UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

~~Form~~ FORM 10-Q


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

For the quarterly period ended June 30, ~~2022~~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~~Name of ~~registrant~~Registrant as ~~specified~~Specified in ~~its charter)~~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)~~214/932-6600

(Registrant’s telephone number, including area code)

~~N/A~~

~~(Former name, former address and former fiscal year, if changed since last report)~~

Securities registered ~~pursuant to~~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 ý☒ 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 ý☒ ¨☐ 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).~~Act. Yes ☐ No ý

On July ~~20, 2022,~~19, 2023, the number of shares set forth below was outstanding with respect to each of the ~~issuer's~~issuer’s classes of common stock:

Common Stock, par value $0.01 per share ~~49,884,477~~48,000,808

Table of Contents

Texas Capital Bancshares, Inc.

Form 10-Q

Quarter Ended June 30, ~~2022~~2023

Index

Table of Contents

PART I—I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

TEXAS CAPITAL BANCSHARES, INC.

CONSOLIDATED BALANCE SHEETS - UNAUDITED
(in thousands except share data) June 30, 2022 December 31, 2021
(Unaudited)
Assets
Cash and due from banks $ 242,425 $ 180,663
Interest-bearing cash and cash equivalents 4,032,931 7,765,996
Available-for-sale debt securities 2,535,646 3,538,201
Held-to-maturity debt securities 980,935 —
Equity securities 36,118 45,607
Investment securities 3,552,699 3,583,808
Loans held for sale 4,266 8,123
Loans held for investment, mortgage finance 6,549,507 7,475,497
Loans held for investment 17,517,866 15,331,457
Less: Allowance for credit losses on loans 229,013 211,866
Loans held for investment, net 23,838,360 22,595,088
Premises and equipment, net 28,722 20,901
Accrued interest receivable and other assets 622,501 559,897
Goodwill and intangible assets, net 17,059 17,262
Total assets $ 32,338,963 $ 34,731,738
Liabilities and Stockholders’ Equity
Liabilities:
Non-interest bearing deposits $ 12,555,367 $ 13,390,370
Interest bearing deposits 12,884,654 14,718,995
Total deposits 25,440,021 28,109,365
Accrued interest payable 8,928 7,699
Other liabilities 314,548 273,488
Short-term borrowings 2,651,536 2,202,832
Long-term debt 917,098 928,738
Total liabilities 29,332,131 31,522,122
Stockholders’ equity:
Preferred stock, $0.01 par value, $1,000 liquidation value:
Authorized shares - 10,000,000
Issued shares - 300,000 shares issued at June 30, 2022 and December 31, 2021 300,000 300,000
Common stock, $0.01 par value:
Authorized shares - 100,000,000
Issued shares - 50,820,337 and 50,618,911 at June 30, 2022 and December 31, 2021, respectively 508 506
Additional paid-in capital 1,015,105 1,008,559
Retained earnings 2,013,458 1,948,274
Treasury stock - 942,296 and 417 shares at cost at June 30, 2022 and December 31, 2021, respectively (50,031) (8)
Accumulated other comprehensive loss, net of taxes (272,208) (47,715)
Total stockholders’ equity 3,006,832 3,209,616
Total liabilities and stockholders’ equity $ 32,338,963 $ 34,731,738



(in thousands except share data)	June 30, 2023		December 31, 2022
Assets
Cash and due from banks	$	260,314	$	233,637
Interest bearing cash and cash equivalents	2,587,131		4,778,623
Available-for-sale debt securities	3,292,478		2,615,644
Held-to-maturity debt securities	900,315		935,514
Equity securities	33,860		33,956
Investment securities	4,226,653		3,585,114
Loans held for sale	29,097		36,357
Loans held for investment, mortgage finance	5,098,812		4,090,033
Loans held for investment	16,227,203		15,197,307
Less: Allowance for credit losses on loans	237,343		253,469
Loans held for investment, net	21,088,672		19,033,871

Premises and equipment, net	26,096		26,382
Accrued interest receivable and other assets	757,085		719,162
Goodwill and intangibles, net	1,496		1,496
Total assets	$	28,976,544	$	28,414,642
Liabilities and Stockholders’ Equity
Liabilities:
Non-interest bearing deposits	$	9,429,352	$	9,618,081
Interest bearing deposits	13,888,888		13,238,799
Total deposits	23,318,240		22,856,880
Accrued interest payable	29,658		24,000
Other liabilities	338,924		345,827
Short-term borrowings	1,350,000		1,201,142
Long-term debt	857,795		931,442
Total liabilities	25,894,617		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 June 30, 2023 and December 31, 2022	300,000		300,000
Common stock, $0.01 par value:
Authorized shares - 100,000,000
Issued shares - 51,087,965 and 50,867,298 at June 30, 2023 and December 31, 2022, respectively	511		509
Additional paid-in capital	1,035,063		1,025,593
Retained earnings	2,362,189		2,263,502
Treasury stock - 3,095,444 and 2,083,535 shares at cost at June 30, 2023 and December 31, 2022, respectively	(175,528)		(115,310)
Accumulated other comprehensive loss, net of taxes	(440,308)		(418,943)
Total stockholders’ equity	3,081,927		3,055,351
Total liabilities and stockholders’ equity	$	28,976,544	$	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 June 30, Six months ended June 30,
(in thousands except per share data) 2022 2021 2022 2021
Interest income
Interest and fees on loans $ 218,290 $ 203,074 $ 405,947 $ 413,405
Investment securities 14,665 10,918 31,967 20,805
Interest-bearing cash and cash equivalents 9,394 2,961 12,965 5,894
Total interest income 242,349 216,953 450,879 440,104
Interest expense
Deposits 20,566 16,271 34,196 36,275
Short-term borrowings 4,859 502 5,617 3,094
Long-term debt 11,393 10,723 21,988 16,466
Total interest expense 36,818 27,496 61,801 55,835
Net interest income 205,531 189,457 389,078 384,269
Provision for credit losses 22,000 (19,000) 20,000 (25,000)
Net interest income after provision for credit losses 183,531 208,457 369,078 409,269
Non-interest income
Service charges on deposit accounts 6,003 4,634 12,025 9,350
Wealth management and trust fee income 4,051 3,143 7,963 5,998
Brokered loan fees 4,133 6,933 8,103 16,244
Servicing income 228 5,935 465 14,944
Investment banking and trading income 11,126 8,071 15,305 13,858
Net gain/(loss) on sale of loans held for sale — (3,070) — 2,502
Other 701 11,993 2,663 19,096
Total non-interest income 26,242 37,639 46,524 81,992
Non-interest expense
Salaries and benefits 103,885 86,830 203,983 174,352
Occupancy expense 8,874 7,865 17,759 16,139
Marketing 8,506 1,900 13,483 3,597
Legal and professional 11,288 9,147 21,590 17,424
Communications and technology 15,649 14,352 30,349 30,321
Federal Deposit Insurance Corporation (“FDIC”) insurance assessment 3,318 5,226 7,299 11,839
Servicing-related expenses — 12,355 — 25,344
Other 12,783 11,385 22,932 20,360
Total non-interest expense 164,303 149,060 317,395 299,376
Income before income taxes 45,470 97,036 98,207 191,885
Income tax expense 11,311 23,555 24,398 46,466
Net income 34,159 73,481 73,809 145,419
Preferred stock dividends 4,312 6,317 8,625 10,096
Net income available to common stockholders $ 29,847 $ 67,164 $ 65,184 $ 135,323
Other comprehensive income/(loss):
Change in unrealized gain/(loss) $ (86,438) $ 38,037 $ (287,057) $ (53,370)
Amounts reclassified into net income 1,903 — 2,889 —
Other comprehensive income/(loss) (84,535) 38,037 (284,168) (53,370)
Income tax expense/(benefit) (17,752) 7,989 (59,675) (11,207)
Other comprehensive income/(loss), net of tax (66,783) 30,048 (224,493) (42,163)
Comprehensive income/(loss) $ (32,624) $ 103,529 $ (150,684) $ 103,256
Basic earnings per common share $ 0.59 $ 1.33 $ 1.29 $ 2.68
Diluted earnings per common share $ 0.59 $ 1.31 $ 1.28 $ 2.65



	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands except per share data)	2023		2022		2023		2022
Interest income
Interest and fees on loans	$	332,867	$	218,292	$	630,305	$	405,948
Investment securities	27,478		14,665		52,770		31,967
Interest bearing cash and cash equivalents	41,571		9,394		104,007		12,965
Total interest income	401,916		242,351		787,082		450,880
Interest expense
Deposits	137,391		20,566		257,485		34,196
Short-term borrowings	18,253		4,859		32,997		5,617
Long-term debt	14,282		11,393		29,265		21,988

Total interest expense	169,926		36,818		319,747		61,801
Net interest income	231,990		205,533		467,335		389,079
Provision for credit losses	7,000		22,000		35,000		20,000
Net interest income after provision for credit losses	224,990		183,533		432,335		369,079
Non-interest income
Service charges on deposit accounts	5,158		6,102		10,180		12,217
Wealth management and trust fee income	3,715		4,051		7,144		7,963
Brokered loan fees	2,415		4,133		4,310		8,103

Investment banking and trading income	27,498		11,126		46,266		15,305


Other	7,225		828		15,514		2,935
Total non-interest income	46,011		26,240		83,414		46,523
Non-interest expense
Salaries and benefits	113,050		103,358		241,720		203,217
Occupancy expense	9,482		8,874		19,101		17,759
Marketing	6,367		8,506		15,411		13,483
Legal and professional	15,669		11,288		30,183		21,590
Communications and technology	20,525		15,649		38,048		30,349
Federal Deposit Insurance Corporation insurance assessment	3,693		3,318		5,863		7,299


Other	12,858		13,310		25,345		23,698
Total non-interest expense	181,644		164,303		375,671		317,395
Income before income taxes	89,357		45,470		140,078		98,207
Income tax expense	20,706		11,311		32,766		24,398
Net income	68,651		34,159		107,312		73,809
Preferred stock dividends	4,312		4,312		8,625		8,625
Net income available to common stockholders	$	64,339	$	29,847	$	98,687	$	65,184
Other comprehensive income/(loss):
Change in unrealized gain/(loss)	$	(99,731)	$	(86,438)	$	(56,778)	$	(287,057)
Amounts reclassified into net income	16,762		1,903		29,735		2,889
Other comprehensive income/(loss)	(82,969)		(84,535)		(27,043)		(284,168)
Income tax expense/(benefit)	(17,423)		(17,752)		(5,678)		(59,675)
Other comprehensive income/(loss), net of tax	(65,546)		(66,783)		(21,365)		(224,493)
Comprehensive income/(loss)	$	3,105	$	(32,624)	$	85,947	$	(150,684)
Basic earnings per common share	$	1.34	$	0.59	$	2.05	$	1.29
Diluted earnings per common share	$	1.33	$	0.59	$	2.02	$	1.28

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 March 31, 2021 6,300,000 $ 450,000 50,558,184 $ 505 $ 984,207 $ 1,781,215 (417) $ (8) $ (56,437) $ 3,159,482
Comprehensive income:
Net income — — — — — 73,481 — — — 73,481
Change in other comprehensive income/(loss), net of taxes — — — — — — — — 30,048 30,048
Total comprehensive income 103,529
Stock-based compensation expense recognized in earnings — — — — 8,315 — — — — 8,315
Preferred stock dividend — — — — — (6,317) — — — (6,317)
Issuance of stock related to stock-based awards — — 34,434 1 (53) — — — — (52)
Redemption of preferred stock (6,000,000) (150,000) — — — — — — — (150,000)
Balance at June 30, 2021 300,000 $ 300,000 50,592,618 $ 506 $ 992,469 $ 1,848,379 (417) $ (8) $ (26,389) $ 3,114,957
Balance at March 31, 2022 300,000 $ 300,000 50,710,858 $ 507 $ 1,011,353 $ 1,983,611 (417) $ (8) $ (205,425) $ 3,090,038
Comprehensive income:
Net income — — — — — 34,159 — — — 34,159
Change in other comprehensive income/(loss), net of taxes — — — — — — — — (66,783) (66,783)
Total comprehensive loss (32,624)
Stock-based compensation expense recognized in earnings — — — — 5,022 — — — — 5,022
Preferred stock dividend — — — — — (4,312) — — — (4,312)
Issuance of stock related to stock-based awards — — 109,479 1 (1,270) — — — — (1,269)
Repurchase of common stock — — — — — — (941,879) (50,023) — (50,023)
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


	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 March 31, 2022	300,000	$	300,000	50,710,858	$	507	$	1,011,353	$	1,983,611	(417)	$	(8)	$	(205,425)	$	3,090,038

Comprehensive income/(loss):
Net income	—	—		—	—		—		34,159		—	—		—		34,159
Change in other comprehensive income/(loss), net of taxes	—	—		—	—		—		—		—	—		(66,783)		(66,783)
Total comprehensive loss																(32,624)

Stock-based compensation expense recognized in earnings	—	—		—	—		5,022		—		—	—		—		5,022

Preferred stock dividend	—	—		—	—		—		(4,312)		—	—		—		(4,312)
Issuance of stock related to stock-based awards	—	—		109,479	1		(1,270)		—		—	—		—		(1,269)
Repurchase of common stock	—	—		—	—		—		—		(941,879)	(50,023)		—		(50,023)



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

Balance at March 31, 2023	300,000	$	300,000	50,947,306	$	509	$	1,031,905	$	2,297,850	(3,095,444)	$	(175,528)	$	(374,762)	$	3,079,974

Comprehensive income/(loss):
Net income	—	—		—	—		—		68,651		—	—		—		68,651
Change in other comprehensive income/(loss), net of taxes	—	—		—	—		—		—		—	—		(65,546)		(65,546)
Total comprehensive income																3,105

Stock-based compensation expense recognized in earnings	—	—		—	—		5,069		—		—	—		—		5,069

Preferred stock dividend	—	—		—	—		—		(4,312)		—	—		—		(4,312)
Issuance of stock related to stock-based awards	—	—		140,659	2		(1,911)		—		—	—		—		(1,909)




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

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					Preferred Stock			Common Stock			Additional				Treasury Stock			Accumulated Other
								Paid-in		Retained					Comprehensive											Paid-in		Retained					Comprehensive
(in thousands except share data)	(in thousands except share data)	Shares	Amount		Shares	Amount		Capital		Earnings		Shares	Amount		Income/(Loss)		Total		(in thousands except share data)	Shares	Amount		Shares	Amount		Capital		Earnings		Shares	Amount		Income/(Loss)		Total
Balance at December 31, 2020 (audited)		6,000,000	$	150,000	50,470,867	$	504	$	991,898	$	1,713,056	(417)	$	(8)	$	15,774	$	2,871,224
Balance at December 31, 2021 (audited)																			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:
Comprehensive income/(loss):																			Comprehensive income/(loss):
Net income																			Net income	—	—		—	—		—		73,809		—	—		—		73,809
Change in other comprehensive income/(loss), net of taxes																			Change in other comprehensive income/(loss), net of taxes	—	—		—	—		—		—		—	—		(224,493)		(224,493)
Total comprehensive loss																			Total comprehensive loss																(150,684)

Stock-based compensation expense recognized in earnings																			Stock-based compensation expense recognized in earnings	—	—		—	—		10,429		—		—	—		—		10,429

Preferred stock dividend																			Preferred stock dividend	—	—		—	—		—		(8,625)		—	—		—		(8,625)
Issuance of stock related to stock-based awards																			Issuance of stock related to stock-based awards	—	—		201,426	2		(3,883)		—		—	—		—		(3,881)

Repurchase of common stock																			Repurchase of common stock	—	—		—	—		—		—		(941,879)	(50,023)		—		(50,023)
Balance at June 30, 2022																			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

Balance at December 31, 2022 (audited)																			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):																			Comprehensive income/(loss):
Net income	Net income	—	—		—	—		—		145,419		—	—		—		145,419		Net income	—	—		—	—		—		107,312		—	—		—		107,312
Change in other comprehensive income/(loss), net of taxes	Change in other comprehensive income/(loss), net of taxes	—	—		—	—		—		—		—	—		(42,163)		(42,163)		Change in other comprehensive income/(loss), net of taxes	—	—		—	—		—		—		—	—		(21,365)		(21,365)
Total comprehensive income	Total comprehensive income																103,256		Total comprehensive income																85,947

Stock-based compensation expense recognized in earnings		—	—		—	—		13,776		—		—	—		—		13,776
Issuance of preferred stock		300,000	300,000		—	—		(10,277)		—		—	—		—		289,723
Preferred stock dividend		—	—		—	—		—		(10,096)		—	—		—		(10,096)
Issuance of stock related to stock-based awards		—	—		121,751	2		(2,928)		—		—	—		—		(2,926)
Redemption of preferred stock		(6,000,000)	(150,000)		—	—		—		—		—	—		—		(150,000)

Balance at June 30, 2021		300,000	$	300,000	50,592,618	$	506	$	992,469	$	1,848,379	(417)	$	(8)	$	(26,389)	$	3,114,957

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:
Net income		—	—		—	—		—		73,809		—	—		—		73,809
Change in other comprehensive income/(loss), net of taxes		—	—		—	—		—		—		—	—		(224,493)		(224,493)
Total comprehensive loss																	(150,684)

Stock-based compensation expense recognized in earnings	Stock-based compensation expense recognized in earnings	—	—		—	—		10,429		—		—	—		—		10,429		Stock-based compensation expense recognized in earnings	—	—		—	—		13,507		—		—	—		—		13,507

Preferred stock dividend	Preferred stock dividend	—	—		—	—		—		(8,625)		—	—		—		(8,625)		Preferred stock dividend	—	—		—	—		—		(8,625)		—	—		—		(8,625)
Issuance of stock related to stock-based awards	Issuance of stock related to stock-based awards	—	—		201,426	2		(3,883)		—		—	—		—		(3,881)		Issuance of stock related to stock-based awards	—	—		220,667	2		(4,037)		—		—	—		—		(4,035)
Repurchase of common stock	Repurchase of common stock	—	—		—	—		—		—		(941,879)	(50,023)		—		(50,023)		Repurchase of common stock	—	—		—	—		—		—		(1,011,909)	(60,218)		—		(60,218)

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
Balance at June 30, 2023																			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

See accompanying notes to consolidated financial statements.

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TEXAS CAPITAL BANCSHARES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED


		Six months ended June 30,					Six Months Ended June 30,
(in thousands)	(in thousands)	2022		2021		(in thousands)	2023		2022
Operating activities	Operating activities					Operating activities
Net income	Net income	$	73,809	$	145,419	Net income	$	107,312	$	73,809
Adjustments to reconcile net income to net cash provided by operating activities:
Provision/(benefit) for credit losses		20,000		(25,000)
Adjustments to reconcile net income to net cash provided by/(used in) operating activities:						Adjustments to reconcile net income to net cash provided by/(used in) operating activities:
Provision for credit losses						Provision for credit losses	35,000		20,000

Depreciation and amortization expense		24,081		47,531
Net (gain)/loss on sale of loans held for sale		—		(2,502)
Decrease in valuation allowance on mortgage servicing rights		—		(16,448)
Depreciation and amortization						Depreciation and amortization	19,717		24,081

Net gain recognized on investment securities						Net gain recognized on investment securities	(2,685)		—

Stock-based compensation expense	Stock-based compensation expense	10,612		14,804		Stock-based compensation expense	13,507		10,612

Purchases and originations of loans held for sale	Purchases and originations of loans held for sale	(1,072)		(1,409,716)		Purchases and originations of loans held for sale	—		(1,072)
Proceeds from sales and repayments of loans held for sale	Proceeds from sales and repayments of loans held for sale	4,600		1,618,331		Proceeds from sales and repayments of loans held for sale	7,260		4,600

Changes in operating assets and liabilities:	Changes in operating assets and liabilities:					Changes in operating assets and liabilities:
Accrued interest receivable and other assets	Accrued interest receivable and other assets	(10,753)		85,388		Accrued interest receivable and other assets	(42,383)		(10,753)
Accrued interest payable and other liabilities	Accrued interest payable and other liabilities	25,259		(19,164)		Accrued interest payable and other liabilities	(47,067)		25,259
Net cash provided by operating activities	Net cash provided by operating activities	146,536		438,643		Net cash provided by operating activities	90,661		146,536
Investing activities	Investing activities					Investing activities
Purchases of available-for-sale debt securities		(637,803)		(903,395)
Purchases of available-for-sale securities						Purchases of available-for-sale securities	(849,391)		(637,803)
Proceeds from sales of available-for-sale debt securities						Proceeds from sales of available-for-sale debt securities	56,923		—
Proceeds from maturities, redemptions and pay-downs of available-for-sale debt securities	Proceeds from maturities, redemptions and pay-downs of available-for-sale debt securities	333,811		240,891		Proceeds from maturities, redemptions and pay-downs of available-for-sale debt securities	106,988		333,811

Proceeds from maturities, redemptions and pay-downs of held-to-maturity debt securities	Proceeds from maturities, redemptions and pay-downs of held-to-maturity debt securities	40,224		—		Proceeds from maturities, redemptions and pay-downs of held-to-maturity debt securities	37,075		40,224
Sales/(purchases) of equity securities, net	Sales/(purchases) of equity securities, net	855		—		Sales/(purchases) of equity securities, net	2,292		855
Originations of loans held for investment, mortgage finance	Originations of loans held for investment, mortgage finance	(54,492,183)		(88,516,423)		Originations of loans held for investment, mortgage finance	(35,597,043)		(54,492,183)
Proceeds from pay-offs of loans held for investment, mortgage finance	Proceeds from pay-offs of loans held for investment, mortgage finance	55,418,173		88,823,033		Proceeds from pay-offs of loans held for investment, mortgage finance	34,588,264		55,418,173
Proceeds from sale of mortgage servicing rights		—		108,646
Net (increase)/decrease in loans held for investment, excluding mortgage finance		(2,188,546)		174,095
Purchases of premises and equipment, net		(9,201)		(1,516)

Net increase in loans held for investment, excluding mortgage finance loans						Net increase in loans held for investment, excluding mortgage finance loans	(1,058,046)		(2,188,546)

Purchase of premises and equipment, net						Purchase of premises and equipment, net	(4,878)		(9,201)

Net cash used in investing activities	Net cash used in investing activities	(1,534,670)		(74,669)		Net cash used in investing activities	(2,717,816)		(1,534,670)
Financing activities	Financing activities					Financing activities
Net decrease in deposits		(2,669,344)		(2,157,026)
Net increase/(decrease) in deposits						Net increase/(decrease) in deposits	461,360		(2,669,344)
Issuance of stock related to stock-based awards	Issuance of stock related to stock-based awards	(3,881)		(2,926)		Issuance of stock related to stock-based awards	(4,035)		(3,881)

Net proceeds from issuance of preferred stock		—		289,723
Redemption of preferred stock		—		(150,000)
Preferred stock dividends paid		(8,625)		(10,096)
Repurchase of common stock		(50,023)		—
Net increase/(decrease) in short-term borrowings		448,704		(1,097,270)

Net proceeds from issuance of long-term debt		—		639,440
Preferred dividends paid						Preferred dividends paid	(8,625)		(8,625)
Repurchase of common stock						Repurchase of common stock	(60,218)		(50,023)
Net increase (decrease) in short-term borrowings						Net increase (decrease) in short-term borrowings	148,858		448,704

Redemption of long-term debt	Redemption of long-term debt	—		(111,000)		Redemption of long-term debt	(75,000)		—

Net cash used in financing activities		(2,283,169)		(2,599,155)
Net cash provided by/(used in) financing activities						Net cash provided by/(used in) financing activities	462,340		(2,283,169)
Net decrease in cash and cash equivalents	Net decrease in cash and cash equivalents	(3,671,303)		(2,235,181)		Net decrease in cash and cash equivalents	(2,164,815)		(3,671,303)
Cash and cash equivalents at beginning of period	Cash and cash equivalents at beginning of period	7,946,659		9,206,380		Cash and cash equivalents at beginning of period	5,012,260		7,946,659
Cash and cash equivalents at end of period	Cash and cash equivalents at end of period	$	4,275,356	$	6,971,199	Cash and cash equivalents at end of period	$	2,847,445	$	4,275,356
Supplemental disclosures of cash flow information:	Supplemental disclosures of cash flow information:					Supplemental disclosures of cash flow information:
Cash paid during the period for interest	Cash paid during the period for interest	$	60,572	$	58,869	Cash paid during the period for interest	$	314,089	$	60,572
Cash paid during the period for income taxes	Cash paid during the period for income taxes	29,350		36,701		Cash paid during the period for income taxes	43,286		29,350

Transfers of debt securities from available-for-sale to held-to-maturity	Transfers of debt securities from available-for-sale to held-to-maturity	1,019,365		—		Transfers of debt securities from available-for-sale to held-to-maturity	—		1,019,365

See accompanying notes to consolidated financial statements.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED

(1) Operations and Summary of Significant Accounting Policies

Organization and Nature of Business

Texas Capital Bancshares, Inc. (“~~we,” “us”,~~TCBI” or the “Company”), a Delaware corporation, was incorporated in November 1996 and commenced banking operations in December 1998. The consolidated financial statements ~~of the Company~~ include the accounts of ~~the Company~~TCBI and its wholly owned subsidiary, Texas Capital Bank (the “Bank”).

~~We serve~~The Company serves the needs of commercial businesses, entrepreneurs and professionals ~~and entrepreneurs~~ located in Texas ~~as well as operate several lines~~through a custom array of ~~business serving a regional or national clientele of commercial borrowers. We are primarily a secured lender,~~financial products and services with the majority of our loans held for investment, excluding mortgage finance loans and other national lines of business, being made to businesses headquartered in or with operations in Texas. Our national lines of business provide specialized lending products to businesses throughout the United States.high-quality personal service.

Basis of Presentation

~~Our~~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 ~~our~~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 ~~our~~the consolidated financial statements, and notes thereto, for the year ended December 31, ~~2021,~~2022, included in ~~our~~the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2021~~2022 (the ~~“2021~~“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,

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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

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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 June 30,				Six months ended June 30,					Three Months Ended June 30,				Six Months Ended June 30,
(in thousands except share and per share data)	(in thousands except share and per share data)	2022		2021		2022		2021		(in thousands except share and per share data)	2023		2022		2023		2022
Numerator:	Numerator:									Numerator:
Net income	Net income	$	34,159	$	73,481	$	73,809	$	145,419	Net income	$	68,651	$	34,159	$	107,312	$	73,809
Preferred stock dividends	Preferred stock dividends	4,312		6,317		8,625		10,096		Preferred stock dividends	4,312		4,312		8,625		8,625
Net income available to common stockholders	Net income available to common stockholders	$	29,847	$	67,164	$	65,184	$	135,323	Net income available to common stockholders	$	64,339	$	29,847	$	98,687	$	65,184
Denominator:	Denominator:									Denominator:
Denominator for basic earnings per common share—weighted average common shares		50,258,681		50,580,184		50,462,735		50,549,236
Basic earnings per common share—weighted average common shares										Basic earnings per common share—weighted average common shares	47,906,624		50,258,681		48,166,977		50,462,735
Effect of dilutive outstanding stock-settled awards	Effect of dilutive outstanding stock-settled awards	542,947		513,476		607,034		553,851		Effect of dilutive outstanding stock-settled awards	514,652		542,947		569,405		607,034

Denominator for dilutive earnings per common share—weighted average diluted common shares		50,801,628		51,093,660		51,069,769		51,103,087

Dilutive earnings per common share—weighted average diluted common shares										Dilutive earnings per common share—weighted average diluted common shares	48,421,276		50,801,628		48,736,382		51,069,769
Basic earnings per common share	Basic earnings per common share	$	0.59	$	1.33	$	1.29	$	2.68	Basic earnings per common share	$	1.34	$	0.59	$	2.05	$	1.29
Diluted earnings per common share	Diluted earnings per common share	$	0.59	$	1.31	$	1.28	$	2.65	Diluted earnings per common share	$	1.33	$	0.59	$	2.02	$	1.28

Anti-dilutive outstanding stock-settled awards	Anti-dilutive outstanding stock-settled awards	430,224		153,232		301,842		98,079		Anti-dilutive outstanding stock-settled awards	533,363		430,224		341,728		301,842

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(3) Investment Securities

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


(in thousands)	(in thousands)	Amortized Cost(1)		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value		(in thousands)	Amortized Cost(1)		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
June 30, 2022
June 30, 2023										June 30, 2023
Available-for-sale debt securities:	Available-for-sale debt securities:									Available-for-sale debt securities:
U.S. Treasury securities	U.S. Treasury securities	$	638,427	$	974	$	(13,598)	$	625,803	U.S. Treasury securities	$	646,811	$	—	$	(26,483)	$	620,328
U.S. government agency securities	U.S. government agency securities	125,000		—		(16,382)		108,618		U.S. government agency securities	125,000		—		(21,314)		103,686
Residential mortgage-backed securities	Residential mortgage-backed securities	2,036,101		21		(246,567)		1,789,555		Residential mortgage-backed securities	2,902,892		—		(346,184)		2,556,708

Credit risk transfer (“CRT”) securities		14,713		—		(3,043)		11,670
CRT securities										CRT securities	14,226		—		(2,470)		11,756
Total available-for-sale debt securities	Total available-for-sale debt securities	2,814,241		995		(279,590)		2,535,646		Total available-for-sale debt securities	3,688,929		—		(396,451)		3,292,478
Held-to-maturity debt securities:	Held-to-maturity debt securities:									Held-to-maturity debt securities:
Residential mortgage-backed securities	Residential mortgage-backed securities	980,935		—		(81,688)		899,247		Residential mortgage-backed securities	900,315		—		(111,880)		788,435
Total held-to-maturity debt securities	Total held-to-maturity debt securities	980,935		—		(81,688)		899,247		Total held-to-maturity debt securities	900,315		—		(111,880)		788,435
Equity securities	Equity securities							36,118		Equity securities							33,860
Total investment securities(2)	Total investment securities(2)							$	3,552,699	Total investment securities(2)							$	4,226,653

December 31, 2021
December 31, 2022										December 31, 2022
Available-for-sale debt securities:	Available-for-sale debt securities:									Available-for-sale debt securities:
U.S. Treasury securities										U.S. Treasury securities	$	698,769	$	—	$	(28,187)	$	670,582
U.S. government agency securities	U.S. government agency securities	$	125,000	$	—	$	(4,056)	$	120,944	U.S. government agency securities	125,000		—		(22,846)		102,154
Residential mortgage-backed securities	Residential mortgage-backed securities	3,288,261		156		(63,039)		3,225,378		Residential mortgage-backed securities	2,162,364		3		(331,320)		1,831,047
Tax-exempt asset-backed securities		170,626		9,407		—		180,033

CRT securities	CRT securities	14,713		—		(2,867)		11,846		CRT securities	14,713		—		(2,852)		11,861
Total available-for-sale debt securities	Total available-for-sale debt securities	3,598,600		9,563		(69,962)		3,538,201		Total available-for-sale debt securities	3,000,846		3		(385,205)		2,615,644
Held-to-maturity securities:										Held-to-maturity securities:
Residential mortgage-backed securities										Residential mortgage-backed securities	935,514		—		(118,600)		816,914
Total held-to-maturity securities										Total held-to-maturity securities	935,514		—		(118,600)		816,914
Equity securities	Equity securities							45,607		Equity securities							33,956
Total investment securities(2)	Total investment securities(2)							$	3,583,808	Total investment securities(2)							$	3,585,114

(1)Excludes accrued interest receivable of ~~$5.2~~$9.5 million and $6.6 million at June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively, related to available-for-sale debt securities and ~~$1.6~~$1.5 million and $1.5 million at June 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 ~~2022, we transferred $1.0 billion~~2023, the Company sold U.S. Treasury securities with an amortized cost of ~~available-for-sale debt securities to held-to-maturity at fair value. The transfer was the result~~$56.4 million and realized a gain of deliberate actions taken to execute on our asset-liability management strategies in response to rising interest rates. Management determined that it has both the positive intent and ability to hold these securities to maturity. On the date of transfer, the difference between the carrying value and fair value of these securities, which was recorded, net of tax, as a loss in accumulated other comprehensive income/(loss) (“AOCI”), resulted in the securities transferring at a discount of $69.2 million. The discount and unrealized loss, net of tax, in AOCI will be amortized to interest income over the remaining life of the securities using the interest method. There were no gains or losses recognized as a result of this transfer.

In the second quarter of 2022, our tax-exempt asset-backed securities were redeemed at par. The outstanding certificates were cancelled and related trusts were terminated. Unrealized gains and losses previously recorded, net of tax, in AOCI were reversed and no additional gains or losses were recognized as a result of the redemption.$489,000.

The amortized cost and estimated fair value as of June 30, ~~2022,~~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					Available-for-sale				Held-to-maturity
(in thousands)	(in thousands)	Amortized Cost		Fair Value		Amortized Cost		Fair Value		(in thousands)	Amortized Cost		Fair Value		Amortized Cost		Fair Value

Due within one year	Due within one year	$	83	$	86	$	—	$	—	Due within one year	$	251,079	$	245,016	$	—	$	—
Due after one year through five years	Due after one year through five years	638,427		625,803		—		—		Due after one year through five years	445,732		418,385		—		—
Due after five years through ten years	Due after five years through ten years	156,370		134,783		—		—		Due after five years through ten years	106,187		86,519		—		—
Due after ten years	Due after ten years	2,019,361		1,774,974		980,935		899,247		Due after ten years	2,885,931		2,542,558		900,315		788,435
Total	Total	$	2,814,241	$	2,535,646	$	980,935	$	899,247	Total	$	3,688,929	$	3,292,478	$	900,315	$	788,435

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The following table discloses ~~our~~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					Less Than 12 Months				12 Months or Longer				Total
(in thousands)	(in thousands)	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		(in thousands)	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
June 30, 2022
U.S. treasury securities		$	429,037	$	(13,598)	$	—	$	—	$	429,037	$	(13,598)
U.S. government agency securities		—		—		108,618		(16,382)		108,618		(16,382)
Residential mortgage-backed securities		893,351		(117,057)		895,346		(129,510)		1,788,697		(246,567)

CRT securities		—		—		11,670		(3,043)		11,670		(3,043)
Total		$	1,322,388	$	(130,655)	$	1,015,634	$	(148,935)	$	2,338,022	$	(279,590)
December 31, 2021
June 30, 2023														June 30, 2023
U.S. Treasury securities														U.S. Treasury securities	$	259,155	$	(9,662)	$	361,173	$	(16,821)	$	620,328	$	(26,483)
U.S. government agency securities	U.S. government agency securities	$	24,085	$	(915)	$	96,859	$	(3,141)	$	120,944	$	(4,056)	U.S. government agency securities	—		—		103,686		(21,314)		103,686		(21,314)
Residential mortgage-backed securities	Residential mortgage-backed securities	2,871,052		(50,721)		303,491		(12,318)		3,174,543		(63,039)		Residential mortgage-backed securities	1,024,801		(27,157)		1,531,907		(319,027)		2,556,708		(346,184)
CRT securities	CRT securities	—		—		11,846		(2,867)		11,846		(2,867)		CRT securities	—		—		11,756		(2,470)		11,756		(2,470)
Total	Total	$	2,895,137	$	(51,636)	$	412,196	$	(18,326)	$	3,307,333	$	(69,962)	Total	$	1,283,956	$	(36,819)	$	2,008,522	$	(359,632)	$	3,292,478	$	(396,451)

December 31, 2022														December 31, 2022
U.S. Treasury securities														U.S. Treasury securities	$	670,582	$	(28,187)	$	—	$	—	$	670,582	$	(28,187)
U.S. government agency securities														U.S. government agency securities	—		—		102,154		(22,846)		102,154		(22,846)
Residential mortgage-backed securities														Residential mortgage-backed securities	261,502		(9,481)		1,569,107		(321,839)		1,830,609		(331,320)
CRT securities														CRT securities	—		—		11,861		(2,852)		11,861		(2,852)
Total														Total	$	932,084	$	(37,668)	$	1,683,122	$	(347,537)	$	2,615,206	$	(385,205)

At June 30, ~~2022, we~~2023, the Company had 88112 available-for-sale debt securities in an unrealized loss position, comprised of 711 U.S. ~~treasury~~Treasury securities, 5five U.S. government agency securities, 7494 residential mortgage-backed securities and 2two 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. ~~We do~~The Company does not currently intend to sell and based on current conditions it does not believe it is ~~not more~~ likely ~~than not~~ that wethe Company will be required to sell these available-for-sale debt securities before recovery of the amortized cost of ~~the available-for-sale debt~~such securities in an unrealized loss position and ~~have,~~has, therefore recorded the unrealized losses related to this portfolio in ~~AOCI.~~accumulated other comprehensive income/loss, net (“AOCI”). Held-to-maturity ~~debt~~ securities consist of government guaranteed securities for which no loss is expected. At June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, no allowance for credit losses was established for available-for-sale or held-to-maturity debt securities.

~~Debt~~At June 30, 2023, debt securities with carrying values of approximately ~~$18.0~~$1.6 million were pledged to secure certain customer deposits at June 30, 2023. At December 31, 2022, debt securities with carrying values of approximately $16.1 million and ~~$1.6~~$1.4 million were pledged to secure certain customer repurchase agreements and deposits, ~~respectively, at June 30, 2022. The comparative amounts at December 31, 2021 were $22.0 million and $2.0 million,~~ respectively.

Equity Securities

Equity securities consist of investments that qualify for consideration under the regulations implementing the Community Reinvestment Act and investments related to ~~our~~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/(loss):~~income:


		Three months ended June 30,				Six months ended June 30,					Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	(in thousands)	2022		2021		2022		2021		(in thousands)	2023		2022		2023		2022
Net gains/(losses) recognized during the period	Net gains/(losses) recognized during the period	$	(4,996)	$	3,268	$	(8,636)	$	3,646	Net gains/(losses) recognized during the period	$	951	$	(4,996)	$	2,196	$	(8,636)
Less: Realized net gains/(losses) recognized on securities sold	Less: Realized net gains/(losses) recognized on securities sold	(204)		351		(2)		749		Less: Realized net gains/(losses) recognized on securities sold	(10)		(204)		(606)		(2)
Unrealized net gains/(losses) recognized on securities held		$	(4,792)	$	2,917	$	(8,634)	$	2,897
Unrealized net gains/(losses) recognized on securities still held										Unrealized net gains/(losses) recognized on securities still held	$	961	$	(4,792)	$	2,802	$	(8,634)

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(4) Loans and Allowance for Credit Losses on Loans

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

Loans are summarized by portfolio segment as follows:


(in thousands)	(in thousands)	June 30, 2022		December 31, 2021		(in thousands)	June 30, 2023		December 31, 2022

Loans held for investment(1):	Loans held for investment(1):					Loans held for investment(1):
Commercial	Commercial	$	11,511,532	$	9,897,561	Commercial	$	10,459,640	$	9,832,676
Energy		962,239		721,373
Mortgage finance	Mortgage finance	6,549,507		7,475,497		Mortgage finance	5,098,812		4,090,033
Real estate		5,118,849		4,777,530
Commercial real estate						Commercial real estate	5,308,997		4,875,363
Consumer						Consumer	531,635		552,848

Gross loans held for investment	Gross loans held for investment	24,142,127		22,871,961		Gross loans held for investment	21,399,084		19,350,920
Unearned income (net of direct origination costs)	Unearned income (net of direct origination costs)	(74,754)		(65,007)		Unearned income (net of direct origination costs)	(73,069)		(63,580)
Total loans held for investment	Total loans held for investment	24,067,373		22,806,954		Total loans held for investment	21,326,015		19,287,340
Allowance for credit losses on loans	Allowance for credit losses on loans	(229,013)		(211,866)		Allowance for credit losses on loans	(237,343)		(253,469)
Total loans held for investment, net	Total loans held for investment, net	$	23,838,360	$	22,595,088	Total loans held for investment, net	$	21,088,672	$	19,033,871
Loans held for sale:						Loans held for sale:

Loans held for sale:
Mortgage loans, at fair value		$	4,266	$	8,123

Non-mortgage loans, at lower of cost or fair value						Non-mortgage loans, at lower of cost or fair value	29,097		36,357
Total loans held for sale	Total loans held for sale	$	4,266	$	8,123	Total loans held for sale	$	29,097	$	36,357

(1) Excludes accrued interest receivable of ~~$57.6~~$105.7 million and ~~$50.9~~$100.4 million at June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively, that is recorded in accrued interest receivable and other assets on the consolidated balance sheets.

Table of Contents

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


(in thousands)	(in thousands)	2022		2021		2020		2019		2018		2017 and prior		Revolving lines of credit		Revolving lines of credit converted to term loans		Total		(in thousands)	2023		2022		2021		2020		2019		2018 and prior		Revolving lines of credit		Revolving lines of credit converted to term loans		Total
June 30, 2022
June 30, 2023																				June 30, 2023
Commercial	Commercial																			Commercial
(1-7) Pass	(1-7) Pass	$	853,390	$	4,017,274	$	293,544	$	434,095	$	295,347	$	379,247	$	4,971,573	$	35,847	$	11,280,317	(1-7) Pass	$	1,046,010	$	1,914,964	$	414,088	$	173,152	$	214,029	$	365,905	$	5,904,419	$	18,637	$	10,051,204
(8) Special mention	(8) Special mention	9,384		3,360		7,696		843		—		7,344		39,201		3,150		70,978		(8) Special mention	95		83,010		18,452		289		707		19,303		54,371		142		176,369
(9) Substandard - accruing	(9) Substandard - accruing	7,860		4,539		503		69,257		23,026		6,837		23,445		4,397		139,864		(9) Substandard - accruing	15,216		55,176		39,042		2,059		—		6,725		33,457		528		152,203
(9+) Non-accrual	(9+) Non-accrual	—		1,718		—		40		10,111		5,420		1,961		1,123		20,373		(9+) Non-accrual	—		42,076		3,211		436		23,385		7,421		161		3,174		79,864
Total commercial	Total commercial	$	870,634	$	4,026,891	$	301,743	$	504,235	$	328,484	$	398,848	$	5,036,180	$	44,517	$	11,511,532	Total commercial	$	1,061,321	$	2,095,226	$	474,793	$	175,936	$	238,121	$	399,354	$	5,992,408	$	22,481	$	10,459,640
Energy
(1-7) Pass		$	89,871	$	18,750	$	—	$	—	$	—	$	1,298	$	827,944	$	—	$	937,863
(8) Special mention		—		—		—		—		—		6,804		—		—		6,804
(9) Substandard - accruing		—		—		—		—		—		—		—		—		—
(9+) Non-accrual		—		8,029		—		—		—		—		9,543		—		17,572
Total energy		$	89,871	$	26,779	$	—	$	—	$	—	$	8,102	$	837,487	$	—	$	962,239
Mortgage finance	Mortgage finance																			Mortgage finance
(1-7) Pass	(1-7) Pass	$	44,918	$	584,253	$	291,404	$	650,170	$	972,308	$	3,861,831	$	—	$	—	$	6,404,884	(1-7) Pass	$	115,533	$	54,104	$	686,673	$	341,626	$	358,533	$	3,542,343	$	—	$	—	$	5,098,812
(8) Special mention	(8) Special mention	—		—		—		—		—		—		—		—		—		(8) Special mention	—		—		—		—		—		—		—		—		—
(9) Substandard - accruing	(9) Substandard - accruing	—		—		—		—		—		144,623		—		—		144,623		(9) Substandard - accruing	—		—		—		—		—		—		—		—		—
(9+) Non-accrual	(9+) Non-accrual	—		—		—		—		—		—		—		—		—		(9+) Non-accrual	—		—		—		—		—		—		—		—		—
Total mortgage finance	Total mortgage finance	$	44,918	$	584,253	$	291,404	$	650,170	$	972,308	$	4,006,454	$	—	$	—	$	6,549,507	Total mortgage finance	$	115,533	$	54,104	$	686,673	$	341,626	$	358,533	$	3,542,343	$	—	$	—	$	5,098,812
Real estate
CRE
Commercial real estate																				Commercial real estate
(1-7) Pass	(1-7) Pass	$	621,736	$	572,504	$	656,808	$	511,457	$	245,343	$	463,050	$	73,715	$	23,102	$	3,167,715	(1-7) Pass	$	398,476	$	1,533,734	$	1,056,719	$	625,786	$	418,687	$	634,714	$	408,959	$	23,700	$	5,100,775
(8) Special mention	(8) Special mention	2,218		10,905		46		4,800		14,072		9,494		—		446		41,981		(8) Special mention	1,048		55,675		22,329		24,047		12,016		39,960		—		5,414		160,489
(9) Substandard - accruing	(9) Substandard - accruing	—		17,850		—		—		26,317		68,767		—		—		112,934		(9) Substandard - accruing	—		—		17,850		—		—		29,708		—		—		47,558
(9+) Non-accrual	(9+) Non-accrual	—		—		—		—		—		190		—		—		190		(9+) Non-accrual	—		—		—		—		—		175		—		—		175
RBF
Total commercial real estate																				Total commercial real estate	$	399,524	$	1,589,409	$	1,096,898	$	649,833	$	430,703	$	704,557	$	408,959	$	29,114	$	5,308,997
Consumer																				Consumer
(1-7) Pass	(1-7) Pass	47,888		117,866		23,022		13,735		7,648		2,471		394,540		—		607,170		(1-7) Pass	$	19,368	$	58,901	$	89,294	$	55,186	$	14,480	$	110,951	$	180,651	$	107	$	528,938
(8) Special mention	(8) Special mention	—		623		—		—		—		—		2,300		—		2,923		(8) Special mention	—		—		—		—		—		1,376		—		—		1,376
(9) Substandard - accruing	(9) Substandard - accruing	—		—		—		—		—		—		—		—		—		(9) Substandard - accruing	—		—		—		—		—		—		—		321		321
(9+) Non-accrual	(9+) Non-accrual	—		—		—		—		—		—		—		—		—		(9+) Non-accrual	—		—		—		—		—		1,000		—		—		1,000
Other
(1-7) Pass		134,821		162,251		127,499		77,889		83,726		179,466		38,245		27,185		831,082
(8) Special mention		—		—		12,972		—		—		17,534		—		—		30,506
(9) Substandard - accruing		—		—		—		—		—		1,080		—		—		1,080
(9+) Non-accrual		—		—		—		—		—		—		—		12,210		12,210
Secured by 1-4 family
(1-7) Pass		31,759		93,841		56,568		27,956		19,911		75,462		4,057		—		309,554
(8) Special mention		—		—		—		—		—		1,156		—		—		1,156
(9) Substandard - accruing		—		—		—		—		—		167		—		—		167
(9+) Non-accrual		—		—		—		—		—		181		—		—		181
Total real estate		$	838,422	$	975,840	$	876,915	$	635,837	$	397,017	$	819,018	$	512,857	$	62,943	$	5,118,849
Total consumer																				Total consumer	$	19,368	$	58,901	$	89,294	$	55,186	$	14,480	$	113,327	$	180,651	$	428	$	531,635
Total	Total	$	1,843,845	$	5,613,763	$	1,470,062	$	1,790,242	$	1,697,809	$	5,232,422	$	6,386,524	$	107,460	$	24,142,127	Total	$	1,595,746	$	3,797,640	$	2,347,658	$	1,222,581	$	1,041,837	$	4,759,581	$	6,582,018	$	52,023	$	21,399,084
Gross charge-offs																				Gross charge-offs	$	—	$	90	$	19,828	$	—	$	8,243	$	552	$	—	$	871	$	29,584


(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

1214

(in thousands) 2021 2020 2019 2018 2017 2016 and prior Revolving lines of credit Revolving lines of credit converted to term loans Total
December 31, 2021
Commercial
(1-7) Pass $ 1,133,013 $ 3,157,150 $ 546,520 $ 319,246 $ 200,478 $ 289,795 $ 3,960,706 $ 41,377 $ 9,648,285
(8) Special mention 2,650 5,277 23,129 8,697 39 5,322 5,120 7,883 58,117
(9) Substandard - accruing — 7,705 102,619 25,010 6,202 6,962 14,742 2,007 165,247
(9+) Non-accrual 736 1,191 49 12,955 1,166 6,196 3,619 — 25,912
Total commercial $ 1,136,399 $ 3,171,323 $ 672,317 $ 365,908 $ 207,885 $ 308,275 $ 3,984,187 $ 51,267 $ 9,897,561
Energy
(1-7) Pass $ 71,750 $ — $ — $ 3 $ — $ 7,188 $ 577,988 $ — $ 656,929
(8) Special mention — — — — — — 27,421 — 27,421
(9) Substandard - accruing — — — — — 8,643 — — 8,643
(9+) Non-accrual — — — — — — 28,380 — 28,380
Total energy $ 71,750 $ — $ — $ 3 $ — $ 15,831 $ 633,789 $ — $ 721,373
Mortgage finance
(1-7) Pass $ 289,042 $ 590,616 $ 656,445 $ 754,507 $ 332,001 $ 4,852,886 $ — $ — $ 7,475,497
(8) Special mention — — — — — — — — —
(9) Substandard - accruing — — — — — — — — —
(9+) Non-accrual — — — — — — — — —
Total mortgage finance $ 289,042 $ 590,616 $ 656,445 $ 754,507 $ 332,001 $ 4,852,886 $ — $ — $ 7,475,497
Real estate
CRE
(1-7) Pass $ 497,462 $ 576,344 $ 600,005 $ 294,005 $ 155,252 $ 451,042 $ 73,988 $ 25,970 $ 2,674,068
(8) Special mention — — 291 8,827 20,089 26,344 — — 55,551
(9) Substandard - accruing 17,850 — — 40,900 37,393 38,188 — 2,308 136,639
(9+) Non-accrual — — — — — 198 — — 198
RBF
(1-7) Pass 155,595 44,362 9,693 8,565 — 12,732 460,888 — 691,835
(8) Special mention — — — — — — — — —
(9) Substandard - accruing — — — — — — — — —
(9+) Non-accrual — — — — — — — — —
Other
(1-7) Pass 166,202 148,811 119,017 106,343 61,723 139,723 47,653 29,595 819,067
(8) Special mention — 7,365 — — 845 4,982 — — 13,192
(9) Substandard - accruing — 6,424 — — 16,922 20,184 — — 43,530
(9+) Non-accrual — — — — 2,641 1,450 — 13,741 17,832
Secured by 1-4 family
(1-7) Pass 96,899 60,659 40,586 22,976 31,826 65,910 4,535 — 323,391
(8) Special mention — 553 — — — 291 — — 844
(9) Substandard - accruing — — — — — 1,203 — — 1,203
(9+) Non-accrual — — — — — 180 — — 180
Total real estate $ 934,008 $ 844,518 $ 769,592 $ 481,616 $ 326,691 $ 762,427 $ 587,064 $ 71,614 $ 4,777,530
Total $ 2,431,199 $ 4,606,457 $ 2,098,354 $ 1,602,034 $ 866,577 $ 5,939,419 $ 5,205,040 $ 122,881 $ 22,871,961

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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 ~~of loans~~ does not preclude its availability to absorb losses in other categories.


(in thousands)	(in thousands)	Commercial		Energy		Mortgage Finance		Real Estate		Total		(in thousands)	Commercial		Mortgage Finance		Commercial Real Estate		Consumer		Total
Six months ended June 30, 2022
Six Months Ended June 30, 2023												Six Months Ended June 30, 2023
Beginning balance	Beginning balance	$	102,202	$	52,568	$	6,083	$	51,013	$	211,866	Beginning balance	$	185,303	$	10,745	$	54,268	$	3,153	$	253,469

Provision for credit losses on loans	Provision for credit losses on loans	16,343		(26,500)		12,975		16,466		19,284		Provision for credit losses on loans	18,198		(3,660)		(1,730)		(785)		12,023
Charge-offs	Charge-offs	2,978		—		—		350		3,328		Charge-offs	29,584		—		—		—		29,584
Recoveries	Recoveries	436		755		—		—		1,191		Recoveries	1,430		—		—		5		1,435
Net charge-offs (recoveries)	Net charge-offs (recoveries)	2,542		(755)		—		350		2,137		Net charge-offs (recoveries)	28,154		—		—		(5)		28,149
Ending balance	Ending balance	$	116,003	$	26,823	$	19,058	$	67,129	$	229,013	Ending balance	$	175,347	$	7,085	$	52,538	$	2,373	$	237,343

Six months ended June 30, 2021
Six Months Ended June 30, 2022												Six Months Ended June 30, 2022
Beginning balance	Beginning balance	$	73,061	$	84,064	$	4,699	$	92,791	$	254,615	Beginning balance	$	154,360	$	6,083	$	48,247	$	3,176	$	211,866

Provision for credit losses on loans	Provision for credit losses on loans	12,035		(23,768)		352		(12,932)		(24,313)		Provision for credit losses on loans	(10,128)		12,975		16,820		(383)		19,284
Charge-offs	Charge-offs	3,863		6,418		—		1,192		11,473		Charge-offs	2,978		—		350		—		3,328
Recoveries	Recoveries	1,358		1,324		—		—		2,682		Recoveries	1,172		—		—		19		1,191
Net charge-offs (recoveries)	Net charge-offs (recoveries)	2,505		5,094		—		1,192		8,791		Net charge-offs (recoveries)	1,806		—		350		(19)		2,137
Ending balance	Ending balance	$	82,591	$	55,202	$	5,051	$	78,667	$	221,511	Ending balance	$	142,426	$	19,058	$	64,717	$	2,812	$	229,013

WeThe Company recorded a ~~$20.0~~$12.0 million provision for credit losses on loans for the six months ended June 30, ~~2022,~~2023, compared to a ~~negative~~$19.3 million provision ~~of $25.0 million~~ for the same period ~~in 2021.~~of 2022. The ~~$20.0~~$12.0 million provision for credit losses on loans resulted primarily from an increase in ~~total~~non-accrual loans and growth in loans held for ~~investment. We recorded $2.1 million in net charge-offs~~investment during the six months ended June 30, ~~2022,~~2023. Net charge-offs of $28.1 million were recorded during the six months ended June 30, 2023, compared to net charge-offs of ~~$8.8~~$2.1 million during the same period ~~in 2021.~~of 2022. Criticized loans totaled $619.4 million at June 30, 2023, $513.2 million at December 31, 2022 and $603.5 million at June 30, 2022, compared to $582.9 million and $891.6 million at December 31, 2021 and June 30, 2021, respectively. The increase in criticized loans as compared to March 31, 2022 was primarily due to one mortgage finance credit which is adequately reserved for as of June 30, 2022, and is expected to be resolved in the third quarter of 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 June 30, ~~2022, we~~2023, the Company had ~~$12.2~~$40.4 million in collateral-dependent ~~real estate~~commercial loans, collateralized by ~~real property and~~ business assets.

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

(in thousands) 30-59 Days
Past Due 60-89 Days
Past Due 90 Days or More Past Due(1) Total Past
Due Non-Accrual Loans(2) Current Total Non-Accrual With No Allowance
June 30, 2022
Commercial $ 13,625 $ 6,395 $ 3,144 $ 23,164 $ 20,373 $ 11,467,995 $ 11,511,532 $ 12,675
Energy — — — — 17,572 944,667 962,239 8,029
Mortgage finance — — — — — 6,549,507 6,549,507 —
Real estate:
CRE 29,852 4,139 — 33,991 190 3,288,639 3,322,820 —
RBF — 3,000 — 3,000 — 607,093 610,093 —
Other — — — — 12,210 862,668 874,878 12,210
Secured by 1-4 family — — 62 62 181 310,815 311,058 —
Total $ 43,477 $ 13,534 $ 3,206 $ 60,217 $ 50,526 $ 24,031,384 $ 24,142,127 $ 32,914


(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
June 30, 2023
Commercial	$	2,273	$	686	$	64	$	3,023	$	79,864	$	10,376,753	$	10,459,640	$	23,385
Mortgage finance	—		—		—		—		—		5,098,812		5,098,812		—
Commercial real estate	524		—		—		524		175		5,308,298		5,308,997		—
Consumer	11		—		—		11		1,000		530,624		531,635		1,000
Total	$	2,808	$	686	$	64	$	3,558	$	81,039	$	21,314,487	$	21,399,084	$	24,385

(1)Loans past due 90 days and still accruing includes premium finance loans of $3.1 million. These loans are generally secured by obligations of insurance carriers to refund premiums on canceled insurance policies. The receipt of the refund of premiums from the insurance carriers can take 180 days or longer from the cancellation date.

~~(2)~~As of June 30, ~~2022 and December 31, 2021, none~~2023, $1.4 million of ~~our~~ non-accrual loans were earning interest income on a cash ~~basis.~~basis compared to $2.2 million as of December 31, 2022. Additionally, no$37,000 of interest income was recognized on non-accrual loans for the six months ended June 30, 2023 compared to none for the same period in 2022. Accrued interest of $1.6 million and $4,000 was reversed during the six months ended June 30, ~~2022.~~2023 and June 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 June 30, 2023 made to borrowers experiencing financial difficulty that were modified during the three and six months ended June 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 June 30, 2023
Commercial	$	—	$	261	$	3,378	$	—	$	3,639	0.02	%




Total	$	—	$	261	$	3,378	$	—	$	3,639	0.02	%
Six Months Ended June 30, 2023
Commercial	$	31,356	$	1,144	$	6,562	$	14,532	$	53,594	0.25	%




Total	$	31,356	$	1,144	$	6,562	$	14,532	$	53,594	0.25	%

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


	Interest Rate Reduction	Term Extension (in months)	Total Payment Deferrals (in thousands)
Three Months Ended June 30, 2023
Commercial	—%	4 to 12	$	358



Six Months Ended June 30, 2023
Commercial	0.70%	4 to 36	$	5,080

As of June 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 June 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
June 30, 2023
Commercial	$	—	$	—	$	6,723	$	46,871	$	53,594



Total	$	—	$	—	$	6,723	$	46,871	$	53,594

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

The Company did not have any loans that were restructured during the six months ended June 30, 2022.

As of December 31, 2022 and ~~December 31, 2021, we~~June 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 June 30, 2022, $531,000 and ~~December 31, 2021,~~ $17.3 ~~million and $19.4~~ million, respectively, met the criteria for restructured. These loans had no unfunded commitments at their respective balance sheet dates.

~~We did not have any loans that were restructured during the six months ended June 30, 2022 or 2021.~~

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

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


(in thousands)	(in thousands)	June 30, 2022		December 31, 2021		(in thousands)	June 30, 2023		December 31, 2022

Customer repurchase agreements	Customer repurchase agreements	$	1,536	$	2,832	Customer repurchase agreements	$	—	$	1,142
Federal Home Loan Bank borrowings	Federal Home Loan Bank borrowings	2,650,000		2,200,000		Federal Home Loan Bank borrowings	1,350,000		1,200,000
Total short-term borrowings	Total short-term borrowings	$	2,651,536	$	2,202,832	Total short-term borrowings	$	1,350,000	$	1,201,142

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


(in thousands)	(in thousands)	June 30, 2022		December 31, 2021		(in thousands)	June 30, 2023		December 31, 2022

Bank-issued floating rate senior unsecured credit-linked notes due 2024	Bank-issued floating rate senior unsecured credit-linked notes due 2024	$	258,497	$	270,487	Bank-issued floating rate senior unsecured credit-linked notes due 2024	$	198,496	$	272,492
Bank-issued 5.75% fixed rate subordinated notes due 2026		174,066		173,935
Bank-issued 5.25% fixed rate subordinated notes due 2026						Bank-issued 5.25% fixed rate subordinated notes due 2026	174,326		174,196
Company-issued 4.00% fixed rate subordinated notes due 2031	Company-issued 4.00% fixed rate subordinated notes due 2031	371,129		370,910		Company-issued 4.00% fixed rate subordinated notes due 2031	371,567		371,348
Trust preferred floating rate subordinated debentures due 2032 to 2036	Trust preferred floating rate subordinated debentures due 2032 to 2036	113,406		113,406		Trust preferred floating rate subordinated debentures due 2032 to 2036	113,406		113,406
Total long-term debt	Total long-term debt	$	917,098	$	928,738	Total long-term debt	$	857,795	$	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.

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(6) Financial Instruments with Off-Balance Sheet Risk

The table below presents ~~our~~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. ~~This~~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 ~~is recorded~~for credit losses between loan portfolio segments and allowance balances allocated to off-balance sheet financial instruments, the results of which are included in ~~other liabilities~~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 ~~consolidated balance sheets.~~
Three months ended June 30, Six months ended June 30,
(in thousands) 2022 2021 2022 2021
Beginning balance of allowance for off-balance sheet credit losses $ 16,492 $ 17,147 $ 17,265 $ 17,434
Provision for off-balance sheet credit losses 1,489 (400) 716 (687)
Ending balance of allowance for off-balance sheet credit losses $ 17,981 $ 16,747 $ 17,981 $ 16,747
(in thousands) June 30, 2022 December 31, 2021
Commitments to extend credit - period end balance $ 10,194,949 $ 9,445,763
Standby letters of credit - period end balance 378,217 357,672
allowance for credit losses on loans.








(in thousands)	Commercial		Mortgage Finance		Commercial Real Estate		Consumer		Total
Six Months Ended June 30, 2023
Beginning balance	$	16,550	$	—	$	5,222	$	21	$	21,793
Provision for off-balance sheet credit losses	17,187		—		5,693		97		22,977
Ending balance	$	33,737	$	—	$	10,915	$	118	$	44,770
Six Months Ended June 30, 2022
Beginning balance	$	15,107	$	—	$	2,136	$	22	$	17,265
Provision for off-balance sheet credit losses	(1,656)		—		2,376		(4)		716
Ending balance	$	13,451	$	—	$	4,512	$	18	$	17,981


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

Commitments to extend credit - period end balance							$	9,973,209	$	9,673,082
Standby letters of credit - period end balance							488,525		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 ~~we maintain~~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 ~~our~~the Company’s common stock during the six months ended June 30, ~~2022~~2023 or ~~during~~2022. In January 2023, the ~~year ended December 31, 2021. On~~Company completed the full $150.0 million of share repurchases authorized by the Company’s board of directors on April 19, ~~2022, our~~2022. On January 18, 2023, the Company’s board of directors authorized a new share repurchase program under which wethe Company may repurchase up to $150.0 million in shares of ~~our~~its outstanding common stock. During the ~~second~~

~~quarter of 2022,~~six months ended June 30, 2023, the Company repurchased ~~941,879~~1,011,909 shares of its common stock for an aggregate price of ~~$50.0~~$59.7 million, at a weighted average price of ~~$53.11~~$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). WeThe Company adopted CECL on January 1, 2020 and have elected to utilize the five-year transition option.

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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 June 30, ~~2022,~~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 ~~the~~ Bank’s capital ratios exceeded the regulatory definition of well capitalized as of June 30, ~~2022~~2023 and December 31, ~~2021.~~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 ~~FDIC~~Federal Deposit Insurance Corporation (“FDIC”) or could result in regulatory actions that could have a material effect on ~~our~~the Bank’s condition and results of operations.

Because ~~our~~the Bank had less than $15.0 billion in total consolidated assets as of December 31, 2009, ~~we are~~it is allowed to continue to classify ~~our~~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%.

The table below summarizes ~~our~~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 ~~our~~the election to utilize the five-year CECL transition described above.


		Actual				Minimum Capital Required(2)					Capital Required to be Well Capitalized					Actual					Minimum Capital Required(2)					Capital Required to be Well Capitalized
(dollars in thousands)	(dollars in thousands)	Capital Amount		Ratio			Capital Amount		Ratio			Capital Amount	Ratio		(dollars in thousands)		Capital Amount		Ratio			Capital Amount		Ratio			Capital Amount	Ratio
June 30, 2022
June 30, 2023															June 30, 2023
CET1	CET1														CET1
Company	Company	$	2,969,107	10.46	%		$	1,986,272	7.00	%		N/A			Company		$	3,225,555	12.18	%		$	1,854,443	7.00	%		N/A
Bank	Bank	3,139,566		11.07	%		1,985,129		7.00	%		1,843,334	6.50	%	Bank		3,516,575		13.31	%		1,849,426		7.00	%		1,717,324	6.50	%
Total capital (to risk-weighted assets)	Total capital (to risk-weighted assets)														Total capital (to risk-weighted assets)
Company	Company	4,091,380		14.42	%		2,979,408		10.50	%		2,837,531	10.00	%	Company		4,351,950		16.43	%		2,781,665		10.50	%		2,649,204	10.00	%
Bank	Bank	3,690,710		13.01	%		2,977,694		10.50	%		2,835,899	10.00	%	Bank		4,071,403		15.41	%		2,774,139		10.50	%		2,642,037	10.00	%
Tier 1 capital (to risk-weighted assets)	Tier 1 capital (to risk-weighted assets)														Tier 1 capital (to risk-weighted assets)
Company	Company	3,379,107		11.91	%		2,411,901		8.50	%		1,702,519	6.00	%	Company		3,635,555		13.72	%		2,251,824		8.50	%		1,589,523	6.00	%
Bank	Bank	3,299,566		11.63	%		2,410,514		8.50	%		2,268,719	8.00	%	Bank		3,676,575		13.92	%		2,245,731		8.50	%		2,113,630	8.00	%
Tier 1 capital (to average assets)(1)	Tier 1 capital (to average assets)(1)														Tier 1 capital (to average assets)(1)
Company	Company	3,379,107		10.67	%		1,266,734		4.00	%		N/A			Company		3,635,555		12.39	%		1,173,583		4.00	%		N/A
Bank	Bank	3,299,566		10.42	%		1,266,412		4.00	%		1,583,014	5.00	%	Bank		3,676,575		12.55	%		1,171,431		4.00	%		1,464,288	5.00	%
December 31, 2021
December 31, 2022															December 31, 2022
CET1	CET1														CET1
Company	Company	$	2,949,785	11.06	%		$	1,866,444	7.00	%		N/A			Company		$	3,180,208	13.00	%		$	1,712,608	7.00	%		N/A
Bank	Bank	3,013,170		11.30	%		1,866,303		7.00	%		1,732,996	6.50	%	Bank		3,408,178		13.95	%		1,710,056		7.00	%		1,587,909	6.50	%
Total capital (to risk-weighted assets)	Total capital (to risk-weighted assets)														Total capital (to risk-weighted assets)
Company	Company	4,085,540		15.32	%		2,799,666		10.50	%		2,666,348	10.00	%	Company		4,331,098		17.70	%		2,568,912		10.50	%		2,446,583	10.00	%
Bank	Bank	3,578,014		13.42	%		2,799,455		10.50	%		2,666,148	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)	Tier 1 capital (to risk-weighted assets)														Tier 1 capital (to risk-weighted assets)
Company	Company	3,359,785		12.60	%		2,266,396		8.50	%		1,599,809	6.00	%	Company		3,590,208		14.67	%		2,079,595		8.50	%		1,467,950	6.00	%
Bank	Bank	3,173,170		11.90	%		2,266,225		8.50	%		2,132,918	8.00	%	Bank		3,568,178		14.61	%		2,076,496		8.50	%		1,954,349	8.00	%
Tier 1 capital (to average assets)(1)	Tier 1 capital (to average assets)(1)														Tier 1 capital (to average assets)(1)
Company	Company	3,359,785		9.01	%		1,490,902		4.00	%		N/A			Company		3,590,208		11.54	%		1,244,494		4.00	%		N/A
Bank	Bank	3,173,170		8.51	%		1,490,677		4.00	%		1,863,346	5.00	%	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 June 30, 2023 and December 31, 2022.

1718

Table of Contents

(8) ~~Stock-based~~Stock-Based Compensation

~~We have~~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, ~~(“SARs”),~~ restricted stock units (“RSUs”), restricted stock and performance units, or any combination thereof. On April 19, 2022, the Company’s stockholders approved the Texas Capital Bancshares, Inc. 2022 Long-Term Incentive Plan, which provides for the issuance of 1,124,880 shares of common stock for compensation to the Company’s key employees and non-employee directors.

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


		Three months ended June 30,				Six months ended June 30,					Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	(in thousands)	2022		2021		2022		2021		(in thousands)	2023		2022		2023		2022
Stock-settled awards:	Stock-settled awards:									Stock-settled awards:

RSUs	RSUs	$	5,022	$	8,315	$	10,429	$	13,775	RSUs	$	5,069	$	5,022	$	13,507	$	10,429
Restricted stock		—		—		—		1

Cash-settled units	Cash-settled units	2		121		183		1,028		Cash-settled units	—		2		—		183
Total	Total	$	5,024	$	8,436	$	10,612	$	14,804	Total	$	5,069	$	5,024	$	13,507	$	10,612


(in thousands except period data)	June 30, ~~2022~~2023
Unrecognized compensation expense related to unvested stock-settled awards	$	~~42,688~~40,155
Weighted average period over which expense is expected to be recognized, in years	~~2.5~~2.3

(9) Fair Value Disclosures

~~We determine~~The Company determines the fair market values of ~~our~~its assets and liabilities measured at fair value on a recurring and nonrecurring basis using the fair value hierarchy as prescribed in ~~the Accounting Standards Codification (“ASC”) 820,~~ ~~Fair Value Measurement~~.ASC 820. See Note 1 - Operations and Summary of Significant Accounting Policies in ~~our 2021~~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 ~~instruments.~~statements.

Assets and liabilities measured at fair value are as follows:


		Fair Value Measurements Using							Fair Value Measurements Using
(in thousands)	(in thousands)	Level 1		Level 2		Level 3		(in thousands)	Level 1		Level 2		Level 3
June 30, 2022
June 30, 2023								June 30, 2023
Available-for-sale debt securities:(1)	Available-for-sale debt securities:(1)							Available-for-sale debt securities:(1)
U.S. Treasury securities	U.S. Treasury securities	$	625,803	$	—	$	—	U.S. Treasury securities	$	620,328	$	—	$	—
U.S. government agency securities	U.S. government agency securities	—		108,618		—		U.S. government agency securities	—		103,686		—
Residential mortgage-backed securities	Residential mortgage-backed securities	—		1,789,555		—		Residential mortgage-backed securities	—		2,556,708		—

CRT securities	CRT securities	—		—		11,670		CRT securities	—		—		11,756
Equity securities(1)(2)	Equity securities(1)(2)	24,724		11,394		—		Equity securities(1)(2)	22,783		11,077		—
Loans held for sale(3)		—		—		4,266

Loans held for investment(3)								Loans held for investment(3)	—		—		26,047

Derivative assets(4)								Derivative assets(4)	—		10,768		—
Derivative liabilities(4)								Derivative liabilities(4)	—		97,909		—
Non-qualified deferred compensation plan liabilities(5)								Non-qualified deferred compensation plan liabilities(5)	21,149		—		—
December 31, 2022								December 31, 2022
Available-for-sale debt securities:(1)								Available-for-sale debt securities:(1)
U.S. Treasury securities								U.S. Treasury securities	$	670,582	$	—	$	—
U.S. government agency securities								U.S. government agency securities	—		102,154		—
Residential mortgage-backed securities								Residential mortgage-backed securities	—		1,831,047		—

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

Derivative assets(4)	Derivative assets(4)	—		11,049		—		Derivative assets(4)	—		13,504		—
Derivative liabilities(4)	Derivative liabilities(4)	—		46,215		—		Derivative liabilities(4)	—		91,758		—
Non-qualified deferred compensation plan liabilities(5)	Non-qualified deferred compensation plan liabilities(5)	22,938		—		—		Non-qualified deferred compensation plan liabilities(5)	21,177		—		—

December 31, 2021
Available-for-sale debt securities:(1)
U.S. government agency securities		$	—	$	120,944	$	—
Residential mortgage-backed securities		—		3,225,378		—
Tax-exempt asset-backed securities		—		—		180,033
CRT securities		—		—		11,846
Equity securities(1)(2)		33,589		12,018		—
Loans held for sale(3)		—		465		7,658

Derivative assets(4)		—		37,788		—
Derivative liabilities(4)		—		37,788		—
Non-qualified deferred compensation plan liabilities(5)		29,695		—		—

(1)Investment securities are measured at fair value on a recurring basis, generally ~~monthly, except for tax-exempt asset-backed securities and CRT securities which are measured quarterly.~~monthly.

(2)Equity securities consist of investments that qualify for consideration under the regulations implementing the Community Reinvestment Act and investments related to ~~our~~ non-qualified deferred compensation plan.

(3)~~Mortgage~~Includes certain collateral-dependent loans held for ~~sale~~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 ~~at fair value~~ on a ~~recurring~~nonrecurring basis, generally ~~monthly.~~annually or more often as warranted by market and economic conditions.

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

(5)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 ~~summarizes~~presents a reconciliation of the ~~changes in Level~~level 3 ~~assets~~fair value category measured at fair value on a recurring basis:


								Net Gains (Losses)													Net Gains/(Losses)
(in thousands)	(in thousands)	Balance at Beginning of Period		Purchases / Additions		Sales / Reductions		Realized		Unrealized		Balance at End of Period		(in thousands)	Balance at Beginning of Period		Purchases / Additions		Sales / Reductions		Realized		Unrealized		Balance at End of Period
Three months ended June 30, 2022
Three Months Ended June 30, 2023														Three Months Ended June 30, 2023
Available-for-sale debt securities:(1)	Available-for-sale debt securities:(1)													Available-for-sale debt securities:(1)
Tax-exempt asset-backed securities		$	165,845	$	—	$	(166,890)	$	—	$	1,045	$	—

CRT securities	CRT securities	11,901		—		—		—		(231)		11,670		CRT securities	$	11,928	$	—	$	—	$	—	$	(172)	$	11,756
Loans held for sale(2)		8,085		—		(4,029)		—		210		4,266
Three months ended June 30, 2021

Three Months Ended June 30, 2022														Three Months Ended June 30, 2022
Available-for-sale debt securities:(1)	Available-for-sale debt securities:(1)													Available-for-sale debt securities:(1)
Tax-exempt asset-backed securities	Tax-exempt asset-backed securities	$	181,566	$	—	$	(142)	$	—	$	4,530	$	185,954	Tax-exempt asset-backed securities	$	165,845	$	—	$	(166,890)	$	—	$	1,045	$	—
CRT securities	CRT securities	11,465		—		—		—		248		11,713		CRT securities	11,901		—		—		—		(231)		11,670
Loans held for sale(2)	Loans held for sale(2)	7,275		1,148		(246)		—		50		8,227		Loans held for sale(2)	8,085		—		(4,029)		—		210		4,266

Six months ended June 30, 2022
Six Months Ended June 30, 2023														Six Months Ended June 30, 2023
Available-for-sale debt securities:(1)														Available-for-sale debt securities:(1)

CRT securities														CRT securities	$	11,861	$	—	$	—	$	—	$	(105)	$	11,756

Six Months Ended June 30, 2022														Six Months Ended June 30, 2022
Available-for-sale debt securities:(1)	Available-for-sale debt securities:(1)													Available-for-sale debt securities:(1)
Tax-exempt asset-backed securities	Tax-exempt asset-backed securities	$	180,033	$	—	$	(170,626)	$	—	$	(9,407)	$	—	Tax-exempt asset-backed securities	$	180,033	$	—	$	(170,626)	$	—	$	(9,407)	$	—
CRT securities	CRT securities	11,846		—		—		—		(176)		11,670		CRT securities	11,846		—		—		—		(176)		11,670
Loans held for sale(2)	Loans held for sale(2)	7,658		1,327		(4,600)		—		(119)		4,266		Loans held for sale(2)	7,658		1,327		(4,600)		—		(119)		4,266
Six months ended June 30, 2021
Available-for-sale debt securities:(1)
Tax-exempt asset-backed securities		$	199,176	$	—	$	(11,513)	$	—	$	(1,709)	$	185,954
CRT securities		11,417		—		—		—		296		11,713
Loans held for sale(2)		6,933		1,685		(525)		5		129		8,227

(1)Unrealized gains/(losses) on available-for-sale debt securities are recorded in ~~AOCI.~~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 ~~net gain/(loss) on sale of loans held for sale~~other non-interest income on the consolidated statements of income and other comprehensive income/(loss).

~~Tax-exempt asset-backed securities~~

The fair value of tax-exempt asset-backed 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 a weighted-average life. The securities were redeemed in full prior to June 30, 2022. At December 31, 2021, the combined weighted-average discount rate and weighted-average life utilized were 2.60% and 4.61 years, respectively.

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 a weighted-average life. At June 30, ~~2022,~~2023, the discount rates utilized ranged from ~~5.88%~~6.25% to ~~10.66%~~11.37% and the weighted-average life ranged from ~~5.35~~4.83 years to ~~9.15~~8.17 years. On a combined amortized cost weighted-average basis a discount rate of ~~7.47%~~8.01% and a weighted-average life of ~~6.62~~5.98 years were utilized to determine the fair value of these securities at June 30, ~~2022.~~2023. At December 31, ~~2021,~~2022, the combined weighted-average discount rate and ~~combined~~ weighted-average life utilized were ~~4.97%~~8.24% and ~~6.35~~6.26 years, respectively.

Loans held for ~~sale~~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 $26.0 million fair value of loans held for sale using Level 3 inputs include loans that cannot be sold through normal sale channels and thus require significant management judgment or estimation when determining the fair value. The fair value of such loans is generally based upon quoted prices of comparableinvestment at June 30, 2023 reported above includes impaired loans with a ~~liquidity discount applied. At June 30, 2022, the~~carrying value of $40.4 million that were reduced by specific allowance allocations totaling $14.3 million based on collateral valuations utilizing Level 3 inputs. There were no collateral-dependent loans held for investment reported at fair value ~~of these loans was calculated using a weighted-average discounted price of 90.2% compared to 97.8%~~ at December 31, ~~2021.~~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:


				Estimated Fair Value									Carrying Amount		Estimated Fair Value
(in thousands)	(in thousands)	Carrying Amount		Total		Level 1		Level 2		Level 3		(in thousands)			Total		Level 1		Level 2		Level 3
June 30, 2022
June 30, 2023												June 30, 2023
Financial assets:	Financial assets:											Financial assets:
Cash and cash equivalents	Cash and cash equivalents	$	4,275,356	$	4,275,356	$	4,275,356	$	—	$	—	Cash and cash equivalents	$	2,847,445	$	2,847,445	$	2,847,445	$	—	$	—
Available-for-sale debt securities	Available-for-sale debt securities	2,535,646		2,535,646		625,803		1,898,173		11,670		Available-for-sale debt securities	3,292,478		3,292,478		620,328		2,660,394		11,756
Held-to-maturity debt securities	Held-to-maturity debt securities	980,935		899,247		—		899,247		—		Held-to-maturity debt securities	900,315		788,435		—		788,435		—
Equity securities	Equity securities	36,118		36,118		24,724		11,394		—		Equity securities	33,860		33,860		22,783		11,077		—
Loans held for sale	Loans held for sale	4,266		4,266		—		—		4,266		Loans held for sale	29,097		29,097		—		29,097		—

Loans held for investment, net	Loans held for investment, net	23,838,360		23,741,360		—		—		23,741,360		Loans held for investment, net	21,088,672		21,016,413		—		—		21,016,413
Derivative assets	Derivative assets	11,049		11,049		—		11,049		—		Derivative assets	10,768		10,768		—		10,768		—
Financial liabilities:	Financial liabilities:											Financial liabilities:
Total deposits	Total deposits	25,440,021		25,439,069		—		—		25,439,069		Total deposits	23,318,240		23,497,477		—		—		23,497,477
Short-term borrowings	Short-term borrowings	2,651,536		2,651,536		—		2,651,536		—		Short-term borrowings	1,350,000		1,350,000		—		1,350,000		—
Long-term debt	Long-term debt	917,098		882,258		—		882,258		—		Long-term debt	857,795		768,222		—		768,222		—
Derivative liabilities	Derivative liabilities	46,215		46,215		—		46,215		—		Derivative liabilities	97,909		97,909		—		97,909		—

December 31, 2021
December 31, 2022												December 31, 2022
Financial assets:	Financial assets:											Financial assets:
Cash and cash equivalents	Cash and cash equivalents	$	7,946,659	$	7,946,659	$	7,946,659	$	—	$	—	Cash and cash equivalents	$	5,012,260	$	5,012,260	$	5,012,260	$	—	$	—
Available-for-sale debt securities	Available-for-sale debt securities	3,538,201		3,538,201		—		3,346,322		191,879		Available-for-sale debt securities	2,615,644		2,615,644		670,582		1,933,201		11,861

Held-to-maturity debt securities												Held-to-maturity debt securities	935,514		816,914		—		816,914		—
Equity securities	Equity securities	45,607		45,607		33,589		12,018		—		Equity securities	33,956		33,956		22,879		11,077		—
Loans held for sale	Loans held for sale	8,123		8,123		—		465		7,658		Loans held for sale	36,357		36,357		—		—		36,357

Loans held for investment, net	Loans held for investment, net	22,595,088		22,631,252		—		—		22,631,252		Loans held for investment, net	19,033,871		18,969,922		—		—		18,969,922
Derivative assets	Derivative assets	37,788		37,788		—		37,788		—		Derivative assets	13,504		13,504		—		13,504		—
Financial liabilities:	Financial liabilities:											Financial liabilities:
Total deposits	Total deposits	28,109,365		28,109,762		—		—		28,109,762		Total deposits	22,856,880		22,857,949		—		—		22,857,949
Short-term borrowings	Short-term borrowings	2,202,832		2,202,832		—		2,202,832		—		Short-term borrowings	1,201,142		1,201,142		—		1,201,142		—
Long-term debt	Long-term debt	928,738		952,404		—		952,404		—		Long-term debt	931,442		881,716		—		881,716		—
Derivative liabilities	Derivative liabilities	37,788		37,788		—		37,788		—		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.


		June 30, 2022						December 31, 2021							June 30, 2023						December 31, 2022
				Estimated Fair Value						Estimated Fair Value							Estimated Fair Value						Estimated Fair Value
(in thousands)	(in thousands)	Notional Amount		Asset Derivative		Liability Derivative		Notional Amount		Asset Derivative		Liability Derivative		(in thousands)	Notional Amount		Asset Derivative		Liability Derivative		Notional Amount		Asset Derivative		Liability Derivative
Derivatives designated as hedges	Derivatives designated as hedges													Derivatives designated as hedges
Cash flow hedges:	Cash flow hedges:													Cash flow hedges:
Interest rate contracts:	Interest rate contracts:													Interest rate contracts:
Swaps hedging loans	Swaps hedging loans	$	750,000	$	1,103	$	1,180	$	—	$	—	$	—	Swaps hedging loans	$	3,100,000	$	—	$	108,292	$	3,000,000	$	—	$	86,378
Non-hedging derivatives	Non-hedging derivatives													Non-hedging derivatives
Customer-initiated and other derivatives:	Customer-initiated and other derivatives:													Customer-initiated and other derivatives:
Foreign currency forward contracts														Foreign currency forward contracts	2,682		38		24		—		—		—
Interest rate contracts:	Interest rate contracts:													Interest rate contracts:
Swaps	Swaps	3,563,862		48,096		48,096		3,536,090		40,922		40,922		Swaps	5,036,185		87,403		87,377		4,396,367		83,529		83,529
Caps and floors written	Caps and floors written	122,810		—		1,197		191,291		94		—		Caps and floors written	1,251,159		2,661		4,636		220,142		—		2,583
Caps and floors purchased	Caps and floors purchased	122,810		1,197		—		191,291		—		94		Caps and floors purchased	1,251,159		4,636		2,661		220,142		2,583		—
Forward contracts	Forward contracts	395,239		1,227		1,147		—		—		—		Forward contracts	7,274,246		14,220		13,515		1,569,326		4,431		4,053

Gross derivatives	Gross derivatives			51,623		51,620				41,016		41,016		Gross derivatives			108,958		216,505				90,543		176,543
Netting adjustment - offsetting derivative assets/liabilities	Netting adjustment - offsetting derivative assets/liabilities			(4,980)		(4,980)				(3,228)		(3,228)		Netting adjustment - offsetting derivative assets/liabilities			(26,524)		(26,524)				(5,164)		(5,164)
Netting adjustment - cash collateral received/posted	Netting adjustment - cash collateral received/posted			(35,594)		(425)				—		—		Netting adjustment - cash collateral received/posted			(71,666)		(92,072)				(71,875)		(79,621)
Net derivatives included on the consolidated balance sheets	Net derivatives included on the consolidated balance sheets			$	11,049	$	46,215			$	37,788	$	37,788	Net derivatives included on the consolidated balance sheets			$	10,768	$	97,909			$	13,504	$	91,758

~~Our~~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. ~~Our~~The Company’s credit exposure associated with these instruments, net of any collateral pledged, was approximately ~~$11.0~~$10.8 million at June 30, ~~2022,~~2023 and approximately ~~$37.8~~$13.5 million at December 31, ~~2021.~~2022. Collateral levels are monitored and adjusted on a regular basis for changes in the value of derivative instruments. At June 30, ~~2022, we~~2023, the Company had ~~$4.8~~$156.9 million in cash collateral pledged to counterparties included in ~~interest-bearing~~interest bearing cash and cash equivalents on the consolidated balance sheet and ~~$42.0~~$74.5 million in cash collateral received from counterparties included in interest bearing deposits on the consolidated balance sheet. The comparative amounts at December 31, ~~2021,~~2022, were ~~$40.3~~$89.2 million in cash collateral pledged to counterparties and no$72.5 million cash collateral received from counterparties.

WeThe Company also ~~enter~~enters into credit risk participation agreements with financial institution counterparties for interest rate swaps related to loans in which ~~we are~~the Company is either a participant or a lead bank. The risk participation agreements entered into by usthe 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. ~~We are~~The Company is party to 1217 risk participation agreements where ~~we are~~it acts as a participant bank with a notional amount of ~~$125.0~~$328.2 million at June 30, ~~2022,~~2023, compared to 719 risk participation agreements ~~having~~with a notional amount of ~~$79.2~~$291.2 million at December 31, ~~2021.~~2022. The maximum estimated exposure to these agreements, assuming 100% default by all obligors, was approximately ~~$78,000~~$9.0 million at June 30, ~~2022~~2023 and ~~$2.3~~$8.9 million at December 31, ~~2021.~~2022. The fair value of these exposures was insignificant to the consolidated financial statements at both June 30, ~~2022~~2023 and December 31, ~~2021.~~2022. Risk participation agreements entered into by usthe Company as the lead bank provide credit protection ~~to us~~ should the borrower fail to perform on its interest rate derivative ~~contract with us. We are~~contract. The Company is party to 1712 risk participation agreements where ~~we are~~the Company acts as the lead bank having a notional amount of ~~$199.5~~$166.5 million at June 30, ~~2022,~~2023, compared to 1518 agreements having a notional amount of ~~$156.1~~$222.0 million at December 31, ~~2021.~~2022.

Derivatives Designated as Cash Flow Hedges

~~During the second quarter of 2022, we entered~~The Company enters into interest rate derivative contracts that ~~were~~are designated as qualifying cash flow hedges to hedge the exposure to variability in expected future cash flows attributable to changes in a contractually specified interest rate. To qualify for hedge accounting, a formal assessment is prepared to determine whether the hedging relationship, both at inception and on an ongoing basis, is expected to be highly effective in achieving offsetting cash flows attributable to the hedged risk during the term of the hedge if a cash flow hedge. At inception a statistical regression analysis is prepared to determine hedge effectiveness. At each reporting period thereafter, a statistical regression or qualitative analysis is performed. If it is determined that hedge effectiveness has not been or will not continue to be highly effective then hedge accounting ceases and any gain or loss in AOCI is recognized in earnings immediately. The cash flow hedges are recorded at fair value in other assets and other liabilities on the consolidated balance sheets with changes in fair value recorded in AOCI, net of tax. Amounts recorded to AOCI are reclassified into earnings in the same period in which the hedged asset or liability affects earnings and are presented in the same income statement line item as the earnings effect of the hedged asset or liability.

During the ~~three and~~ six months ended June 30, ~~2022, we~~2023, the Company recorded ~~$304,000~~$45.5 million in unrealized ~~gains~~losses to adjust ~~our~~its cash flow hedges to fair value, which was recorded net of tax to AOCI, and reclassified ~~$704,000~~$26.0 million from AOCI into interest income on loans. Based on current market conditions, ~~we estimate~~the Company estimates that during the next 12 months, an additional ~~$621,000~~$68.9 million will be reclassified from AOCI as a decrease to interest income. As of June 30, ~~2022,~~2023, the maximum length of time over which forecasted transactions are hedged is ~~2.95~~3.25 years.

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(11) Accumulated Other Comprehensive Income

The following table provides the change in AOCI by component:


(in thousands)	(in thousands)	Cash Flow Hedges		AFS Securities		HTM Securities		Total		(in thousands)	Cash Flow Hedges		Available-for-Sale Securities		Held-to-Maturity Securities		Total
Three months ended June 30, 2022
Three Months Ended June 30, 2023										Three Months Ended June 30, 2023
Beginning balance	Beginning balance	$	—	$	(151,564)	$	(53,861)	$	(205,425)	Beginning balance	$	(46,916)	$	(281,063)	$	(46,783)	$	(374,762)
Change in unrealized gain/(loss)	Change in unrealized gain/(loss)	304		(86,742)		—		(86,438)		Change in unrealized gain/(loss)	(59,057)		(40,674)		—		(99,731)
Amounts reclassified into net income	Amounts reclassified into net income	(704)		—		2,607		1,903		Amounts reclassified into net income	14,919		—		1,843		16,762
Total OCI		(400)		(86,742)		2,607		(84,535)
Total other comprehensive income/(loss)										Total other comprehensive income/(loss)	(44,138)		(40,674)		1,843		(82,969)
Income tax expense/(benefit)	Income tax expense/(benefit)	(84)		(18,216)		548		(17,752)		Income tax expense/(benefit)	(9,269)		(8,541)		387		(17,423)
Total OCI, net of tax		(316)		(68,526)		2,059		(66,783)
Total other comprehensive income/(loss), net of tax										Total other comprehensive income/(loss), net of tax	(34,869)		(32,133)		1,456		(65,546)
Ending balance	Ending balance	$	(316)	$	(220,090)	$	(51,802)	$	(272,208)	Ending balance	$	(81,785)	$	(313,196)	$	(45,327)	$	(440,308)
Three months ended June 30, 2021
Three Months Ended June 30, 2022										Three Months Ended June 30, 2022
Beginning balance	Beginning balance	$	—	$	(56,437)	$	—	$	(56,437)	Beginning balance	$	—	$	(151,564)	$	(53,861)	$	(205,425)
Change in unrealized gain/(loss)	Change in unrealized gain/(loss)	—		38,037		—		38,037		Change in unrealized gain/(loss)	304		(86,742)		—		(86,438)
Amounts reclassified into net income	Amounts reclassified into net income	—		—		—		—		Amounts reclassified into net income	(704)		—		2,607		1,903
Total OCI		—		38,037		—		38,037
Total other comprehensive income/(loss)										Total other comprehensive income/(loss)	(400)		(86,742)		2,607		(84,535)
Income tax expense/(benefit)	Income tax expense/(benefit)	—		7,989		—		7,989		Income tax expense/(benefit)	(84)		(18,216)		548		(17,752)
Total OCI, net of tax		—		30,048		—		30,048
Total other comprehensive income/(loss), net of tax										Total other comprehensive income/(loss), net of tax	(316)		(68,526)		2,059		(66,783)
Ending balance	Ending balance	$	—	$	(26,389)	$	—	$	(26,389)	Ending balance	$	(316)	$	(220,090)	$	(51,802)	$	(272,208)

Six months ended June 30, 2022
Six Months Ended June 30, 2023										Six Months Ended June 30, 2023
Beginning balance	Beginning balance	$	—	$	(47,715)	$	—	$	(47,715)	Beginning balance	$	(66,394)	$	(304,309)	$	(48,240)	$	(418,943)
Change in unrealized gain/(loss)	Change in unrealized gain/(loss)	304		(218,196)		(69,165)		(287,057)		Change in unrealized gain/(loss)	(45,529)		(11,249)		—		(56,778)
Amounts reclassified into net income	Amounts reclassified into net income	(704)		—		3,593		2,889		Amounts reclassified into net income	26,048		—		3,687		29,735
Total OCI		(400)		(218,196)		(65,572)		(284,168)
Total other comprehensive income/(loss)										Total other comprehensive income/(loss)	(19,481)		(11,249)		3,687		(27,043)
Income tax expense/(benefit)	Income tax expense/(benefit)	(84)		(45,821)		(13,770)		(59,675)		Income tax expense/(benefit)	(4,090)		(2,362)		774		(5,678)
Total OCI, net of tax		(316)		(172,375)		(51,802)		(224,493)
Total other comprehensive income/(loss), net of tax										Total other comprehensive income/(loss), net of tax	(15,391)		(8,887)		2,913		(21,365)
Ending balance	Ending balance	$	(316)	$	(220,090)	$	(51,802)	$	(272,208)	Ending balance	$	(81,785)	$	(313,196)	$	(45,327)	$	(440,308)
Six months ended June 30, 2021
Six Months Ended June 30, 2022										Six Months Ended June 30, 2022
Beginning balance	Beginning balance	$	—	$	15,774	$	—	$	15,774	Beginning balance	$	—	$	(47,715)	$	—	$	(47,715)
Change in unrealized gain/(loss)	Change in unrealized gain/(loss)	—		(53,370)		—		(53,370)		Change in unrealized gain/(loss)	304		(218,196)		(69,165)		(287,057)
Amounts reclassified into net income	Amounts reclassified into net income	—		—		—		—		Amounts reclassified into net income	(704)		—		3,593		2,889
Total OCI		—		(53,370)		—		(53,370)
Total other comprehensive income/(loss)										Total other comprehensive income/(loss)	(400)		(218,196)		(65,572)		(284,168)
Income tax expense/(benefit)	Income tax expense/(benefit)	—		(11,207)		—		(11,207)		Income tax expense/(benefit)	(84)		(45,821)		(13,770)		(59,675)
Total OCI, net of tax		—		(42,163)		—		(42,163)
Total other comprehensive income/(loss), net of tax										Total other comprehensive income/(loss), net of tax	(316)		(172,375)		(51,802)		(224,493)
Ending balance	Ending balance	$	—	$	(26,389)	$	—	$	(26,389)	Ending balance	$	(316)	$	(220,090)	$	(51,802)	$	(272,208)

(12) New Accounting Standards

~~Accounting Standard Update (“ASU”) 2022-03, “Fair Value Measurement (Topic 820)”~~ ~~(“ASU 2022-03”) clarifies~~There were no accounting standards or updates issued during the ~~guidance in ASC 820 when measuring the fair value~~second quarter of an equity security subject to contractual restrictions that prohibit the sale of an equity security. This update also requires specific disclosures related to these types of securities. ASU 2022-03 is effective January 1, 2023 and is not expected to have a significant impact on our consolidated financial statements.2023.

Table of Contents

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of ~~our~~the Company’s financial condition and results of operations for the ~~three and~~ six months ended June 30, ~~2022~~2023 and ~~2021~~2022 should be read in conjunction with ~~our~~its audited consolidated financial statements and the related notes to the consolidated financial statements included in ~~our~~its Annual Report on Form 10-K for the year ended December 31, ~~2021~~2022 (the ~~“2021~~“2022 Form 10-K”). Operating results for the three and six months ended June 30, ~~2022~~2023 are not necessarily indicative of the results for the year ending December 31, ~~2022~~2023 or any future period.

Forward-Looking Statements

This ~~Quarterly Report on Form 10-Q~~report contains “forward-looking statements” within the meaning of and pursuant to the Private Securities Litigation Reform Act of ~~1995.~~1995 regarding, among other things, the Company’s financial condition, results of operations, business plans, strategies, future performance and business and industry outlook. These ~~forward-looking~~ statements are ~~based on our beliefs, assumptions~~not historical in nature and ~~expectations of our future performance taking into account all information available to us at the time such statements are made. Forward-looking statements~~ may often be identified by the use of words such as “believes,” “projects,” “expects,” “may,” “estimates,” ~~“anticipates,~~“should,” “plans,” ~~“goals,~~“targets,” ~~“objectives,~~“intends” “could,” ~~“intends,~~“would,” ~~“seeks,~~“anticipates,” ~~“likely,~~“potential,” ~~“should,~~“confident,” ~~“may” “could”~~“optimistic” or the negative thereof, or other variations thereon, or comparable terminology, or by discussions of strategy, objectives, estimates, trends, guidance, expectations and ~~other similar expressions. These~~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 the historical performance of the Company or on the Company’s current plans, estimates and expectations. The inclusion of this forward-looking information should not be regarded as a representation by the Company that the future ~~plans, estimates or expectations so contemplated will be achieved, and should not be the primary basis upon which investors evaluate an investment in our securities. Certain~~results. Numerous risks ~~uncertainties~~ and other factors, ~~including those set forth under “Risk Factors” in Part I, Item 1A~~many of ~~the 2021 Form 10-K and any subsequent Quarterly Report on Form 10-Q or Current Report on Form 8-K may~~which are beyond management’s control, could cause actual results to differ materially from ~~the~~future results ~~discussed in the~~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 ~~appearing in this discussion and analysis and may~~ include, ~~factors such as,~~ but are not limited to, credit quality and risk, the ~~COVID-19 pandemic,~~unpredictability of economic and business conditions that may impact the Company or its customers, recent adverse developments in the banking industry highlighted by high-profile bank failures and ~~technological changes,~~the potential impact of such developments on customer confidence, liquidity and regulatory responses to these developments, the Company’s ability to effective manage its liquidity risk and any growth plans and the availability of capital and funding, the Company’s ability to effectively manage information technology systems, cyber incidents or other failures, disruptions or security breaches, interest rates, including the impact of rising rates on the Company’s securities portfolio and funding costs, commercial and residential real estate values, adverse or unexpected economic conditions, including inflation, ~~and~~recession, the threat of recession, ~~as well as~~and market conditions in Texas, the United States or ~~internationally as well as~~globally, including governmental and consumer responses to those economic and market conditions, fund availability, accounting estimates and risk management processes, the transition away from the London Interbank Offered Rate (LIBOR), legislative and regulatory changes, enforcement actions and regulatory examinations and investigations, ratings or interpretations, business strategy execution, the failure to identify, attract and retain key personnel and other employees, increased or expanded competition ~~mortgage~~from banks and other financial service providers in the Company’s markets, ~~fraud,~~the failure to maintain adequate regulatory capital, environmental liability associated with properties related to the Company’s lending activities, and severe weather, natural disasters, acts of war, or terrorism, global conflict, or other external ~~events.~~events, climate change and related legislative and regulatory initiatives as well as the risks more fully described in the 2022 10-K, including the “Risk Factors” section in Part I, Item 1A of the 2022 10-K, Quarterly Reports on Form 10-Q, including the “Risk Factors” section in Part II, Item 1A of this report, and in its other documents and filings with the SEC. The information contained in this report speaks only as of its date. Except to the extent required by applicable law or regulation, the Company ~~does not undertake~~disclaims any obligation to update such factors or to publicly ~~update~~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 half 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 and eroding consumer confidence in the banking system. Despite these negative industry developments, the Company’s liquidity position and balance sheet remains robust. The Company’s total deposits increased by 2% as compared to December 31, 2022, to $23.3 billion at June 30, 2023. During the first half of 2023, the Company took a number of preemptive actions, which included pro-active outreach to clients and a robust review ~~any forward-looking statement, whether~~of its borrowing and liquidity positions to ensure that the Company is positioned to best serve its clients. Furthermore, the Company’s capital remains at historically high levels with CET1 and Total Capital ratios of 12.2% and 16.4%, respectively, as ~~a result~~ of ~~new information, future developments or otherwise.~~June 30, 2023.

Table of Contents

Results of Operations

Selected income statement data and key performance indicators are presented in the table below:


		Three months ended June 30,			Six months ended June 30,						Three Months Ended June 30,								Six Months Ended June 30,
(dollars in thousands except per share data)	(dollars in thousands except per share data)	2022			2021			2022				2021			(dollars in thousands except per share data)	2023			2022			2023			2022
Net interest income	Net interest income	$	205,531		$	189,457		$	389,078			$	384,269		Net interest income	$	231,990		$	205,533		$	467,335		$	389,079
Provision for credit losses	Provision for credit losses	22,000			(19,000)			20,000				(25,000)			Provision for credit losses	7,000			22,000			35,000			20,000
Non-interest income	Non-interest income	26,242			37,639			46,524				81,992			Non-interest income	46,011			26,240			83,414			46,523
Non-interest expense	Non-interest expense	164,303			149,060			317,395				299,376			Non-interest expense	181,644			164,303			375,671			317,395
Income before income taxes	Income before income taxes	45,470			97,036			98,207				191,885			Income before income taxes	89,357			45,470			140,078			98,207
Income tax expense	Income tax expense	11,311			23,555			24,398				46,466			Income tax expense	20,706			11,311			32,766			24,398
Net income	Net income	34,159			73,481			73,809				145,419			Net income	68,651			34,159			107,312			73,809
Preferred stock dividends	Preferred stock dividends	4,312			6,317			8,625				10,096			Preferred stock dividends	4,312			4,312			8,625			8,625
Net income available to common stockholders	Net income available to common stockholders	$	29,847		$	67,164		$	65,184			$	135,323		Net income available to common stockholders	$	64,339		$	29,847		$	98,687		$	65,184
Basic earnings per common share	Basic earnings per common share	$	0.59		$	1.33		$	1.29			$	2.68		Basic earnings per common share	$	1.34		$	0.59		$	2.05		$	1.29
Diluted earnings per common share	Diluted earnings per common share	$	0.59		$	1.31		$	1.28			$	2.65		Diluted earnings per common share	$	1.33		$	0.59		$	2.02		$	1.28
Net interest margin	Net interest margin	2.68		%	2.02		%	2.45		%		2.03		%	Net interest margin	3.29		%	2.68		%	3.31		%	2.45		%
Return on average assets		0.44		%	0.76		%	0.45		%		0.75		%
Return on average common equity		4.35		%	9.74		%	4.67		%		9.91		%
Return on average assets (“ROA”)															Return on average assets (“ROA”)	0.95		%	0.44		%	0.74		%	0.45		%
Return on average common equity (“ROE”)															Return on average common equity (“ROE”)	9.17		%	4.35		%	7.15		%	4.67		%
Efficiency ratio(1)															Efficiency ratio(1)	65.3		%	70.9		%	68.2		%	72.9		%
Non-interest income to average earning assets	Non-interest income to average earning assets	0.34		%	0.40		%	0.29		%		0.43		%	Non-interest income to average earning assets	0.66		%	0.34		%	0.60		%	0.29		%
Efficiency ratio(1)		70.9		%	65.6		%	72.9		%		64.2		%
Non-interest expense to average earning assets	Non-interest expense to average earning assets	2.16		%	1.59		%	2.00		%		1.58		%	Non-interest expense to average earning assets	2.61		%	2.16		%	2.69		%	2.00		%

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

Three months ended June 30, ~~2022~~2023 compared to three months ended June 30, ~~2021~~2022

WeThe Company reported net income of $68.7 million and net income available to common stockholders of $64.3 million for the second quarter of 2023, compared to net income of $34.2 million and net income available to common stockholders of $29.8 million for the second quarter of ~~2022, compared to net income of $73.5 million and net income available to common stockholders of $67.2 million for the second quarter of 2021.~~2022. On a fully diluted basis, earnings per common share were ~~$0.59~~$1.33 for the second quarter of ~~2022,~~2023, compared to ~~$1.31~~$0.59 for the same period in 2022. ROE was 9.17% and ROA was 0.95% for the second quarter of ~~2021. Return on average common equity (“ROE”) was~~2023, compared to 4.35% and ~~return on average assets (“ROA”) was~~ 0.44% ~~for the second quarter of 2022, compared to 9.74% and 0.76%~~, respectively, for the ~~second quarter of 2021.~~same period in 2022. The ~~decrease~~increase in net income for the second quarter of ~~2022~~2023 compared to the second quarter of ~~2021~~2022 resulted primarily from ~~an increase~~increases in net interest income and non-interest income as well as a decrease in provision for credit ~~losses.~~losses, partially offset by an increase in non-interest expense.

Six months ended June 30, ~~2022~~2023 compared to six months ended June 30, ~~2021~~2022

WeThe Company reported net income of $107.3 million and net income available to common stockholders of $98.7 million for the six months ended June 30, 2023, compared to net income of $73.8 million and net income available to common stockholders of $65.2 million for the ~~six months ended June 30, 2022, compared to net income of $145.4 million and net income available to common stockholders of $135.3 million for the~~ same period in ~~2021.~~2022. On a fully diluted basis, earnings per common share were ~~$1.28~~$2.02 for the six months ended June 30, ~~2022,~~2023, compared to ~~$2.65~~$1.28 for the same period in ~~2021.~~2022. ROE was ~~4.67%~~7.15% and ROA was ~~0.45%~~0.74% for the six months ended June 30, ~~2022,~~2023, compared to ~~9.91%~~4.67% and ~~0.75%~~0.45%, respectively, for the same period in ~~2021.~~2022. The ~~decrease~~increase in net income for the six months ended June 30, ~~2022~~2023 compared to the same period in ~~2021~~2022 resulted primarily from ~~a decrease~~increases in net interest income and non-interest income, ~~coupled with~~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 June 30, 2022 Three months ended June 30, 2021
(in thousands except percentages) Average
Balance Income/
Expense Yield/
Rate Average
Balance Income/
Expense Yield/
Rate
Assets
Investment securities(2) $ 3,543,576 $ 15,065 1.60 % $ 3,543,270 $ 11,369 1.29 %
Interest-bearing cash and cash equivalents 4,747,377 9,394 0.79 % 11,583,759 2,961 0.10 %
Loans held for sale 8,123 62 3.07 % 93,164 781 3.36 %
Loans held for investment, mortgage finance 5,858,599 49,914 3.42 % 7,462,223 57,401 3.09 %
Loans held for investment(3) 16,616,234 168,407 4.07 % 15,242,975 144,978 3.81 %
Less: Allowance for credit losses on loans 211,385 — — 241,676 — —
Loans held for investment, net 22,263,448 218,321 3.93 % 22,463,522 202,379 3.61 %
Total earning assets 30,562,524 242,842 3.16 % 37,683,715 217,490 2.31 %
Cash and other assets 870,396 996,946
Total assets $ 31,432,920 $ 38,680,661
Liabilities and Stockholders’ Equity
Transaction deposits $ 1,671,729 $ 3,920 0.94 % $ 3,795,152 $ 5,395 0.57 %
Savings deposits 8,696,819 15,462 0.71 % 11,296,382 8,990 0.32 %
Time deposits 877,399 1,184 0.54 % 1,755,993 1,886 0.43 %
Total interest bearing deposits 11,245,947 20,566 0.73 % 16,847,527 16,271 0.39 %
Short-term borrowings 2,232,119 4,859 0.87 % 2,349,718 502 0.09 %
Long-term debt 929,616 11,393 4.92 % 881,309 10,723 4.88 %
Total interest bearing liabilities 14,407,682 36,818 1.02 % 20,078,554 27,496 0.55 %
Non-interest bearing deposits 13,747,876 15,139,546
Other liabilities 227,701 274,401
Stockholders’ equity 3,049,661 3,188,160
Total liabilities and stockholders’ equity $ 31,432,920 $ 38,680,661
Net interest income $ 206,024 $ 189,994
Net interest margin 2.68 % 2.02 %
Net interest spread 2.14 % 1.76 %


	Three Months Ended June 30, 2023						Three Months Ended June 30, 2022
(in thousands except percentages)	Average Balance		Income/ Expense		Yield/ Rate		Average Balance		Income/ Expense		Yield/ Rate
Assets
Investment securities(2)	$	4,306,881	$	27,478	2.36	%	$	3,543,576	$	15,065	1.60	%
Interest-bearing cash and cash equivalents	3,286,091		41,571		5.07	%	4,747,377		9,394		0.79	%
Loans held for sale	28,414		599		8.46	%	8,123		62		3.07	%
Loans held for investment, mortgage finance	4,376,235		36,198		3.32	%	5,858,599		49,914		3.42	%
Loans held for investment(3)	16,217,314		296,183		7.33	%	16,616,234		168,409		4.07	%
Less: Allowance for credit losses on loans	261,027		—		—		211,385		—		—
Loans held for investment, net	20,332,522		332,381		6.56	%	22,263,448		218,323		3.93	%
Total earning assets	27,953,908		402,029		5.69	%	30,562,524		242,844		3.16	%
Cash and other assets	1,049,145						870,396
Total assets	$	29,003,053					$	31,432,920
Liabilities and Stockholders’ Equity
Transaction deposits	$	1,345,742	$	9,468	2.82	%	$	1,671,729	$	3,920	0.94	%
Savings deposits	10,590,558		114,275		4.33	%	8,696,819		15,462		0.71	%
Time deposits	1,531,922		13,648		3.57	%	877,399		1,184		0.54	%

Total interest bearing deposits	13,468,222		137,391		4.09	%	11,245,947		20,566		0.73	%
Short-term borrowings	1,397,253		18,253		5.24	%	2,232,119		4,859		0.87	%
Long-term debt	883,871		14,282		6.48	%	929,616		11,393		4.92	%
Total interest bearing liabilities	15,749,346		169,926		4.33	%	14,407,682		36,818		1.02	%
Non-interest bearing deposits	9,749,105						13,747,876
Other liabilities	389,155						227,701
Stockholders’ equity	3,115,447						3,049,661
Total liabilities and stockholders’ equity	$	29,003,053					$	31,432,920

Net interest income			$	232,103					$	206,026
Net interest margin					3.29	%					2.68	%

(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)

Six months ended June 30, 2022 Six months ended June 30, 2021
(in thousands except percentages) Average
Balance Revenue/
Expense Yield/
Rate Average
Balance Revenue/
Expense Yield/
Rate
Assets
Investment securities(2) $ 3,606,069 $ 32,809 1.75 % $ 3,483,254 $ 21,728 1.25 %
Interest-bearing cash and cash equivalents 6,639,327 12,965 0.39 % 11,713,931 5,894 0.10 %
Loans held for sale 7,880 175 4.49 % 167,830 2,376 2.85 %
Loans held for investment, mortgage finance 5,796,097 93,379 3.25 % 7,818,014 122,343 3.16 %
Loans held for investment(3) 16,153,845 312,542 3.90 % 15,349,838 288,913 3.80 %
Less: Allowance for credit losses on loans 211,995 — — 248,151 — —
Loans held for investment, net 21,737,947 405,921 3.77 % 22,919,701 411,256 3.62 %
Total earning assets 31,991,223 451,870 2.83 % 38,284,716 441,254 2.32 %
Cash and other assets 845,082 1,030,625
Total assets $ 32,836,305 $ 39,315,341
Liabilities and Stockholders’ Equity
Transaction deposits $ 2,050,106 $ 7,883 0.78 % $ 3,893,015 $ 11,256 0.58 %
Savings deposits 9,553,920 24,044 0.51 % 12,088,776 19,778 0.33 %
Time deposits 957,615 2,269 0.48 % 1,978,879 5,241 0.53 %
Total interest-bearing deposits 12,561,641 34,196 0.55 % 17,960,670 36,275 0.41 %
Short-term borrowings 2,002,724 5,617 0.57 % 2,517,128 3,094 0.25 %
Long-term debt 929,312 21,988 4.77 % 674,171 16,466 4.93 %
Total interest-bearing liabilities 15,493,677 61,801 0.80 % 21,151,969 55,835 0.53 %
Non-interest bearing deposits 13,990,465 14,782,509
Other liabilities 235,378 291,925
Stockholders’ equity 3,116,785 3,088,938
Total liabilities and stockholders’ equity $ 32,836,305 $ 39,315,341
Net interest income $ 390,069 $ 385,419
Net interest margin 2.45 % 2.03 %
Net interest spread 2.03 % 1.79 %



	Six Months Ended June 30, 2023						Six Months Ended June 30, 2022
(dollars in thousands)	Average Balance		Revenue / Expense		Yield / Rate		Average Balance		Revenue / Expense		Yield / Rate
Assets
Investment securities(2)	$	4,184,349	$	52,770	2.34	%	$	3,606,069	$	32,808	1.75	%
Interest bearing cash and cash equivalents	4,407,486		104,007		4.76	%	6,639,327		12,965		0.39	%
Loans held for sale	35,902		1,537		8.63	%	7,880		175		4.49	%
Loans held for investment, mortgage finance	3,834,529		64,726		3.40	%	5,796,097		93,380		3.25	%
Loans held for investment(3)	15,909,792		564,314		7.15	%	16,153,845		312,542		3.90	%
Less: Allowance for credit losses on loans	256,900		—		—		211,995		—		—
Loans held for investment, net	19,487,421		629,040		6.51	%	21,737,947		405,922		3.77	%
Total earning assets	28,115,158		787,354		5.57	%	31,991,223		451,870		2.83	%
Cash and other assets	1,045,466						845,082
Total assets	$	29,160,624					$	32,836,305
Liabilities and Stockholders’ Equity
Transaction deposits	$	1,062,694	$	13,321	2.53	%	$	2,050,106	$	7,882	0.78	%
Savings deposits	10,891,309		219,982		4.07	%	9,553,920		24,045		0.51	%
Time deposits	1,481,569		24,182		3.29	%	957,615		2,269		0.48	%

Total interest bearing deposits	13,435,572		257,485		3.86	%	12,561,641		34,196		0.55	%
Short-term borrowings	1,320,493		32,997		5.04	%	2,002,724		5,617		0.57	%
Long-term debt	907,701		29,265		6.50	%	929,312		21,988		4.77	%
Total interest bearing liabilities	15,663,766		319,747		4.12	%	15,493,677		61,801		0.80	%
Non-interest bearing deposits	10,000,024						13,990,465
Other liabilities	412,758						235,378
Stockholders’ equity	3,084,076						3,116,785
Total liabilities and stockholders’ equity	$	29,160,624					$	32,836,305

Net interest income			$	467,607					$	390,069
Net interest margin					3.31	%					2.45	%

(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~~taxable equivalent net interest income and identifies the changes due to differences in the average volume of earning assets and ~~interest-bearing~~interest bearing liabilities and the changes due to differences in the average interest rate on those assets and liabilities.


				Three Months Ended June 30, 2023/2022							Six Months Ended June 30, 2023/2022
		Three months ended June 30, 2022/2021							Six months ended June 30, 2022/2021
		Net Change			Change due to(1)				Net Change			Change Due To(1)					Net Change		Change Due To(1)				Net Change		Change Due To(1)
(in thousands)	(in thousands)				Volume		Yield/Rate(2)					Volume		Yield/Rate(2)		(in thousands)			Volume		Yield/Rate(2)				Volume		Yield/Rate(2)
Interest income:
Interest income																Interest income
Investment securities	Investment securities	$	3,696		$	1	$	3,695	$	11,081		$	749	$	10,332	Investment securities	$	12,413	$	3,045	$	9,368	$	19,962	$	4,887	$	15,075
Interest bearing cash and cash equivalents	Interest bearing cash and cash equivalents	6,433			(1,705)		8,138		7,071			(2,516)		9,587		Interest bearing cash and cash equivalents	32,177		(2,881)		35,058		91,042		(4,143)		95,185
Loans held for sale	Loans held for sale	(719)			(712)		(7)		(2,201)			(2,258)		57		Loans held for sale	537		155		382		1,362		686		676
Loans held for investment, mortgage finance loans		(7,487)			(12,354)		4,867		(28,964)			(31,766)		2,802
Loans held for investment, mortgage finance																Loans held for investment, mortgage finance	(13,716)		(12,639)		(1,077)		(28,654)		(31,156)		2,502
Loans held for investment	Loans held for investment	23,429			13,044		10,385		23,629			15,173		8,456		Loans held for investment	127,774		(4,048)		131,822		251,772		(4,852)		256,624

Total		25,352			(1,726)		27,078		10,616			(20,618)		31,234
Interest expense:
Total interest income																Total interest income	159,185		(16,368)		175,553		335,484		(34,578)		370,062
Interest expense																Interest expense
Transaction deposits	Transaction deposits	(1,475)			(3,018)		1,543		(3,373)			(5,325)		1,952		Transaction deposits	5,548		(764)		6,312		5,439		(3,459)		8,898
Savings deposits	Savings deposits	6,472			(2,074)		8,546		4,266			(4,144)		8,410		Savings deposits	98,813		3,352		95,461		195,937		3,983		191,954
Time deposits	Time deposits	(702)			(942)		240		(2,972)			(2,724)		(248)		Time deposits	12,464		881		11,583		21,913		1,287		20,626
Short-term borrowings	Short-term borrowings	4,357			(26)		4,383		2,523			(906)		3,429		Short-term borrowings	13,394		(1,811)		15,205		27,380		(2,032)		29,412
Long-term debt	Long-term debt	670			588		82		5,522			6,323		(801)		Long-term debt	2,889		(561)		3,450		7,277		(529)		7,806
Total		9,322			(5,472)		14,794		5,966			(6,776)		12,742
Total interest expense																Total interest expense	133,108		1,097		132,011		257,946		(750)		258,696
Net interest income	Net interest income	$	16,030		$	3,746	$	12,284	$	4,650		$	(13,842)	$	18,492	Net interest income	$	26,077	$	(17,465)	$	43,542	$	77,538	$	(33,828)	$	111,366

(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 ~~$205.5~~$232.0 million for the three months ended June 30, ~~2022,~~2023, compared to ~~$189.5~~$205.5 million for the same period in ~~2021.~~2022. The increase was primarily due to an increase in yields on ~~total~~ average earning assets, partially offset by an increase in funding costs ~~both attributed to the impact of rising interest rates.~~and a decrease in average earning assets.

Average earning assets for the three months ended June 30, ~~2022~~2023 decreased ~~$7.1~~$2.6 billion compared to the same period in ~~2021 and~~2022, which included a ~~$6.8~~$1.5 billion decrease in average interest-bearing cash and cash ~~equivalents. The~~equivalents and a $1.5 billion decrease in average ~~interest bearing cash and cash equivalents resulted primarily from our proactive exit of certain high-cost indexed deposit products in the second half of 2021.~~loans held for investment, mortgage finance. Average interest-bearing liabilities increased $1.3 billion for the three months ended June 30, ~~2022 decreased $5.7 billion~~2023 compared to the same period in ~~2021,~~2022, primarily due to a ~~$5.6~~$2.2 billion ~~decrease~~increase in average interest-bearing deposits. Average ~~demand~~non-interest bearing deposits for the three months ended June 30, ~~2022~~2023 decreased ~~$1.4~~to $9.7 billion ~~compared~~from $13.7 billion to the same period in ~~2021.~~2022.

Net interest margin for the three months ended June 30, ~~2022~~2023 was ~~2.68%~~3.29%, compared to ~~2.02%~~2.68% for the same period in ~~2021.~~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 ~~composition~~impact of rising interest rates.

The yield on total loans held for investment increased to 6.56% for the three months ended June 30, 2023, compared to 3.93% for the same period in 2022, and the yield on earning assets ~~coupled with~~increased to 5.69% for the three months ended June 30, 2023, compared to 3.16% for the same period in 2022. Total cost of deposits increased to 2.37% for the three months ended June 30, 2023 from 0.33% for the same period in 2022, and total funding costs, including non-interest bearing deposits and stockholders' equity, increased to 2.38% for the three months ended June 30, 2023, compared to 0.47% for the same period in 2022.

Net interest income was $467.3 million for the six months ended June 30, 2023, compared to $389.1 million for the same period in 2022. The increase was primarily due to an increase in yields on average earnings assets, partially offset by ~~an increase~~rising funding costs and a decrease in ~~funding costs.~~total average earning assets.

~~The yield on total~~Average earning assets decreased $3.9 billion for the six months ended June 30, 2023, compared to the same period in 2022, which included decreases of $2.2 billion in average interest-bearing cash and cash equivalents and $2.0 million in average loans held for investment, mortgage finance. Average interest-bearing liabilities increased to 3.93% for the three months ended June 30, 2022 compared to 3.61% for the same period in 2021 and the yield on earning assets increased to 3.16% for the three months ended June 30, 2022 compared to 2.31% for the same period in 2021. Total cost of deposits increased to 0.33% for the three months ended June 30, 2022 from 0.20% for the same period in 2021, and total funding costs, including all deposits, long-term debt and stockholders' equity, increased to 0.47% for the three months ended June 30, 2022 compared to 0.29% for the same period in 2021.

~~Net interest income was $389.1~~$170.1 million for the six months ended June 30, 2022 compared to $384.3 million for the same period in 2021. The increase was primarily due to an increase in yields on earnings assets, partially offset by a decrease in average total loans and rising cost of funds. The increases in yields on earning assets and cost of funds are attributable to the impact of rising interest rates.

~~Average earning assets decreased $6.3 billion for the six months ended June 30, 2022,~~2023, compared to the same period in ~~2021 and included~~2022, primarily due to an $873.9 million increase in average interest-bearing deposits partially offset by a ~~$5.1 billion~~$682.2 million decrease in average ~~interest-bearing cash and cash equivalents.~~short-term borrowings. Average interest-bearing liabilities decreased $5.7 billion for the six months ended June 30, 2022, compared to the same period in 2021, primarily due to a $5.4 billion decrease in average interest-bearing deposits. Average demandnon-interest bearing deposits for the six months ended June 30, ~~2022~~2023 decreased to ~~$14.0~~$10.0 billion from ~~$14.8~~$14.0 billion for the same period in ~~2021.~~2022.

Table of Contents

Net interest margin for the six months ended June 30, ~~2022~~2023 was ~~2.45%~~3.31%, compared to ~~2.03%~~2.45% for the same period of ~~2021.~~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 ~~2021.~~2022.

The yield on total loans held for investment increased to ~~3.77%~~6.51% for the six months ended June 30, ~~2022,~~2023, compared to ~~3.62%~~3.77% for the same period in ~~2021~~2022, and the yield on earning assets increased to ~~2.83%~~5.57% for the six months ended June 30, ~~2022,~~2023, compared to ~~2.32%~~2.83% for the same period in ~~2021.~~2022. Total cost of deposits increased to ~~0.26%~~2.22% for the six months ended June 30, ~~2022~~2023 from ~~0.22%~~0.26% for the same period in ~~2021~~2022 and total funding costs, including ~~all~~non-interest bearing deposits ~~long-term debt~~ and stockholders' equity, increased to ~~0.38%~~2.24% for the six months ended June 30, ~~2022,~~2023, compared to ~~0.29%~~0.38% for the same period in ~~2021.~~2022.

Non-interest Income



		Three months ended June 30,		Six months ended June 30,				Three Months Ended June 30,						Six Months Ended June 30,
(in thousands)	(in thousands)	2022		2021		2022			2021		(in thousands)	2023		2022		2023		2022
Service charges on deposit accounts	Service charges on deposit accounts	$	6,003	$	4,634	$	12,025		$	9,350	Service charges on deposit accounts	$	5,158	6,102		$	10,180	$	12,217
Wealth management and trust fee income	Wealth management and trust fee income	4,051		3,143		7,963			5,998		Wealth management and trust fee income	3,715		4,051		7,144		7,963
Brokered loan fees	Brokered loan fees	4,133		6,933		8,103			16,244		Brokered loan fees	2,415		4,133		4,310		8,103
Servicing income		228		5,935		465			14,944

Investment banking and trading income	Investment banking and trading income	11,126		8,071		15,305			13,858		Investment banking and trading income	27,498		11,126		46,266		15,305
Net gain/(loss) on sale of loans held for sale		—		(3,070)		—			2,502

Other	Other	701		11,993		2,663			19,096		Other	7,225		828		15,514		2,935
Total non-interest income	Total non-interest income	$	26,242	$	37,639	$	46,524		$	81,992	Total non-interest income	$	46,011	$	26,240	$	83,414	$	46,523

Non-interest income ~~decreased $11.4~~increased $19.8 million during the three months ended June 30, ~~2022,~~2023, compared to the same period in ~~2021.~~2022. The ~~decrease~~increase was primarily due to ~~decreases in servicing fee income, as a result of the sale of our mortgage servicing rights portfolio in 2021, and other non-interest income, partially offset by an increase~~increases in investment banking and trading income and ~~the elimination of net losses recorded in the prior year on the sale of loans held for sale.~~other non-interest income.

Non-interest income ~~decreased $35.5~~increased by $36.9 million during the six months ended June 30, ~~2022,~~2023 to $83.4 million, compared to $46.5 million for the same period in ~~2021.~~2022. The ~~decrease~~increase was primarily due to ~~decreases~~increases in ~~brokered loan fees, servicing fee~~investment banking and trading income and net gain/(loss) on sale of loans held for sale all as a result of the sale of our mortgage servicing rights portfolio and transition of the mortgage correspondent aggregation program in 2021, as well asother non-interest income, partially offset by a decrease in ~~other non-interest income.~~brokered loans fees.

Non-interest Expense

Three months ended June 30, Six months ended June 30,
(in thousands) 2022 2021 2022 2021
Salaries and benefits $ 103,885 $ 86,830 $ 203,983 $ 174,352
Occupancy expense 8,874 7,865 17,759 16,139
Marketing 8,506 1,900 13,483 3,597
Legal and professional 11,288 9,147 21,590 17,424
Communications and technology 15,649 14,352 30,349 30,321
FDIC insurance assessment 3,318 5,226 7,299 11,839
Servicing-related expenses — 12,355 — 25,344
Other 12,783 11,385 22,932 20,360
Total non-interest expense $ 164,303 $ 149,060 $ 317,395 $ 299,376

Non-interest expense for the three months ended June 30, 2022 increased $15.2 million compared to the same period in 2021. The increase was primarily due to an increase in salaries and benefits expense, resulting primarily from an increase in headcount, as well as an increase in marketing expense, partially offset by a decrease in servicing-related expenses related to the sale of our mortgage servicing rights portfolio in 2021.



	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	2023		2022		2023		2022
Salaries and benefits	$	113,050	$	103,358	$	241,720	$	203,217
Occupancy expense	9,482		8,874		19,101		17,759
Marketing	6,367		8,506		15,411		13,483
Legal and professional	15,669		11,288		30,183		21,590
Communications and technology	20,525		15,649		38,048		30,349
Federal Deposit Insurance Corporation insurance assessment	3,693		3,318		5,863		7,299


Other	12,858		13,310		25,345		23,698
Total non-interest expense	$	181,644	$	164,303	$	375,671	$	317,395

Non-interest expense increased ~~by $18.0~~$17.3 million during the six months ended June 30, ~~2022,~~2023, compared to the same period in ~~2021.~~2022. The increase was primarily due to increases in salaries and benefits, ~~expense, resulting primarily from an increase in headcount,~~legal and ~~marketing expense,~~professional and communications and technology expenses, partially offset by a decrease in ~~servicing-related expenses resulting from~~marketing expense.

Non-interest expense for the ~~sale of our mortgage servicing rights portfolio~~six months ended June 30, 2023 increased $58.3 million compared to the same period in ~~2021.~~2022, primarily due to increases in salaries and benefits, legal and professional and communications and technology expenses.

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.

Table of Contents

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


		June 30, 2022		December 31, 2021
(in thousands)	(in thousands)					(in thousands)	June 30, 2023		December 31, 2022
Commercial	Commercial	$	11,511,532	$	9,897,561	Commercial	$	10,459,640	$	9,832,676
Energy		962,239		721,373
Mortgage finance	Mortgage finance	6,549,507		7,475,497		Mortgage finance	5,098,812		4,090,033

Real estate		5,118,849		4,777,530
Commercial real estate						Commercial real estate	5,308,997		4,875,363
Consumer						Consumer	531,635		552,848
Gross loans held for investment						Gross loans held for investment	21,399,084		19,350,920
Unearned income (net of direct origination costs)						Unearned income (net of direct origination costs)	(73,069)		(63,580)
Total loans held for investment						Total loans held for investment	$	21,326,015	$	19,287,340

Gross loans held for investment		$	24,142,127	$	22,871,961
Deferred income (net of direct origination costs)		(74,754)		(65,007)
Total loans held for investment		24,067,373		22,806,954
Allowance for credit losses on loans		(229,013)		(211,866)
Total loans held for investment, net		$	23,838,360	$	22,595,088

Total loans held for investment were ~~$24.1~~$21.3 billion at June 30, ~~2022,~~2023, an increase of ~~$1.3~~$2.0 billion from December 31, ~~2021. We~~2022. The Company experienced broad-based loan growth across all loan categories, except for ~~mortgage finance loans,~~consumer, as ~~we executed~~it has continued to execute on ~~our~~its long-term strategy. Mortgage finance loans relate to ~~our~~the mortgage warehouse lending operations in which ~~we purchase~~the Company purchases mortgage loan ownership interests that are typically sold within 10 to 20 days and represent ~~27%~~24% of total loans held for investment at June 30, ~~2022~~2023 compared to ~~33%~~21% at December 31, ~~2021.~~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. Mortgage finance loans experienced seasonal growth of 12% during the second quarter of 2022 compared to the first quarter of 2022, however overall balances are lower than at December 31, 2021 as interest rates have continued to rise.

~~We originate~~The Company originates a substantial majority of all loans held for investment. WeThe Company also ~~participate~~participates in syndicated loan relationships, both as a participant and as an agent. As of June 30, ~~2022, we~~2023, the Company had ~~$3.2~~$4.4 billion in syndicated loans, ~~$721.6 million~~$1.2 billion of which ~~we administer~~the Company administered as agent. All syndicated loans, whether ~~we act~~the Company acts as agent or participant, are underwritten to the same standards as all other loans ~~we originate.~~the Company originates. As of June 30, ~~2022, none~~2023, $3.0 million of ~~our~~ syndicated loans were on non-accrual.

Portfolio Concentrations

Although more than 50% of ~~our~~the Company’s total loan exposure is outside of Texas and more than 50% of ~~our~~ deposits are sourced outside of Texas, ~~our~~ Texas concentration remains significant. As of June 30, ~~2022,~~2023, a majority of ~~our~~the loans held for investment, excluding mortgage finance ~~loans~~ 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 ~~our non-performing assets~~non-accrual loans by ~~type~~portfolio segment and by type of property securing the credit.

(in thousands) June 30, 2022 December 31, 2021
Non-accrual loans held for investment(1):
Commercial:
Assets of the borrowers $ 14,454 $ 18,366
Accounts receivable and inventory 4,136 5,501
Other 1,783 2,045
Total commercial 20,373 25,912
Energy:
Oil and gas properties 17,572 28,380
Total energy 17,572 28,380
Real estate:
Assets of the borrowers 12,210 13,741
Commercial property 190 2,840
Single family residences 181 1,629
Total real estate 12,581 18,210
Total non-accrual loans held for investment 50,526 72,502
Non-accrual loans held for sale — —
Other real estate owned — —
Total non-performing assets $ 50,526 $ 72,502
Non-accrual loans held for investment to total loans held for investment 0.21 % 0.32 %
Allowance for credit losses on loans to non-accrual loans held for investment 4.5x 2.9x
Loans held for investment past due 90 days and still accruing(2) $ 3,206 $ 3,467
Loans held for investment past due 90 days to total loans held for investment 0.01 % 0.02 %
Loans held for sale past due 90 days and still accruing(3) $ 1,602 $ 3,986

~~(1)As of June 30, 2022 and December 31, 2021, non-accrual loans include $17.3 million and $19.4 million, respectively, in loans that met the criteria for restructured.~~

~~(2)At June 30, 2022 and December 31, 2021, loans past due 90 days and still accruing includes premium finance loans of $3.1 million and $3.3 million, respectively.~~

~~(3)~~Includes loans guaranteed by U.S. government agencies that were repurchased out of Ginnie Mae securities. Loans are recorded as loans held for sale and carried at fair value on the balance sheet. Interest on these past due loans accrues at the debenture rate guaranteed by the U.S. government.



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

Non-accrual loans held for investment
Commercial:
Business assets	$	76,543		$	41,448
Oil and gas properties	3,184			3,658
Accounts receivable and inventory	137			1,405

Other	—			531
Total commercial	79,864			47,042
Commercial real estate:

Commercial property	175			1,263



Total commercial real estate	175			1,263
Consumer
Single family residences	1,000			—
Other	—			33
Total consumer	1,000			33
Total non-accrual loans held for investment	$	81,039		$	48,338
Non-accrual loans held for sale	—			—
Other real estate owned (“OREO”)	—			—
Total non-performing assets	$	81,039		$	48,338


Non-accrual loans held for investment to total loans held for investment	0.38		%	0.25		%
Total non-performing assets to total assets	0.28		%	0.17		%
Allowance for credit losses on loans to non-accrual loans held for investment	2.9x			5.2x

Loans held for investment past due 90 days and accruing	$	64		$	131
Loans held for investment past due 90 days to total loans held for investment	—		%	—		%
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.

~~We recorded~~ Below is a ~~$20.0 million~~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 $12.0 million for the six months ended June 30, ~~2022,~~2023 compared to a ~~negative~~ provision of ~~$25.0~~$19.3 million for the ~~same period in 2021.~~six months ended June 30, 2022. The ~~$20.0 million~~ provision for credit losses ~~resulted from~~on loans for the six months ended June 30, 2023 reflects an increase in ~~total~~non-accrual loans and growth in loans held for ~~investment. We~~investment during the six months ended June 30, 2023. The Company recorded ~~$2.1~~$28.1 million in net charge-offs during the six months ended June 30, ~~2022,~~2023 compared to $2.1 million in net charge-offs ~~of $8.8 million~~ during the ~~six months ended June 30, 2021.~~same period in 2022. Criticized loans totaled ~~$603.5~~$619.4 million at June 30, ~~2022,~~2023, compared to ~~$582.9~~$513.2 million and ~~$891.6~~$603.5 million at December 31, ~~2021~~2022 and June 30, ~~2021,~~2022, respectively. The increase in criticized loans as compared to March 31, 2022 was primarily due to one mortgage finance credit which is adequately reserved for as of June 30, 2022, and is expected to be resolved in the third quarter of 2022.

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


		June 30, 2022		June 30, 2021			June 30, 2023		June 30, 2022
Allowance for credit losses on loans to total loans held for investment	Allowance for credit losses on loans to total loans held for investment	0.95	%	0.93	%	Allowance for credit losses on loans to total loans held for investment	1.11	%	0.95	%
Allowance for credit losses on loans to total average loans held for investment(1)		1.04	%	0.96	%
Allowance for credit losses on loans to average total loans held for investment(1)						Allowance for credit losses on loans to average total loans held for investment(1)	1.20	%	1.04	%
Total allowance for credit losses to total loans held for investment						Total allowance for credit losses to total loans held for investment	1.32	%	1.03	%
Total provision for credit losses to average total loans held for investment(1)(2)	Total provision for credit losses to average total loans held for investment(1)(2)	0.18	%	(0.22)	%	Total provision for credit losses to average total loans held for investment(1)(2)	0.36	%	0.18	%
Total allowance for credit losses to total loans held for investment		1.03	%	1.00	%

(1) Ratios are calculated using average balance for the six months ended June 30, ~~2022~~2023 and ~~2021,~~2022, respectively.

(2) Ratios are annualized utilizing provision for credit losses for the six months ended June 30, 2023 and 2022, ~~and 2021,~~ respectively.

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


		Six months ended June 30,
			2022	2021
						Net Charge-offs				Net Charge-offs			Six Months Ended June 30,
				Net		to Average		Net		to Average			2023				2022
				Charge-offs		Loans(1)		Charge-offs		Loans(1)			Net Charge-offs		Net Charge-offs to Average Loans(1)		Net Charge-offs		Net Charge-offs to Average Loans(1)
Commercial	Commercial			$	2,542	0.05	%	$	2,505	0.06	%	Commercial	$	28,154	0.55	%	$	1,806	0.03	%
Energy				(755)		(0.05)	%	5,094		1.57	%
Mortgage finance	Mortgage finance			—		—	%	—		—	%	Mortgage finance	—		—	%	—		—	%
Real estate				350		0.01	%	1,192		0.04	%
CRE												CRE	—		—	%	350		0.02	%
Consumer												Consumer	(5)		—	%	(19)		(0.01)	%
Total	Total			$	2,137	0.02	%	$	8,791	0.08	%	Total	$	28,149	0.29	%	$	2,137	0.02	%

(1) ~~Interim period ratios~~Ratios are ~~annualized.~~annualized utilizing net charge-offs for the six months ended June 30, 2023 and 2022, respectively.

Liquidity and Capital Resources

Liquidity

In general terms, liquidity is a measurement of ~~our~~the Company’s ability to meet ~~our~~its cash needs. ~~Our~~The Company’s objectives in managing ~~our~~its liquidity are to maintain ~~our~~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 ~~our~~ current or future earnings. ~~Our~~The Company’s liquidity strategy is guided by policies, formulated and monitored by ~~our~~ senior management and ~~our~~the Asset and Liability Management Committee (“ALCO”), which take into account the demonstrated marketability of ~~our~~the Company’s assets, the sources and stability of ~~our~~its funding and the level of unfunded commitments. WeThe Company regularly ~~evaluate~~evaluates all of ~~our~~its various funding sources with an emphasis on accessibility, stability, reliability and cost-effectiveness. ~~Our~~The Company’s principal source of funding is customer deposits, supplemented by short-term borrowings, primarily from federal funds purchased and Federal Home Loan ~~Banks~~Bank (“FHLB”) borrowings, which are generally used to fund mortgage finance assets ~~as well as~~and long-term debt. WeThe Company also ~~rely~~relies on the availability of the mortgage secondary market provided by Ginnie Mae and ~~the government-sponsored enterprises~~government sponsored entities to support the liquidity of ~~our~~ mortgage finance assets.

During 2020 and into the first half of 2021, we significantly increased our interest-bearing cash and cash equivalents to ensure that we had the balance sheet strength to serve our clients during the COVID-19 pandemic. In the second half of 2021 and continuing into the first six months of 2022, these balances have run off as we have purchased investment securities and proactively exited certain high-cost indexed deposit products. The following table summarizes ~~these balances:~~the Company’s interest bearing cash and cash equivalents:


(in thousands except percentage data)		June 30, 2022			December 31, 2021			June 30, 2021

Interest-bearing cash and cash equivalents		$	4,032,931		$	7,765,996		$	6,768,650
Interest-bearing cash and cash equivalents as a percent of:
(dollars in thousands)											(dollars in thousands)	June 30, 2023			December 31, 2022
Interest bearing cash and cash equivalents											Interest bearing cash and cash equivalents	$	2,587,131		$	4,778,623
Interest bearing cash and cash equivalents as a percent of:											Interest bearing cash and cash equivalents as a percent of:
Total loans held for investment	Total loans held for investment	16.8		%	34.1		%	28.3		%	Total loans held for investment	12.1		%	24.8		%
Total earning assets	Total earning assets	12.8		%	22.9		%	19.7		%	Total earning assets	9.3		%	17.4		%
Total deposits	Total deposits	15.9		%	27.6		%	23.5		%	Total deposits	11.1		%	20.9		%

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



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

	Balance		% of Total		Balance		% of Total
Customer deposits	$	21,838,842	93.7	%	$	21,247,999	93.0	%
Brokered deposits	1,479,398		6.3	%	1,608,881		7.0	%
Total deposits	$	23,318,240	100.0	%	$	22,856,880	100.0	%

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We also have access to incremental deposits through brokered retail certificates of deposit, or CDs. These traditional brokered deposits are generally of short maturities and are used to fund temporary differences in the growth in loan balances as compared to customer deposits. The ~~following table summarizes our period-end and average core customer deposits, relationship brokered deposits and traditional brokered deposits:~~

(in thousands) June 30, 2022 December 31, 2021 June 30, 2021
Deposits from core customers $ 24,176,479 $ 25,409,180 $ 26,309,504
Deposits from core customers as a percent of total deposits 95.1 % 90.4 % 91.2 %
Relationship brokered deposits $ 113,142 $ 1,855,892 $ 1,373,763
Relationship brokered deposits as a percent of average total deposits 0.4 % 6.6 % 4.8 %
Traditional brokered deposits $ 1,150,400 $ 844,293 $ 1,156,296
Traditional brokered deposits as a percent of total deposits 4.5 % 3.0 % 4.0 %
Average deposits from core customers(1) $ 24,993,505 $ 28,734,460 $ 29,545,933
Average deposits from core customers as a percent of average total deposits 94.2 % 91.1 % 90.2 %
Average relationship brokered deposits(1) $ 909,565 $ 1,608,587 $ 1,804,015
Average relationship brokered deposits as a percent of average total deposits 3.4 % 5.1 % 5.5 %
Average traditional brokered deposits(1) $ 649,036 $ 1,188,544 $ 1,393,231
Average traditional brokered deposits as a percent of average total deposits 2.4 % 3.8 % 4.3 %

~~(1) Annual averages presented for December 31, 2021.~~

We have access to sources of traditional brokered deposits that we estimate to be $7.5 billion. Based on our internal guidelines, we have currently chosen to limit our use of these sources to a lesser amount.

~~We have~~Company has short-term borrowing sources available to supplement deposits and meet ~~our~~its funding needs. Such borrowings are generally used to fund ~~our~~ mortgage finance loans, due to their liquidity, short duration and interest spreads available. These borrowing sources include federal funds purchased from ~~our~~ downstream correspondent bank relationships (which consist of banks that are smaller than ~~our~~the Bank) and from ~~our~~ upstream correspondent bank relationships (which consist of banks that are larger than ~~our~~the Bank), customer repurchase agreements and advances from the FHLB and the Federal Reserve. The following table summarizes ~~the outstanding balance of our~~ short-term borrowings, all of which mature within one year:


(in thousands)	(in thousands)	June 30, 2022		December 31, 2021	(in thousands)	June 30, 2023		December 31, 2022

Repurchase agreements	Repurchase agreements	$	1,536	2,832	Repurchase agreements	$	—	$	1,142
FHLB borrowings	FHLB borrowings	2,650,000		2,200,000	FHLB borrowings	1,350,000		1,200,000

Total short-term borrowings		$	2,651,536	2,202,832
Total short-term and other borrowings					Total short-term and other borrowings	$	1,350,000	$	1,201,142

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


(in thousands)	(in thousands)	June 30, 2022		December 31, 2021		(in thousands)	June 30, 2023		December 31, 2022
FHLB borrowing capacity relating to loans		$	3,019,254	$	5,190,703
FHLB borrowing capacity relating to securities		3,416,759		3,352,111

FHLB borrowing capacity relating to loans and pledged securities						FHLB borrowing capacity relating to loans and pledged securities	$	3,253,409	$	2,621,218
FHLB borrowing capacity relating to unencumbered securities						FHLB borrowing capacity relating to unencumbered securities	4,238,418		3,539,297
Total FHLB borrowing capacity(1)	Total FHLB borrowing capacity(1)	$	6,436,013	$	8,542,814	Total FHLB borrowing capacity(1)	$	7,491,827	$	6,160,515
Unused federal funds lines available from commercial banks	Unused federal funds lines available from commercial banks	$	1,456,000	$	892,000	Unused federal funds lines available from commercial banks	$	1,458,000	$	1,479,000
Unused Federal Reserve borrowings capacity	Unused Federal Reserve borrowings capacity	$	3,479,343	$	2,414,702	Unused Federal Reserve borrowings capacity	$	3,726,632	$	3,574,762
Unused revolving line of credit(2)	Unused revolving line of credit(2)	$	75,000	$	75,000	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, ~~2023.~~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 six months ended June 30, ~~2022.~~2023.

~~We also have~~The Company has long-term debt outstanding of ~~$917.1~~$857.8 million as of June 30, ~~2022,~~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 ~~our~~its long-term funding needs.

For additional information regarding our borrowings see Note 5 - Short-term Borrowings and Long-term Debt in the accompanying notes to the consolidated unaudited financial statements included elsewhere in this report.

As the Company is a holding company and is a separate operating entity from the Bank, ~~our~~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 ~~unaudited~~ financial statements included elsewhere in this report for additional information regarding dividend ~~restrictions.~~

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 ~~our~~its existing indebtedness, ~~we or~~ the ~~Bank~~Company may repay, repurchase, exchange or redeem outstanding indebtedness, or otherwise enter into transactions regarding ~~our~~ debt or capital structure. For example, ~~we and~~ the ~~Bank~~Company periodically ~~evaluate~~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 ~~as we seek~~ to actively manage ~~our~~the debt maturity profile and interest cost.

As of June 30, 2022, management is not aware of any events that are reasonably likely to have a material adverse effect on our liquidity, capital resources or operations. In addition, management is not aware of any regulatory recommendations regarding liquidity that would have a material adverse effect on us.

Capital Resources

~~Average total~~The Company’s equity ~~was~~capital averaged $3.1 billion for the six months ended June 30, 2023 compared to $3.1 billion for the same period in 2022. ~~We have~~The Company has not paid any cash dividends on ~~our~~ common stock since weoperations commenced ~~operations~~ and ~~have~~has no plans to do so in the foreseeable future.

OnIn 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, our~~2022. On January 18, 2023, the Company’s board of directors authorized a new share repurchase program under which wethe Company may repurchase up to $150.0 million in shares of ~~our~~ outstanding common stock. Any repurchases under the repurchase program ~~will be~~have been made in accordance with applicable securities laws ~~from time to time~~ in open market or private transactions. The extent to which ~~we repurchase~~the Company repurchases shares, and the timing of such repurchases, will be at management’s discretion and will depend upon a variety of factors, including market conditions, ~~our~~ capital position and amount of retained earnings, regulatory requirements and other considerations. 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 ~~three~~six months ended June 30, ~~2022,~~2023, the Company repurchased ~~941,879~~1,011,909 shares of its common stock for an aggregate purchase price of ~~$50.0~~$59.7 million, at a weighted average price of ~~$53.11~~$58.98 per share. The aggregate purchase price and weighted average price per share does not include the effect of excise tax expense incurred on net stock repurchases.

~~See~~

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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 ~~unaudited~~ financial statements included elsewhere in this ~~report for additional information regarding capital.~~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.

~~We follow~~The Company follows financial accounting and reporting policies that are in accordance with accounting principles generally accepted in the United States. ~~Certain~~The more significant of these policies are summarized in Note 1 - Operations and Summary of Significant Accounting Policies in the notes to the consolidated ~~unaudited~~ financial statements included elsewhere in this report and in ~~our 2021~~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 ~~be highly dependent on estimates, assumptions and judgments that~~ meet the SEC’s definition of a critical accounting ~~estimate.~~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 ~~ASC~~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 ~~our~~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 ~~product types in order to recognize differing risk profiles among categories,~~portfolio segment and then ~~further segregated~~ by past due status or credit ~~grades.~~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. ~~Adjustments~~Modifications to ~~historical~~ loss ~~information~~estimates are made to incorporate ~~our~~a reasonable and supportable forecast of future losses at the ~~portfolio segment~~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 June 30, ~~2022,~~2023, the quantitative estimate of the allowance for credit loss would increase by approximately ~~$107~~$153.3 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.

~~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 unaudited financial statements included elsewhere in this report for further discussion of the risk factors considered by management in establishing the allowance for credit losses.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

Market risk ~~is a broad term for~~represents the ~~risk of~~potential economic loss on trading and non-trading portfolios and financial instruments due to adverse ~~changes~~price movements in ~~the fair value of a financial instrument. These changes may be the result of various factors,~~markets including interest rates, foreign exchange rates, credit spreads, commodity prices orand equity ~~prices.~~ and related implied volatility levels.

The ~~financial instruments subject to market risk can be classified either as held for trading purposes or held for purposes other than trading.~~

~~We are~~Company is subject to market risk primarily through the effect of changes in interest rates on ~~our~~its portfolio of assets held for purposes other than ~~trading. Additionally, we have some~~trading and interest rate derivative instruments that are used for managing interest rate risk.

In addition, the Company has exposure to market risk ~~relative to commodity prices~~ through ~~our energy lending activities. Declines and volatility~~its trading desk that engages in commodity prices negatively impacted our energy clients' ability to perform on their loan obligations in recent years, and further uncertainty and volatility could have a negative impact on our customers and our loan portfolio in future periods. Foreign exchange rates, commodity prices (other than energy)fixed income and equity ~~prices are~~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 June 30, 2023, the Company’s exposure through its trading desk does not ~~expected to pose~~post a significant market risk to ~~us.~~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 ~~Asset and Liability Management Committee (“ALCO”),~~ALCO, which operates under policy guidelines established by ~~our~~the Company’s board of directors. ~~The acceptable negative variation in net interest revenue due to a 100 basis point increase or decrease in interest rates is generally limited by these guidelines to plus or minus 10-12%.~~ Oversight of ~~our~~the Company’s compliance with ~~these~~the guidelines is the ongoing responsibility of the ALCO, with exceptions reported to the Executive Risk Committee and ~~to our Board~~the board of ~~Directors,~~directors, if necessary, on a quarterly basis. Additionally, the Credit Policy Committee (“CPC”) specifically manages risk relative to commodity price market risks. The CPC establishes maximum portfolio concentration levels for energy loans as well as maximum advance rates for energy collateral.

Interest Rate Risk Management

~~Our~~The Company’s interest rate sensitivity as of June 30, 2023 is illustrated in the following table. The table reflects rate-sensitive positions as of June 30, ~~2022~~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. To reflect anticipated prepayments, certain asset and liability categories are shown in the table using estimated cash flows rather than contractual cash flows. The Company employs interest rate floors in certainCertain variable rate loans ~~to enhance~~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.

~~Interest Rate Sensitivity Gap Analysis~~

~~June 30, 2022~~


(in thousands)	(in thousands)	0-3 month Balance		4-12 month Balance		1-3 year Balance		3+ year Balance		Total Balance		(in thousands)	0-3 months		4-12 months		1-3 years		3+ years		Total
Assets:
Interest-bearing cash and cash equivalents		$	4,032,931	$	—	$	—	$	—	$	4,032,931
Assets												Assets
Interest bearing cash and cash equivalents												Interest bearing cash and cash equivalents	$	2,587,131	$	—	$	—	$	—	$	2,587,131
Investment securities(1)	Investment securities(1)	48,182		1,533		243,532		3,259,452		3,552,699		Investment securities(1)	45,942		246,072		259,155		3,675,484		4,226,653
Variable loans	Variable loans	20,857,027		104,330		47,163		268,883		21,277,403		Variable loans	19,731,115		203,597		68,469		261,636		20,264,817
Fixed loans	Fixed loans	208,705		1,521,491		210,961		927,833		2,868,990		Fixed loans	10,986		86,959		210,844		854,575		1,163,364
Total loans(2)	Total loans(2)	21,065,732		1,625,821		258,124		1,196,716		24,146,393		Total loans(2)	19,742,101		290,556		279,313		1,116,211		21,428,181
Total interest sensitive assets	Total interest sensitive assets	$	25,146,845	$	1,627,354	$	501,656	$	4,456,168	$	31,732,023	Total interest sensitive assets	$	22,375,174	$	536,628	$	538,468	$	4,791,695	$	28,241,965
Liabilities:
Liabilities												Liabilities
Interest bearing customer deposits	Interest bearing customer deposits	$	11,483,607	$	—	$	—	$	—	$	11,483,607	Interest bearing customer deposits	$	12,290,602	$	—	$	—	$	—	$	12,290,602
CDs & IRAs		146,417		86,025		17,605		600		250,647
Traditional brokered deposits		613,424		536,976		—		—		1,150,400
CDs												CDs	670,363		870,868		56,816		239		1,598,286

Total interest bearing deposits	Total interest bearing deposits	12,243,448		623,001		17,605		600		12,884,654		Total interest bearing deposits	12,960,965		870,868		56,816		239		13,888,888
Short-term borrowings	Short-term borrowings	2,651,536		—		—		—		2,651,536		Short-term borrowings	1,350,000		—		—		—		1,350,000
Long-term debt	Long-term debt	258,497		—		—		658,601		917,098		Long-term debt	311,902		—		174,326		371,567		857,795
Total borrowings												Total borrowings	1,661,902		—		174,326		371,567		2,207,795
Total interest sensitive liabilities	Total interest sensitive liabilities	$	15,153,481	$	623,001	$	17,605	$	659,201	$	16,453,288	Total interest sensitive liabilities	$	14,622,867	$	870,868	$	231,142	$	371,806	$	16,096,683
GAP	GAP	$	9,993,364	$	1,004,353	$	484,051	$	3,796,967	$	—	GAP	$	7,752,307	$	(334,240)	$	307,326	$	4,419,889	$	—
Cumulative GAP	Cumulative GAP	$	9,993,364	$	10,997,717	$	11,481,768	$	15,278,735	$	15,278,735	Cumulative GAP	$	7,752,307	$	7,418,067	$	7,725,393	$	12,145,282	$	12,145,282

Non-interest bearing deposits	Non-interest bearing deposits									12,555,367		Non-interest bearing deposits									9,429,352
Stockholders’ equity	Stockholders’ equity									3,006,832		Stockholders’ equity									3,081,927
Total	Total									$	15,562,199	Total									$	12,511,279

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

(2)Total loans include gross loans held for ~~investments~~investment and loans held for ~~sale at fair value.~~sale.

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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 ~~demand~~non-interest bearing deposits and stockholders’ equity. ~~We perform~~Management performs a sensitivity analysis to identify interest rate risk exposure on net interest income. ~~We quantify~~Management also quantifies and ~~measure~~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 ~~(“BSBY”), LIBOR~~ and other alternative indexes are the basis for most of ~~our~~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 ~~our~~the Company’s primary interest rate exposures. Interest rate derivative contracts may be used to manage ~~our~~ exposure to adverse fluctuations in these primary interest rate ~~exposures. See Note 10 - Derivative Financial Instruments for~~exposures as is discussed in more ~~information on interest rate derivative contracts.~~detail under the heading Use of Derivatives to Manage Interest Rate and Other Risks below.

For modeling purposes, the “shock test” scenarios as of June 30, ~~2022~~2023 assume immediate, sustained 100 and 200 basis point increases in interest rates as well as a 100 and 200 basis point ~~decrease~~decreases in interest rates. As of June 30, ~~2021,~~2022, the scenarios assumed a sustained 100 and 200 basis point increase in interest ~~rates. As short-term~~ rates, ~~remained low through 2021, we did not believe that analysis of an assumed~~as well as a 100 basis point decrease in interest ~~rates would provide meaningful results. We~~rates. The Company will continue to evaluate these scenarios as interest rates change.

~~Our~~During 2023, the Company’s interest rate risk exposure model ~~incorporates~~incorporated updated assumptions regarding the level of interest rate, onincluding indeterminable maturity deposits ~~(demand~~(non-interest bearing deposits, ~~interest-bearing~~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 ~~increasing~~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.~~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
		Anticipated Impact Over the Next Twelve Months as Compared to Most Likely Scenario										June 30, 2023								June 30, 2022
		June 30, 2022						June 30, 2021				Increase				Decrease				Increase				Decrease
(in thousands)	(in thousands)	100 bps Increase		200 bps Increase		100 bps Decrease		100 bps Increase		200 bps Increase			(in thousands)	100 bps		200 bps		100 bps		200 bps		100 bps		200 bps		100 bps
Change in net interest income	Change in net interest income	$	91,461	$	163,136	$	(114,831)	$	24,267	$	79,342		Change in net interest income	$	26,320	$	52,538	$	(38,844)	$	(79,029)	$	91,461	$	163,136	$	(114,831)

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 ~~proposed to extend~~extended publication of the most commonly used U.S. dollar LIBOR settings to June 30, 2023 and ~~to cease~~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

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as practicable and in any event by December 31, 2021. ~~We have significant exposure~~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 ~~instruments with attributes that are either directly or indirectly dependent on LIBOR to establish their interest rate and/or value, some~~contracts after June 30, 2023. As of ~~which mature after December 31, 2021. We have established a working group, consisting of key stakeholders from throughout~~June 30, 2023, the Company to monitor developments relating to LIBOR changes and to guide the Bank’s response. This team is continuing to work to ensure that our technology systems are prepared for the transition, our loan documents that reference LIBOR-based rates have been appropriately amended to reference other methodshas transitioned substantially all of interest rate determinations and internal and external stakeholders are apprised of the transition. Based on our transition progress to date, we ceased originating LIBOR-based products and began originating BSBY based loans in December 2021. We are also prepared with other alternative benchmarks to support the transition from LIBOR. Over the next 12 months, we will continue to transition all remaining LIBOR-based productsits financial instruments to an alternative benchmark. We will also continue to evaluate the transition process and align our trajectory with regulatory guidelines regarding the cessation of LIBOR as well as monitor new developments for transitioning to alternative reference rates.benchmark rate.

3837

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ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

~~Our~~The Company’s management, with the supervision and participation of ~~our~~its Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the design and operation of ~~our~~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, ~~we have~~the Company has concluded that, as of the end of such period, ~~our~~its disclosure controls and procedures were effective in recording, processing, summarizing and reporting, on a timely basis, information required to be disclosed ~~by us~~ in the reports that ~~we file~~the Company files or ~~submit~~submits under the Exchange Act and were effective in ensuring that information required to be disclosed ~~by us~~ in the reports ~~that we file~~filed or ~~submit~~submitted under the Exchange Act is accumulated and communicated to the Company's management, including ~~our~~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 ~~our~~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, ~~our~~the Company’s internal control over financial reporting.

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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 ~~2021~~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 six months ended June 30, ~~2022~~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 Plans or Programs(1) Plans or Programs(1)
May 1 through May 31, 2022 902,418 $ 53.22 902,418 $ 101,975,648
June 1 through June 30, 2022 39,461 $ 50.66 39,461 $ 99,976,436
Total 941,879 $ 53.11 941,879 $ 99,976,436


				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
Total	1,011,909	$	58.98	1,011,909	$	125,019,420

(1) On April 19, 2022, ~~our~~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 wethe Company may repurchase up to $150.0 million in shares of ~~our~~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 ~~we repurchase~~the Company repurchases shares, and the timing of such repurchases, will be at management’s discretion and will depend upon a variety of factors, including market conditions, ~~our~~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 six months ended June 30, 2023, excise tax expense totaled $540,000.

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ITEM 6. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

(a) Exhibits





~~10.1~~			~~Amended Key Executive Severance Policy~~+*
~~10.2~~			~~Texas Capital Bancshares, Inc. 2022 Long-Term Incentive Plan, which is incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K, dated April 19, 2022~~+
31.1			Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Exchange ~~Act~~Act**
31.2			Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the Exchange ~~Act~~Act**
32.1			Section 1350 Certification of Chief Executive ~~Officer~~Officer****
32.2			Section 1350 Certification of Chief Financial ~~Officer~~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

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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: July ~~21, 2022~~20, 2023


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


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	24
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3635
	Item 4.	Controls and Procedures	3938

Part II.—Other Information
	Item 1.	Legal Proceedings	39
	Item 1A.	Risk Factors	39
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	39
	Item 6.	Exhibits	40

Signatures			41