on average earnings assets, partially offset by rising funding costs and a decrease in average earning assets.

Table of Contents

Average earning assets decreased $3.2 billion for the nine months ended September 30, 2023, compared to the same period in 2022, which included decreases of $2.2 billion in average total loans and $1.6 billion in average interest-bearing cash and cash equivalents, partially offset by a $617.9 million increase in average investment securities. Average interest-bearing liabilities increased $189.2 million for the nine months ended September 30, 2023, compared to the same period in 2022, primarily due to an $858.6 million increase in average interest-bearing deposits, partially offset by a $633.6 million decrease in average short-term borrowings. Average non-interest bearing deposits for the nine months ended September 30, 2023 decreased to $10.0 billion from $13.4 billion for the same period in 2022.

Net interest margin for the nine months ended September 30, 2023 was 3.25%, compared to 2.64% for the same period of 2022. The increase was primarily due to the effect of rising interest rates on earning asset yields and a shift in earning asset composition, partially offset by higher funding costs, also as a result of rising interest rates, compared to the same period in 2022.

The yield on total loans held for investment increased to 6.53% for the nine months ended September 30, 2023, compared to 4.15% for the same period in 2022, and the yield on earning assets increased to 5.63% for the nine months ended September 30, 2023, compared to 3.25% for the same period in 2022. Total cost of deposits increased to 2.36% for the nine months ended September 30, 2023 from 0.48% for the same period in 2022 and total funding costs, including non-interest bearing deposits and stockholders' equity, increased to 2.36% for the nine months ended September 30, 2023, compared to 0.60% for the same period in 2022.

Non-interest Income



	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	2023		2022		2023		2022
Service charges on deposit accounts	$	5,297	$	5,797	$	15,477	$	18,014
Wealth management and trust fee income	3,509		3,631		10,653		11,594
Brokered loan fees	2,532		3,401		6,842		11,504

Investment banking and trading income	29,191		7,812		75,457		23,117


Other	6,343		4,691		21,857		7,626
Total non-interest income	$	46,872	$	25,332	$	130,286	$	71,855

Non-interest income increased $21.5 million during the three months ended September 30, 2023, compared to the same period in 2022. The increase was primarily due to an increase in investment banking and trading income

Non-interest income increased by $58.4 million during the nine months ended September 30, 2023 to $130.3 million, compared to $71.9 million for the same period in 2022. The increase was primarily due to increases in investment banking and trading income and other non-interest income.

Non-interest Expense



	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	2023		2022		2023		2022
Salaries and benefits	$	110,010	$	128,764	$	351,730	$	331,981
Occupancy expense	9,910		9,433		29,011		27,192
Marketing	4,757		8,282		20,168		21,765
Legal and professional	17,614		16,775		47,797		38,365
Communications and technology	19,607		18,470		57,655		48,819
Federal Deposit Insurance Corporation (“FDIC”) insurance assessment	5,769		3,953		11,632		11,252


Other	12,224		11,370		37,569		35,068
Total non-interest expense	$	179,891	$	197,047	$	555,562	$	514,442

Non-interest expense decreased $17.2 million during the three months ended September 30, 2023, compared to the same period in 2022. The decrease was primarily due to decreases in salaries and benefits and marketing expenses, partially offset by increases in communications and technology and FDIC insurance assessment expenses. The third quarter of 2022 included $13.7 million in salaries and benefits expense related to the sale of our premium finance subsidiary.

Non-interest expense for the nine months ended September 30, 2023 increased $41.1 million compared to the same period in 2022, primarily due to increases in salaries and benefits, legal and professional and communications and technology expenses.

Table of Contents

Analysis of Financial Condition

Loans Held for Investment

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

The following table summarizes the Company’s loans held for investment by portfolio segment. See Note 1 - Operations and Summary of Significant Accounting Policies in the accompanying notes to the consolidated financial statements included elsewhere in this report for details of these portfolio segments.



(in thousands)	September 30, 2023		December 31, 2022
Commercial	$	10,365,650	$	9,832,676
Mortgage finance	4,429,489		4,090,033
Commercial real estate	5,358,770		4,875,363
Consumer	537,229		552,848
Gross loans held for investment	20,691,138		19,350,920
Unearned income (net of direct origination costs)	(77,767)		(63,580)
Total loans held for investment	$	20,613,371	$	19,287,340

Total loans held for investment were $20.6 billion at September 30, 2023, an increase of $1.3 billion from December 31, 2022. The Company experienced broad-based loan growth across all loan categories, except for consumer, as it has continued to execute on its long-term strategy. Mortgage finance loans relate to the mortgage warehouse lending operations in which the Company purchases mortgage loan ownership interests that are typically sold within 10 to 20 days and represent 21% of total loans held for investment at both September 30, 2023 and December 31, 2022. 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, 2023, the Company had $4.8 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 the same standards as all other loans the Company originates. As of September 30, 2023, approximately $407,000 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, 2023, 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 this state. The risks created by this concentration have been considered by management in the determination of the appropriateness of the allowance for credit losses.

Table of Contents

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.



(dollars in thousands)	September 30, 2023			December 31, 2022

Non-accrual loans held for investment
Commercial:
Business assets	$	60,266		$	41,448
Oil and gas properties	2,863			3,658
Accounts receivable and inventory	—			1,405

Other	—			531
Total commercial	63,129			47,042
Commercial real estate:

Commercial property	—			1,263



Total commercial real estate	—			1,263
Consumer

Other	—			33
Total consumer	—			33
Total non-accrual loans held for investment	$	63,129		$	48,338
Non-accrual loans held for sale	—			—
Other real estate owned (“OREO”)	—			—
Total non-performing assets	$	63,129		$	48,338


Non-accrual loans held for investment to total loans held for investment	0.31		%	0.25		%
Total non-performing assets to total assets	0.21		%	0.17		%
Allowance for credit losses on loans to non-accrual loans held for investment	3.9x			5.2x

Loans held for investment past due 90 days and accruing	$	4,602		$	131
Loans held for investment past due 90 days to total loans held for investment	0.02		%	—		%
Loans held for sale past due 90 days and accruing	$	—		$	—

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. Below is a discussion of provision for credit losses on loans. The changes made to the Company’s current expected credit loss model, as discussed above and in Note 1 - Operations and Summary of Significant Accounting Policies in the accompanying notes to the consolidated financial statements included elsewhere in this report, resulted in a reallocation of the allowance for credit losses between loan portfolio segments and allowance balances allocated to off-balance sheet financial instruments. The changes made result in a higher allocation of losses to off-balance sheet financial statements. See Note 6 - Financial Instruments with Off-Balance Sheet Risk in the accompanying notes to the consolidated financial statements included elsewhere in this report for presentation of the activity in the allowance for credit losses for off-balance asset credit losses.

The Company recorded a provision for credit losses on loans of $28.5 million for the nine months ended September 30, 2023 compared to a provision of $27.6 million for the nine months ended September 30, 2022. The provision for credit losses on loans for the nine months ended September 30, 2023 reflects increases in criticized loans and total loans held for investment during the nine months ended September 30, 2023. The Company recorded $37.1 million in net charge-offs during the nine months ended September 30, 2023 compared to $4.9 million in net charge-offs during the same period in 2022. Criticized loans totaled $677.4 million at September 30, 2023, compared to $513.2 million and $484.0 million at December 31, 2022 and September 30, 2022, respectively.

The table below presents key metrics related to the Company’s credit loss experience:


	September 30, 2023		September 30, 2022
Allowance for credit losses on loans to total loans held for investment	1.19	%	1.19	%
Allowance for credit losses on loans to average total loans held for investment(1)	1.21	%	1.07	%
Total allowance for credit losses to total loans held for investment	1.41	%	1.30	%
Total provision for credit losses to average total loans held for investment(1)(2)	0.35	%	0.19	%

(1) Ratios are calculated using average balance for the nine months ended September 30, 2023 and 2022, respectively.

(2) Ratios are annualized utilizing provision for credit losses for the nine months ended September 30, 2023 and 2022, respectively.

Table of Contents

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


	Nine Months Ended September 30,
	2023				2022
	Net Charge-offs		Net Charge-offs to Average Loans(1)		Net Charge-offs		Net Charge-offs to Average Loans(1)
Commercial	$	37,054	0.48	%	$	4,541	0.05	%
Mortgage finance	—		—	%	—		—	%
CRE	—		—	%	350		0.01	%
Consumer	36		0.01	%	(21)		(0.01)	%
Total	$	37,090	0.25	%	$	4,870	0.03	%

(1)Ratios are annualized utilizing net charge-offs for the nine months ended September 30, 2023 and 2022, 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 Federal Home Loan Bank (“FHLB”) borrowings, which are generally used to fund mortgage finance assets and long-term debt. The Company also relies on the availability of the mortgage secondary market provided by Ginnie Mae and government sponsored entities to support the liquidity of mortgage finance assets.

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



(dollars in thousands)	September 30, 2023			December 31, 2022
Interest bearing cash and cash equivalents	$	3,975,860		$	4,778,623
Interest bearing cash and cash equivalents as a percent of:
Total loans held for investment	19.3		%	24.8		%
Total earning assets	13.9		%	17.4		%
Total deposits	16.7		%	20.9		%

Liquidity to support growth in loans held for investment has been fulfilled primarily through growth in customer deposits. The Company’s goal is to obtain as much of its funding for loans held for investment and other earning assets as possible from customer deposits, which are generated principally through development of long-term customer relationships, with a significant focus on treasury management products. As of September 30, 2023, estimated uninsured deposits represented approximately 40% of total deposits. In addition, the Company also has access to deposits through brokered channels. The following table summarizes period-end total deposits:



(dollars in thousands)	September 30, 2023				December 31, 2022

	Balance		% of Total		Balance		% of Total
Customer deposits	$	22,485,141	94.2	%	$	21,247,999	93.0	%
Brokered deposits	1,393,837		5.8	%	1,608,881		7.0	%
Total deposits	$	23,878,978	100.0	%	$	22,856,880	100.0	%

Table of Contents

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), customer repurchase agreements 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, 2023		December 31, 2022


Repurchase agreements	$	—	$	1,142
FHLB borrowings	1,400,000		1,200,000

Total short-term and other borrowings	$	1,400,000	$	1,201,142

The following table summarizes the Company’s short-term borrowing capacities net of balances outstanding:



(in thousands)	September 30, 2023		December 31, 2022

FHLB borrowing capacity relating to loans and pledged securities	$	2,921,767	$	2,621,218
FHLB borrowing capacity relating to unencumbered securities	4,015,604		3,539,297
Total FHLB borrowing capacity(1)	$	6,937,371	$	6,160,515
Unused federal funds lines available from commercial banks	$	1,388,000	$	1,479,000
Unused Federal Reserve borrowings capacity	$	3,052,148	$	3,574,762
Unused revolving line of credit(2)	$	100,000	$	75,000

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

(2)Unsecured revolving, non-amortizing line of credit with maturity date of February 8, 2024. 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, 2023.

The Company has long-term debt outstanding of $858.5 million as of September 30, 2023, comprised of trust preferred securities, subordinated notes and senior unsecured credit linked notes with maturity dates ranging from September 2024 to December 2036. In the second quarter of 2023, the Company partially paid down $75.0 million of the senior unsecured credit-linked notes in accordance with the terms of the notes. 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 of the 2022 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 subordinated notes, 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 $3.1 billion for the nine months ended September 30, 2023 compared to $3.1 billion for the same period in 2022. The Company has not paid any cash dividends on common stock since operations commenced and has no plans to do so in the foreseeable future.

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 may repurchase up to $150.0 million in shares of outstanding common stock. Any repurchases under the repurchase program have been made in accordance with applicable securities laws in open market or private transactions. The extent to which the Company repurchases shares, and the timing of such repurchases, will be at management’s discretion and will depend upon a variety of factors, including market conditions, capital position and amount of retained earnings, regulatory requirements and other considerations. No time limit was set for the completion of the share repurchase program, and the program may be suspended or discontinued at any time. During the nine months ended September 30, 2023, the Company repurchased 1,011,909 shares of its common stock for an aggregate purchase price of $59.7 million, at a weighted average price of $58.98 per share. The aggregate

Table of Contents

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

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.

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 elsewhere in this report and in the Company’s 2022 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 policy.

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, 2023, the quantitative estimate of the allowance for credit loss would increase by approximately $183.7 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.

Table of Contents

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

Market risk represents the potential economic loss on trading and non-trading portfolios and financial instruments due to adverse price movements in markets including interest rates, foreign exchange rates, credit spreads, commodity prices and equity and related implied volatility levels.

The Company is subject to market risk primarily through the effect of changes in interest rates on its portfolio of assets held for purposes other than trading and interest rate derivative instruments that are used for managing interest rate risk.

In addition, the Company has exposure to market risk through its trading desk that engages in fixed income and equity securities, derivatives and foreign exchange transactions to support the investing and hedging activities of customers. The Company uses Value-at-Risk (“VaR”) as a means to measure, monitor, and limit aggregate market risk on the trading portfolio. VaR is a statistical risk measure estimating potential loss at the 95th percentile based on a one-year history of market risk factors associated with the trading portfolio. VaR provides a consistent cross-asset measure for risk profiles and allows for diversification benefit based on historical correlations across market moves. As of September 30, 2023, the Company’s exposure through its trading desk does not post a significant market risk to the Company. All statistical models involve a degree of uncertainty and VaR is calculated at a statistical confidence interval of the 95th percentile based on one-year daily historic market moves. Larger economic losses are possible, particularly during stressed macroeconomic and market conditions.

The responsibility for managing market risk rests with the ALCO, which operates under policy guidelines established by the Company’s board of directors. Oversight of the Company’s compliance with the guidelines is the ongoing responsibility of the ALCO, with exceptions reported to the Executive Risk Committee and the board of directors, if necessary, on a quarterly basis.

Interest Rate Risk Management

The Company’s interest rate sensitivity as of September 30, 2023 is illustrated in the following table. The table reflects rate-sensitive positions as of September 30, 2023 and is not necessarily indicative of positions on other dates. The table does not take into account the effect of the Company’s derivatives designated as cash flow hedges. The balances of interest rate sensitive assets and liabilities are presented in the periods in which they next reprice to market rates or mature and are aggregated to show the interest rate sensitivity gap. The mismatch between repricings or maturities within a time period is commonly referred to as the “gap” for that period. A positive gap (asset sensitive), where interest rate-sensitive assets exceed interest rate sensitive liabilities, generally will result in the net interest margin increasing in a rising rate environment and decreasing in a falling rate environment. A negative gap (liability sensitive) will generally have the opposite results on the net interest margin. Certain variable rate loans have embedded floors which limit the decline in yield on those loans at times when market interest rates are extraordinarily low. The degree of asset sensitivity, spreads on loans and net interest margin may be reduced until rates increase by an amount sufficient to eliminate the effects of floors. The adverse effect of floors as market rates increase may also be offset by the positive gap, the extent to which rates on deposits and other funding sources lag increasing market rates for loans and changes in composition of funding.


(in thousands)	0-3 months		4-12 months		1-3 years		3+ years		Total
Assets
Interest bearing cash and cash equivalents	$	3,975,860	$	—	$	—	$	—	$	3,975,860
Investment securities(1)	53,561		248,054		260,144		3,507,958		4,069,717
Variable loans	19,112,350		294,241		58,337		261,069		19,725,997
Fixed loans	19,665		69,535		227,518		803,496		1,120,214
Total loans(2)	19,132,015		363,776		285,855		1,064,565		20,846,211
Total interest sensitive assets	$	23,161,436	$	611,830	$	545,999	$	4,572,523	$	28,891,788
Liabilities
Interest bearing customer deposits	$	12,864,017	$	—	$	—	$	—	$	12,864,017
CDs	410,716		1,201,371		49,806		185		1,662,078

Total interest bearing deposits	13,274,733		1,201,371		49,806		185		14,526,095
Short-term borrowings	1,400,000		—		—		—		1,400,000
Long-term debt	312,403		—		174,392		371,676		858,471
Total borrowings	1,712,403		—		174,392		371,676		2,258,471
Total interest sensitive liabilities	$	14,987,136	$	1,201,371	$	224,198	$	371,861	$	16,784,566
GAP	$	8,174,300	$	(589,541)	$	321,801	$	4,200,662	$	—
Cumulative GAP	$	8,174,300	$	7,584,759	$	7,906,560	$	12,107,222	$	12,107,222
Non-interest bearing deposits									9,352,883
Stockholders’ equity									3,077,700
Total									$	12,430,583

(1)Available-for-sale debt securities and equity securities based on fair market value.

(2)Total loans include gross loans held for investment and loans held for sale.

Table of Contents

While a gap interest table is useful in analyzing interest rate sensitivity, an interest rate sensitivity simulation provides a better illustration of the sensitivity of earnings to changes in interest rates. Earnings are also affected by the effects of changing interest rates on the value of funding derived from non-interest bearing deposits and stockholders’ equity. Management performs a sensitivity analysis to identify interest rate risk exposure on net interest income. Management also quantifies and measures interest rate risk exposure using a model to dynamically simulate the effect of changes in net interest income relative to changes in interest rates over the next twelve months based on three interest rate scenarios. These are a static rate scenario and two “shock test” scenarios.

These scenarios are based on interest rates as of the last day of a reporting period published by independent sources and incorporate relevant spreads of instruments that are actively traded in the open market. The Federal Reserve’s federal funds target affects short-term borrowing; the prime lending rate, SOFR, Bloomberg Short Term Yield Index and other alternative indexes are the basis for most of the variable-rate loan pricing. The 10-year treasury rate is also monitored because of its effect on prepayment speeds for mortgage-backed securities. These are the Company’s primary interest rate exposures. Interest rate derivative contracts may be used to manage exposure to adverse fluctuations in these primary interest rate exposures as is discussed in more detail under the heading Use of Derivatives to Manage Interest Rate and Other Risks below.

For modeling purposes, the “shock test” scenarios as of September 30, 2023 assume immediate, sustained 100 and 200 basis point increases in interest rates as well as 100 and 200 basis point decreases in interest rates. As of September 30, 2022, the scenarios assumed a sustained 100 and 200 basis point increase in interest rates, as well as a 100 basis point decrease in interest rates. The Company will continue to evaluate these scenarios as interest rates change.

During 2023, the Company’s interest rate risk exposure model incorporated updated assumptions regarding the level of interest rate, including indeterminable maturity deposits (non-interest bearing deposits, interest bearing transaction accounts and savings accounts) and loan and security prepayments behaviors for a given level of market rate change. In the current environment of changing short-term rates, deposit pricing can vary by product and customer. These assumptions have been developed through a combination of historical analysis and projection of future expected pricing behavior. Changes in prepayment behavior of mortgage-backed securities, residential and commercial mortgage loans in each rate environment are captured using industry estimates of prepayment speeds for various coupon segments of the portfolio. The impact of these changes is factored into the simulation model results for 2023. This modeling indicated interest rate sensitivity as follows:


	Anticipated Impact Over the Next Twelve Months as Compared to Most Likely Scenario
	September 30, 2023								September 30, 2022
	Increase				Decrease				Increase				Decrease
(in thousands)	100 bps		200 bps		100 bps		200 bps		100 bps		200 bps		100 bps
Change in net interest income	$	29,296	$	58,451	$	(41,562)	$	(83,055)	$	76,688	$	134,859	$	(103,564)

The simulations used to manage market risk are based on numerous assumptions regarding the effect of changes in interest rates on the timing and extent of repricing characteristics, future cash flows and customer behavior. These assumptions are inherently uncertain and, as a result, the model cannot precisely estimate net interest income or precisely predict the impact of higher or lower interest rates on net interest income. Actual results will differ from simulated results due to timing, magnitude and frequency of interest rate changes as well as changes in market conditions, customer behavior and management strategies, among other factors.

Use of Derivatives to Manage Interest Rate and Other Risks

In the ordinary course of business, the Company enters into derivative transactions to manage various risks and to accommodate the business requirements of its customers.

On the date the Company enters into a derivative contract, the derivative is designated as either a fair value hedge, cash flow hedge, net investment hedge, or a designation is not made as it is a customer-related transaction, an economic hedge for asset/liability risk management purposes or another stand-alone derivative created through the Company’s operations.

To manage the sensitivity of earnings and capital to interest rate, prepayment, credit, price and foreign currency fluctuations (asset and liability management positions), the Company may enter into derivative transactions. In addition, the Company enters into interest rate and foreign exchange derivative contracts to support the business requirements of its customers (customer-related positions).

For additional information regarding derivatives, see Note 10 - Derivative Financial Instruments in the accompanying notes to the consolidated financial statements included elsewhere in this report.

LIBOR Transition

In 2017, the U.K. Financial Conduct Authority announced that it would no longer compel banks to submit rates for the calculation of LIBOR after 2021. The administrator of LIBOR extended publication of the most commonly used U.S. dollar LIBOR settings to June 30, 2023 and ceased publishing other LIBOR settings on December 31, 2021. The U.S. federal banking agencies issued guidance strongly encouraging banking organizations to cease using U.S. dollar LIBOR as a reference rate in new contracts as soon

Table of Contents

as practicable and in any event by December 31, 2021. On March 15, 2022, President Biden signed into law the “Adjustable Interest Rate (LIBOR) Act,” as part of the Consolidated Appropriations Act, 2022, which provides for a statutory transition to a replacement rate selected by the Federal Reserve based on the SOFR for contracts referencing LIBOR that contain no fallback provisions or ineffective fallback provisions, unless a replacement rate is selected by a determining person as outlined in the statute. On December 16, 2022, the Federal Reserve adopted a final rule implementing the Adjustable Interest Rate (LIBOR) Act by identifying benchmark rates based on SOFR that will replace LIBOR in certain financial contracts after June 30, 2023. As of September 30, 2023, the Company has transitioned substantially all of its financial instruments to an alternative benchmark rate, with the exception of certain loans and instruments that will transition to an alternative benchmark rate upon their next index reset period.

Table of Contents

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

The Company’s management, with the supervision and participation of its Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. Based upon that evaluation, the Company has concluded that, as of the end of such period, its disclosure controls and procedures were effective in recording, processing, summarizing and reporting, on a timely basis, information required to be disclosed in the reports that the Company files or submits under the Exchange Act and were effective in ensuring that information required to be disclosed in the reports filed or submitted under the Exchange Act is accumulated and communicated to the Company's management, including its Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There were no changes in the Company’s internal control over financial reporting (as defined in Rules 13a-15(e) and 15d-15(f) under the Exchange Act) during the period covered by this report that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Table of Contents

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The Company is subject to various claims and legal actions that may arise in the ordinary course of conducting its business. Management does not expect the disposition of any of these matters to have a material adverse impact on the Company’s financial statements or results of operations.

ITEM 1A. RISK FACTORS

There have been no material changes in the risk factors previously disclosed in the March 31, 2023 Quarterly Report on Form 10-Q and in the 2022 Form 10-K.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The Company repurchased shares of its common stock in the open market during the nine months ended September 30, 2023 as follows:


				Total Number of	Approximate Dollar Value
				Shares Purchased as Part	of Shares That May Yet
	Total Number of	Average Price Paid		of Publicly Announced	Be Purchased Under the
	Shares Purchased	per Share(2)		Plans or Programs(1)	Plans or Programs(1)
January 2023	564,206	$	61.50	564,206	$	150,000,000
February 2023	—	—		—	150,000,000
March 2023	447,703	55.80		447,703	125,019,420
April 2023	—	—		—	125,019,420
May 2023	—	—		—	125,019,420
June 2023	—	—		—	125,019,420
July 2023	—	—		—	125,019,420
August 2023	—	—		—	125,019,420
September 2023	—	—		—	125,019,420
Total	1,011,909	$	58.98	1,011,909	$	125,019,420

(1) On April 19, 2022, the Company’s board of directors authorized a share repurchase program under which the Company could repurchase up to $150.0 million in shares of its outstanding common stock. In January 2023, the Company completed the full $150.0 million of repurchases authorized under this plan. On January 18, 2023, the Company’s board of directors authorized a new share repurchase program under which the Company may repurchase up to $150.0 million in shares of its outstanding common stock. Any repurchases under the repurchase program will be made in accordance with applicable securities laws from time to time in open market or private transactions. The extent to which the Company repurchases shares, and the timing of such repurchases, will be at management’s discretion and will depend upon a variety of factors, including market conditions, the Company’s capital position and amount of retained earnings, regulatory requirements and other considerations. No time limit was set for the completion of the share repurchase program, and the program may be suspended or discontinued at any time.

(2) The aggregate purchase price and weighted average price per share does not include the effect of excise tax expense incurred on net stock repurchases. For the nine months ended September 30, 2023, excise tax expense totaled $540,000.

Table of Contents

ITEM 6. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

(a) Exhibits


31.1			Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Exchange Act*
31.2			Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the Exchange Act*
32.1			Section 1350 Certification of Chief Executive Officer**
32.2			Section 1350 Certification of Chief Financial Officer**
101.INS			XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCH			XBRL Taxonomy Extension Schema Document*
101.CAL			XBRL Taxonomy Extension Calculation Linkbase Document*
101.DEF			XBRL Taxonomy Extension Definition Linkbase Document*
101.LAB			XBRL Taxonomy Extension Label Linkbase Document*
101.PRE			XBRL Taxonomy Extension Presentation Linkbase Document*
104			Cover Page Interactive Data File (embedded within the Inline XBRL document)

* Filed herewith

** Furnished herewith

+ Management contract or compensatory plan arrangement

Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

TEXAS CAPITAL BANCSHARES, INC.

Date: October 19, 2023


/s/ J. Matthew Scurlock
J. Matthew Scurlock
Chief Financial Officer
(Duly authorized officer and principal financial officer)