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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
For the quarterly period ended March 31, 2023
☐Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
For the transition period from              to             
Commission file number 001-34657
TEXAS CAPITAL BANCSHARES, INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware 75-2679109
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification Number)
2000 McKinney Avenue
Suite 700
                DallasTXUSA75201
(Address of principal executive offices)(Zip Code)
214/932-6600
(Registrant’s telephone number, including area code)

Securities registered under Section 12(b) of the Exchange Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $0.01 per shareTCBINasdaq Stock Market
5.75% Non-Cumulative Perpetual Preferred Stock Series B, par value $0.01 per shareTCBIONasdaq Stock Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes  ☒        No  ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒        ☐  No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
Large Accelerated Filerx Accelerated Filer ☐
Non-Accelerated Filer☐Smaller Reporting Company☐
Emerging Growth Company☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act. Yes  ☐        No ý
On April 19, 2023, the number of shares set forth below was outstanding with respect to each of the issuer’s classes of common stock:
Common Stock, par value $0.01 per share 47,869,688

Texas Capital Bancshares, Inc.
Form 10-Q
Quarter Ended March 31, 2023

Index
 



PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
TEXAS CAPITAL BANCSHARES, INC.
CONSOLIDATED BALANCE SHEETS - UNAUDITED
(in thousands except share data)March 31, 2023December 31, 2022
Assets
Cash and due from banks$264,211 $233,637 
Interest bearing cash and cash equivalents3,385,494 4,778,623 
Available-for-sale debt securities3,394,293 2,615,644 
Held-to-maturity debt securities918,962 935,514 
Equity securities32,714 33,956 
Investment securities4,345,969 3,585,114 
Loans held for sale27,608 36,357 
Loans held for investment, mortgage finance4,060,570 4,090,033 
Loans held for investment16,014,497 15,197,307 
Less: Allowance for credit losses on loans260,928 253,469 
Loans held for investment, net19,814,139 19,033,871 
Premises and equipment, net25,268 26,382 
Accrued interest receivable and other assets732,468 719,162 
Goodwill and intangibles, net1,496 1,496 
Total assets$28,596,653 $28,414,642 
Liabilities and Stockholders’ Equity
Liabilities:
Non-interest bearing deposits$9,500,583 $9,618,081 
Interest bearing deposits12,679,114 13,238,799 
Total deposits22,179,697 22,856,880 
Accrued interest payable31,198 24,000 
Other liabilities273,665 345,827 
Short-term borrowings2,100,000 1,201,142 
Long-term debt932,119 931,442 
Total liabilities25,516,679 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 March 31, 2023 and December 31, 2022
300,000 300,000 
Common stock, $0.01 par value:
Authorized shares - 100,000,000
Issued shares - 50,947,306 and 50,867,298 at March 31, 2023 and December 31, 2022, respectively
509 509 
Additional paid-in capital1,031,905 1,025,593 
Retained earnings2,297,850 2,263,502 
Treasury stock - 3,095,444 and 2,083,535 shares at cost at March 31, 2023 and December 31, 2022, respectively
(175,528)(115,310)
Accumulated other comprehensive loss, net of taxes(374,762)(418,943)
Total stockholders’ equity3,079,974 3,055,351 
Total liabilities and stockholders’ equity$28,596,653 $28,414,642 
See accompanying notes to consolidated financial statements.
3
TEXAS CAPITAL BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF INCOME AND OTHER
COMPREHENSIVE INCOME/(LOSS) - UNAUDITED
Three Months Ended March 31,
(in thousands except per share data)20232022
Interest income
Interest and fees on loans$297,438 $187,656 
Investment securities25,292 17,302 
Interest bearing cash and cash equivalents62,436 3,571 
Total interest income385,166 208,529 
Interest expense
Deposits120,094 13,630 
Short-term borrowings14,744 758 
Long-term debt14,983 10,595 
Total interest expense149,821 24,983 
Net interest income235,345 183,546 
Provision for credit losses28,000 (2,000)
Net interest income after provision for credit losses207,345 185,546 
Non-interest income
Service charges on deposit accounts5,022 6,115 
Wealth management and trust fee income3,429 3,912 
Brokered loan fees1,895 3,970 
Investment banking and trading income18,768 4,179 
Other8,289 2,107 
Total non-interest income37,403 20,283 
Non-interest expense
Salaries and benefits128,670 99,859 
Occupancy expense9,619 8,885 
Marketing9,044 4,977 
Legal and professional14,514 10,302 
Communications and technology17,523 14,700 
Federal Deposit Insurance Corporation insurance assessment2,170 3,981 
Other12,487 10,388 
Total non-interest expense194,027 153,092 
Income before income taxes50,721 52,737 
Income tax expense12,060 13,087 
Net income38,661 39,650 
Preferred stock dividends4,313 4,313 
Net income available to common stockholders$34,348 $35,337 
Other comprehensive income/(loss):
Change in unrealized gain/(loss)$42,953 $(200,619)
Amounts reclassified into net income12,973 986 
Other comprehensive income/(loss)55,926 (199,633)
Income tax expense/(benefit)11,745 (41,923)
Other comprehensive income/(loss), net of tax44,181 (157,710)
Comprehensive income/(loss)$82,842 $(118,060)
Basic earnings per common share$0.71 $0.70 
Diluted earnings per common share$0.70 $0.69 
See accompanying notes to consolidated financial statements.
4
TEXAS CAPITAL BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY - UNAUDITED

Preferred StockCommon StockAdditional Treasury StockAccumulated Other 
 Paid-inRetainedComprehensive 
(in thousands except share data)SharesAmountSharesAmountCapitalEarningsSharesAmountIncome/(Loss)Total
Balance at December 31, 2021 (audited)
300,000 $300,000 50,618,911 $506 $1,008,559 $1,948,274 (417)$(8)$(47,715)$3,209,616 
Comprehensive income/(loss):
Net income— — — — — 39,650 — — — 39,650 
Change in other comprehensive income/(loss), net of taxes— — — — — — — — (157,710)(157,710)
Total comprehensive loss(118,060)
Stock-based compensation expense recognized in earnings
— — — — 5,407 — — — — 5,407 
Preferred stock dividend — — — — — (4,313)— — — (4,313)
Issuance of stock related to stock-based awards
— — 91,947 1 (2,613)— — — — (2,612)
Balance at March 31, 2022300,000 $300,000 50,710,858 $507 $1,011,353 $1,983,611 (417)$(8)$(205,425)$3,090,038 
Balance at December 31, 2022 (audited)
300,000 $300,000 50,867,298 $509 $1,025,593 $2,263,502 (2,083,535)$(115,310)$(418,943)$3,055,351 
Comprehensive income/(loss):
Net income— — — — — 38,661 — — — 38,661 
Change in other comprehensive income/(loss), net of taxes— — — — — — — — 44,181 44,181 
Total comprehensive income82,842 
Stock-based compensation expense recognized in earnings
— — — — 8,438 — — — — 8,438 
Preferred stock dividend— — — — — (4,313)— — — (4,313)
Issuance of stock related to stock-based awards
— — 80,008 — (2,126)— — — — (2,126)
Repurchase of common stock— — — — — — (1,011,909)(60,218)— (60,218)
Balance at March 31, 2023300,000 $300,000 50,947,306 $509 $1,031,905 $2,297,850 (3,095,444)$(175,528)$(374,762)$3,079,974 
See accompanying notes to consolidated financial statements.
5
TEXAS CAPITAL BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED
Three Months Ended March 31,
(in thousands)20232022
Operating activities
Net income$38,661 $39,650 
Adjustments to reconcile net income to net cash provided by/(used in) operating activities:
Provision for credit losses28,000 (2,000)
Depreciation and amortization8,683 10,604 
Net gain recognized on investment securities(1,734)— 
Stock-based compensation expense8,438 5,588 
Proceeds from sales and repayments of loans held for sale8,749 571 
Changes in operating assets and liabilities:
Accrued interest receivable and other assets(28,286)43,200 
Accrued interest payable and other liabilities(44,308)(24,691)
Net cash provided by operating activities18,203 72,922 
Investing activities
Purchases of available-for-sale securities(849,391)(376,415)
Proceeds from sales of available-for-sale debt securities56,923 — 
Proceeds from maturities, redemptions and pay-downs of available-for-sale debt securities45,716 104,338 
Proceeds from maturities, redemptions and pay-downs of held-to-maturity debt securities17,489 9,882 
Sales/(purchases) of equity securities, net2,487 940 
Originations of loans held for investment, mortgage finance(14,897,110)(26,902,960)
Proceeds from pay-offs of loans held for investment, mortgage finance14,926,573 28,550,492 
Net increase in loans held for investment, excluding mortgage finance loans(837,100)(517,465)
Purchase of premises and equipment, net(1,363)(2,709)
Net cash provided by/(used in) investing activities(1,535,776)866,103 
Financing activities
Net decrease in deposits(677,183)(2,731,427)
Issuance of stock related to stock-based awards(2,126)(2,612)
Preferred dividends paid(4,313)(4,313)
Repurchase of common stock(60,218)— 
Net increase (decrease) in short-term borrowings898,858 (775,799)
Net cash provided by/(used in) financing activities155,018 (3,514,151)
Net decrease in cash and cash equivalents(1,362,555)(2,575,126)
Cash and cash equivalents at beginning of period5,012,260 7,946,659 
Cash and cash equivalents at end of period$3,649,705 $5,371,533 
Supplemental disclosures of cash flow information:
Cash paid during the period for interest$142,623 $24,122 
Cash paid during the period for income taxes451 302 
Transfers of debt securities from available-for-sale to held-to-maturity— 1,019,365 
See accompanying notes to consolidated financial statements.
6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
(1) Operations and Summary of Significant Accounting Policies
Organization and Nature of Business
Texas Capital Bancshares, Inc. (“TCBI” or the “Company”), a Delaware corporation, was incorporated in November 1996 and commenced banking operations in December 1998. The consolidated financial statements include the accounts of TCBI and its wholly owned subsidiary, Texas Capital Bank (the “Bank”).
The Company serves the needs of commercial businesses, entrepreneurs and professionals located in Texas through a custom array of financial products and services with high-quality personal service.
Basis of Presentation
The Company’s accounting and reporting policies conform to accounting principles generally accepted in the United States (“GAAP”) and to generally accepted practices within the banking industry. Certain prior period balances have been reclassified to conform to the current period presentation.
The consolidated interim financial statements are unaudited, and certain information and disclosures in the notes to consolidated unaudited financial statements that are presented in accordance with GAAP have been condensed or omitted. In the opinion of management, the interim financial statements include all normal and recurring adjustments and the disclosures made present a fair presentation of our 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 consolidated financial statements, and notes thereto, for the year ended December 31, 2022, included in our Annual Report on Form 10-K for the year ended December 31, 2022 (the “2022 Form 10-K”). Operating results for the interim periods disclosed herein are not necessarily indicative of the results that may be expected for a full year or any future period.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. Actual results could differ from those estimates. The allowance for credit losses, the fair value of financial instruments and the status of contingencies are particularly susceptible to significant change.
(2) Earnings Per Share
The following table presents the computation of basic and diluted earnings per share:
Three Months Ended March 31,
(in thousands except share and per share data)20232022
Numerator:
Net income$38,661 $39,650 
Preferred stock dividends4,313 4,313 
Net income available to common stockholders$34,348 $35,337 
Denominator:
Denominator for basic earnings per common share—weighted average common shares48,264,121 50,667,090 
Effect of dilutive outstanding stock-settled awards616,604 656,937 
Denominator for dilutive earnings per common share—weighted average diluted common shares48,880,725 51,324,027 
Basic earnings per common share$0.71 $0.70 
Diluted earnings per common share$0.70 $0.69 
Anti-dilutive outstanding stock-settled awards252,308229,488

7
(3) Investment Securities
The following is a summary of the Company’s investment securities: 
(in thousands)Amortized
Cost(1)		Gross
Unrealized
Gains		Gross
Unrealized
Losses		Estimated
Fair
Value
March 31, 2023
Available-for-sale debt securities:
U.S. Treasury securities$644,697 $— $(21,385)$623,312 
U.S. government agency securities125,000 — (20,883)104,117 
Residential mortgage-backed securities2,965,866 1,077 (312,007)2,654,936 
CRT securities14,507 — (2,579)11,928 
Total available-for-sale debt securities3,750,070 1,077 (356,854)3,394,293 
Held-to-maturity debt securities:
Residential mortgage-backed securities918,962 — (107,431)811,531 
Total held-to-maturity debt securities918,962 — (107,431)811,531 
Equity securities32,714 
Total investment securities(2)$4,345,969 
December 31, 2022
Available-for-sale debt securities:
U.S. Treasury securities$698,769 $— $(28,187)$670,582 
U.S. government agency securities125,000 — (22,846)102,154 
Residential mortgage-backed securities2,162,364 3 (331,320)1,831,047 
CRT securities14,713 — (2,852)11,861 
Total available-for-sale debt securities3,000,846 3 (385,205)2,615,644 
Held-to-maturity securities:
Residential mortgage-backed securities935,514 — (118,600)816,914 
Total held-to-maturity securities935,514 — (118,600)816,914 
Equity securities33,956 
Total investment securities(2)$3,585,114 
(1)    Excludes accrued interest receivable of $8.4 million and $6.6 million at March 31, 2023 and December 31, 2022, respectively, related to available-for-sale debt securities and $1.5 million and $1.5 million at March 31, 2023 and December 31, 2022, respectively, related to held-to-maturity debt securities that is recorded in accrued interest receivable and other assets on the consolidated balance sheets.
(2)    Includes available-for-sale debt securities and equity securities at estimated fair value and held-to-maturity debt securities at amortized cost.
Debt Securities
In the first quarter of 2023, the Company sold U.S. Treasury securities with an amortized cost of $56.4 million and realized a gain of $489,000.
The amortized cost and estimated fair value as of March 31, 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-saleHeld-to-maturity
(in thousands)Amortized CostFair ValueAmortized CostFair Value
Due within one year$250,900 $243,554 $— $— 
Due after one year through five years443,798 422,944 — — 
Due after five years through ten years106,319 87,120 — — 
Due after ten years2,949,053 2,640,675 918,962 811,531 
Total$3,750,070 $3,394,293 $918,962 $811,531 
8
The following table discloses the Company’s available-for-sale debt securities that have been in a continuous unrealized loss position for less than 12 months and those that have been in a continuous unrealized loss position for 12 or more months:
Less Than 12 Months12 Months or LongerTotal
(in thousands)Fair ValueUnrealized LossFair ValueUnrealized LossFair ValueUnrealized Loss
March 31, 2023
U.S. Treasury securities$261,821 $(5,170)$361,491 $(16,215)$623,312 $(21,385)
U.S. government agency securities— — 104,117 (20,883)104,117 (20,883)
Residential mortgage-backed securities947,217 (10,451)1,593,098 (301,556)2,540,315 (312,007)
CRT securities— — 11,928 (2,579)11,928 (2,579)
Total$1,209,038 $(15,621)$2,070,634 $(341,233)$3,279,672 $(356,854)
December 31, 2022
U.S. Treasury securities$670,582 $(28,187)$— $— $670,582 $(28,187)
U.S. government agency securities— — 102,154 (22,846)102,154 (22,846)
Residential mortgage-backed securities261,502 (9,481)1,569,107 (321,839)1,830,609 (331,320)
CRT securities— — 11,861 (2,852)11,861 (2,852)
Total$932,084 $(37,668)$1,683,122 $(347,537)$2,615,206 $(385,205)
At March 31, 2023, the Company had 109 available-for-sale debt securities in an unrealized loss position, comprised of 11 U.S. Treasury securities, five U.S. government agency securities, 91 residential mortgage-backed securities and two CRT securities. The unrealized losses on the available-for-sale debt securities were the result of changes in market interest rates compared to the date the securities were acquired rather than the credit quality of the issuers or underlying loans. The Company does not currently intend to sell and based on current conditions it does not believe it is likely that the Company will be required to sell these available-for-sale debt securities before recovery of the amortized cost of such securities in an unrealized loss position and has, therefore recorded the unrealized losses related to this portfolio in AOCI. Held-to-maturity securities consist of government guaranteed securities for which no loss is expected. At March 31, 2023 and December 31, 2022, no allowance for credit losses was established for available-for-sale or held-to-maturity debt securities.
Debt securities with carrying values of approximately $1.6 billion and $1.7 million were pledged to secure certain customer repurchase agreements and deposits, respectively, at March 31, 2023. The comparative amounts at December 31, 2022 were $16.1 million and $1.4 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 the Company’s non-qualified deferred compensation plan. The following is a summary of unrealized and realized gains/(losses) recognized on equity securities included in other non-interest income on the consolidated statements of income and other comprehensive income:
Three Months Ended March 31,
(in thousands)20232022
Net gains/(losses) recognized during the period$1,245 $(3,640)
Less: Realized net gains/(losses) recognized on securities sold(596)202 
Unrealized net gains/(losses) recognized on securities still held$1,841 $(3,842)
9
(4) Loans and Allowance for Credit Losses on Loans
Loans are summarized by portfolio segment as follows:
(in thousands)March 31, 2023December 31, 2022
Loans held for investment(1):
Commercial$9,514,781 $8,902,948 
Energy1,294,671 1,159,296 
Mortgage finance4,060,570 4,090,033 
Real estate5,272,443 5,198,643 
Gross loans held for investment20,142,465 19,350,920 
Unearned income (net of direct origination costs)(67,398)(63,580)
Total loans held for investment20,075,067 19,287,340 
Allowance for credit losses on loans(260,928)(253,469)
Total loans held for investment, net$19,814,139 $19,033,871 
Loans held for sale:
Non-mortgage loans, at lower of cost or fair value27,608 36,357 
Total loans held for sale$27,608 $36,357 
(1)    Excludes accrued interest receivable of $100.0 million and $100.4 million at March 31, 2023 and December 31, 2022, respectively, that is recorded in accrued interest receivable and other assets on the consolidated balance sheets.


10
The following tables summarize gross loans held for investment by year of origination and internally assigned credit grades:
(in thousands)202320222021202020192018 and priorRevolving lines of creditRevolving lines of credit converted to term loansTotal
March 31, 2023
Commercial
(1-7) Pass$668,265 $1,913,280 $594,666 $192,154 $186,922 $440,995 $5,079,665 $19,786 $9,095,733 
(8) Special mention95 47,169 18,690 1,399 61,187 12,025 67,354 1,860 209,779 
(9) Substandard - accruing— 18,298 39,079 1,649 3,295 24,755 34,358 895 122,329 
(9+) Non-accrual— 42,328 3,104 2,229 31,319 7,046 — 914 86,940 
Total commercial$668,360 $2,021,075 $655,539 $197,431 $282,723 $484,821 $5,181,377 $23,455 $9,514,781 
Energy
(1-7) Pass$55,167 $114,845 $— $— $— $— $1,114,145 $— $1,284,157 
(8) Special mention— — — — — — — — — 
(9) Substandard - accruing— — — — — — 7,037 — 7,037 
(9+) Non-accrual— — — — — — — 3,477 3,477 
Total energy$55,167 $114,845 $— $— $— $— $1,121,182 $3,477 $1,294,671 
Mortgage finance
(1-7) Pass$110,532 $29,682 $486,327 $261,183 $288,589 $2,884,257 $— $— $4,060,570 
(8) Special mention— — — — — — — — — 
(9) Substandard - accruing— — — — — — — — — 
(9+) Non-accrual— — — — — — — — — 
Total mortgage finance$110,532 $29,682 $486,327 $261,183 $288,589 $2,884,257 $— $— $4,060,570 
Real estate
CRE
(1-7) Pass$156,825 $1,199,143 $807,286 $492,723 $369,393 $450,333 $97,541 $10,924 $3,584,168 
(8) Special mention— 2,650 5,847 29,802 — 24,926 — — 63,225 
(9) Substandard - accruing— — 17,850 — — 29,860 — — 47,710 
(9+) Non-accrual— — — — — 179 — — 179 
RBF
(1-7) Pass17,975 88,017 52,541 10,180 1,636 4,966 281,514 — 456,829 
(8) Special mention— 8,352 — — — — — — 8,352 
(9) Substandard - accruing— — — — — — — — — 
(9+) Non-accrual— — — — — — — — — 
Other
(1-7) Pass8,741 182,857 145,691 92,562 61,954 222,495 39,401 25,465 779,166 
(8) Special mention— 720 — 6,161 — 376 — — 7,257 
(9) Substandard - accruing— — — — — 442 — — 442 
(9+) Non-accrual— — — 3,355 — — — — 3,355 
Secured by 1-4 family
(1-7) Pass7,781 64,081 89,336 52,460 17,746 84,837 4,519 — 320,760 
(8) Special mention— — — — — 1,000 — — 1,000 
(9) Substandard - accruing— — — — — — — — — 
(9+) Non-accrual— — — — — — — — — 
Total real estate$191,322 $1,545,820 $1,118,551 $687,243 $450,729 $819,414 $422,975 $36,389 $5,272,443 
Total$1,025,381 $3,711,422 $2,260,417 $1,145,857 $1,022,041 $4,188,492 $6,725,534 $63,321 $20,142,465 
Gross charge-offs$— $90 $19,828 $— $262 $552 $— $— $20,732 
11
(in thousands)202220212020201920182017 and priorRevolving lines of creditRevolving lines of credit converted to term loansTotal
December 31, 2022
Commercial
(1-7) Pass$1,903,529 $671,459 $244,568 $255,444 $325,201 $244,373 $4,877,753 $21,063 $8,543,390 
(8) Special mention9,141 7,740 3,628 37,794 11,998 4,975 95,310 2,250 172,836 
(9) Substandard - accruing18,670 71,147 514 1,666 14,933 6,305 30,070 — 143,305 
(9+) Non-accrual376 512 751 30,425 6,226 2,520 2,607 — 43,417 
Total commercial$1,931,716 $750,858 $249,461 $325,329 $358,358 $258,173 $5,005,740 $23,313 $8,902,948 
Energy
(1-7) Pass$124,691 $12,517 $— $— $— $3,317 $1,007,776 $— $1,148,301 
(8) Special mention— — — — — — — — — 
(9) Substandard - accruing— — — — — — 7,337 — 7,337 
(9+) Non-accrual— — — — — — 3,658 — 3,658 
Total energy$124,691 $12,517 $— $— $— $3,317 $1,018,771 $— $1,159,296 
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 
Real estate
CRE
(1-7) Pass$1,085,254 $756,180 $563,341 $447,346 $183,634 $284,698 $97,337 $11,944 $3,429,734 
(8) Special mention2,765 6,524 37,791 5,295 19,350 3,652 — — 75,377 
(9) Substandard - accruing— 17,850 — — 11,458 17,698 — — 47,006 
(9+) Non-accrual— — — — — 182 — — 182 
RBF
(1-7) Pass94,066 70,951 12,161 6,106 2,655 — 326,164 — 512,103 
(8) Special mention— — — — — — — — — 
(9) Substandard - accruing7,840 — — — — — — — 7,840 
(9+) Non-accrual— — — — — — — — — 
Other
(1-7) Pass182,840 131,538 94,611 67,518 76,951 163,838 42,333 31,293 790,922 
(8) Special mention729 — 8,721 — — 386 — — 9,836 
(9) Substandard - accruing— — — 247 — 1,035 — — 1,282 
(9+) Non-accrual— — 1,081 — — — — — 1,081 
Secured by 1-4 family
(1-7) Pass64,050 89,967 53,003 24,314 16,953 70,082 4,911 — 323,280 
(8) Special mention— — — — — — — — — 
(9) Substandard - accruing— — — — — — — — — 
(9+) Non-accrual— — — — — — — — — 
Total real estate$1,437,544 $1,073,010 $770,709 $550,826 $311,001 $541,571 $470,745 $43,237 $5,198,643 
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 
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The following table details activity in the allowance for credit losses on loans. 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)CommercialEnergyMortgage
Finance		Real
Estate		Total
Three Months Ended March 31, 2023
Beginning balance$136,841 $49,000 $10,745 $56,883 $253,469 
Provision for credit losses on loans32,475 1,930 (3,345)(3,691)27,369 
Charge-offs20,732 — — — 20,732 
Recoveries816 6 — — 822 
Net charge-offs (recoveries)19,916 (6)— — 19,910 
Ending balance$149,400 $50,936 $7,400 $53,192 $260,928 
Three Months Ended March 31, 2022
Beginning balance$102,202 $52,568 $6,083 $51,013 $211,866 
Provision for credit losses on loans5,437 (24,522)4,159 13,699 (1,227)
Charge-offs110 — — 350 460 
Recoveries217 755 — — 972 
Net charge-offs (recoveries)(107)(755)— 350 (512)
Ending balance$107,746 $28,801 $10,242 $64,362 $211,151 
The Company recorded a $27.4 million provision for credit losses on loans for the three months ended March 31, 2023, compared to a $1.2 million negative provision for the same period of 2022. The $27.4 million provision for credit losses on loans resulted primarily from updated views on the downside risks to the economic forecast and increases in net charge-offs and criticized loans during the three months ended March 31, 2023. Net charge-offs of $19.9 million were recorded during the three months ended March 31, 2023, related primarily to a single commercial loan, compared to net recoveries of $512,000 during the same period of 2022. Criticized loans totaled $561.1 million at March 31, 2023, $513.2 million at December 31, 2022 and $476.1 million at March 31, 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 March 31, 2023, the Company had $38.7 million in collateral-dependent commercial loans, collateralized by business assets, and $1.1 million in collateral-dependent real estate loans, collateralized by real estate property.
The table below provides an age analysis of gross loans held for investment:
(in thousands)30-59 Days
Past Due		60-89 Days
Past Due		90 Days or More Past DueTotal Past
Due		Non-accrual(1)CurrentTotalNon-accrual With No Allowance
March 31, 2023
Commercial$3,185 $242 $3,098 $6,525 $86,940 $9,421,316 $9,514,781 $71,999 
Energy— — — — 3,477 1,291,194 1,294,671 3,477 
Mortgage finance— — — — — 4,060,570 4,060,570 — 
Real estate
CRE— — — — 179 3,695,103 3,695,282 — 
RBF— — — — — 465,181 465,181 — 
Other430 — — 430 3,355 786,435 790,220 3,355 
Secured by 1-4 family2,388 — — 2,388 — 319,372 321,760 — 
Total$6,003 $242 $3,098 $9,343 $93,951 $20,039,171 $20,142,465 $78,831 
(1)As of March 31, 2023, $2.1 million of non-accrual loans were earning interest income on a cash basis compared to $2.2 million as of December 31, 2022. We did not recognize interest income on non-accrual loans for the three months ended March 31, 2023 and March 31, 2022. Accrued interest of $1.5 million and $4,000 was reversed during the three months ended March 31, 2023 and March 31, 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 measure of troubled debt restructurings and enhanced disclosures for loan modifications to borrowers experiencing financial difficulty.
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The table below details the amortized cost of gross loans held for investment made to borrowers experiencing financial difficulty that were modified during the three months ended March 31, 2023:
(in thousands)Payment
Deferral		Term
Extension		Payment
Deferral
and Term
Extension		Interest Rate
Reduction
and Term
Extension		TotalPercentage of
Total Loans
Held for
Investment
Commercial$31,431 $1,800 $— $14,933 $48,164 0.24 %
Energy— — 3,477 — 3,477 0.02 %
Total$31,431 $1,800 $3,477 $14,933 $51,641 0.26 %
The following table summarizes the financial impacts of loan modifications made to borrowers experiencing financial difficulty during the three months ended March 31, 2023:
Interest Rate
Reduction		Term Extension
(in months)		Total Payment
Deferrals
(in thousands)
Commercial0.70%
6 to 18
$3,523 
Energy—361,200 
As of March 31, 2023, the Company did not have any loans made to borrowers experiencing financial difficulty that were modified during the first quarter of 2023 that subsequently defaulted. Payment 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 made to borrowers experiencing financial difficulty that were modified on or after January 1, 2023, the date we adopted ASU 2022-02:
(in thousands)30-89 Days
Past Due		90+ Days
Past Due		Non-AccrualCurrentTotal
March 31, 2023
Commercial$161 $— $924 $47,079 $48,164 
Energy— — 3,477 — 3,477 
Total$161 $— $4,401 $47,079 $51,641 
Troubled Debt Restructuring Disclosures Prior to the Adoption of ASU 2022-02
The Company did not have any loans that were restructured during the three months ended March 31, 2022.
As of December 31, 2022 and March 31, 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 March 31, 2022, $531,000 and $18.0 million, respectively, met the criteria for restructured. These loans had no unfunded commitments at their respective balance sheet dates.
(5) Short-Term Borrowings and Long-Term Debt
The table below presents a summary of short-term borrowings:
(in thousands)March 31, 2023December 31, 2022
Customer repurchase agreements$— $1,142 
Federal Home Loan Bank borrowings2,100,000 1,200,000 
Total short-term borrowings$2,100,000 $1,201,142 
The table below presents a summary of long-term debt:
(in thousands)March 31, 2023December 31, 2022
Bank-issued floating rate senior unsecured credit-linked notes due 2024$272,994 $272,492 
Bank-issued 5.25% fixed rate subordinated notes due 2026
174,262 174,196 
Company-issued 4.00% fixed rate subordinated notes due 2031
371,457 371,348 
Trust preferred floating rate subordinated debentures due 2032 to 2036113,406 113,406 
Total long-term debt$932,119 $931,442 
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(6) Financial Instruments with Off-Balance Sheet Risk
The table below presents the Company’s financial instruments with off-balance sheet risk, as well as the activity in the allowance for off-balance sheet credit losses related to those financial instruments:
Three Months Ended March 31,
(in thousands)20232022
Beginning balance of allowance for off-balance sheet credit losses$21,793 $17,265 
Provision for off-balance sheet credit losses631 (773)
Ending balance of allowance for off-balance sheet credit losses$22,424 $16,492 
(in thousands)March 31, 2023December 31, 2022
Commitments to extend credit - period end balance$10,231,682 $9,673,082 
Standby letters of credit - period end balance436,057 417,896 
(7) Regulatory Ratios and Capital
The Company and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory (and possibly additional discretionary) actions by regulators that, if undertaken, could have a direct material adverse effect on the Company’s and the Bank’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and the Bank must meet specific capital guidelines that involve quantitative measures of the Company’s and the Bank’s assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The Company’s and the Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.
The Basel III regulatory capital framework (the “Basel III Capital Rules”) adopted by U.S. federal regulatory authorities, among other things, (i) establishes the capital measure called “Common Equity Tier 1” (“CET1”), (ii) specifies that Tier 1 capital consist of CET1 and “Additional Tier 1 Capital” instruments meeting stated requirements, (iii) requires that most deductions/adjustments to regulatory capital measures be made to CET1 and not to other components of capital and (iv) defines the scope of the deductions/adjustments to the capital measures.
Additionally, the Basel III Capital Rules require that the Company maintains a 2.5% capital conservation buffer with respect to each of CET1, Tier 1 and total capital to risk-weighted assets, which provides for capital levels that exceed the minimum risk-based capital adequacy requirements. A financial institution with a conservation buffer of less than the required amount is subject to limitations on capital distributions, including dividend payments and stock repurchases, and certain discretionary bonus payments to executive officers. No dividends were declared or paid on the Company’s common stock during the three months ended March 31, 2023 or 2022. In January 2023, the Company completed the full $150.0 million of repurchases authorized by the Company’s board of directors on April 19, 2022. On January 18, 2023, the Company’s board of directors authorized a new share repurchase program under which the Company may repurchase up to $150.0 million in shares of its outstanding common stock. During the three months ended March 31, 2023, the Company repurchased 1,011,909 shares of its common stock for an aggregate price of $59.7 million, at a weighted average price of $58.98 per share. The aggregate purchase price and weighted average price per share does not include the effect of excise tax incurred on net stock repurchases.
In February 2019, the federal bank regulatory agencies issued a final rule (the “2019 CECL Rule”) that revised certain capital regulations to account for changes to credit loss accounting under GAAP. The 2019 CECL Rule included a transition option that allows banking organizations to phase in, over a three-year period, the day-one adverse effects of adopting the new accounting standard related to the measurement of current expected credit losses on their regulatory capital ratios (three-year transition option). In March 2020, the federal bank regulatory agencies issued an interim final rule that maintains the three-year transition option of the 2019 CECL Rule and also provides banking organizations that were required under GAAP to implement CECL before the end of 2020 the option to delay for two years an estimate of the effect of CECL on regulatory capital, relative to the incurred loss methodology's effect on regulatory capital, followed by a three-year transition period (five-year transition option). The Company adopted CECL on January 1, 2020 and have elected to utilize the five-year transition option.
Quantitative measures established by regulation to ensure capital adequacy require the Company and the Bank to maintain minimum amounts and ratios of CET1, Tier 1 and total capital to risk-weighted assets, and of Tier 1 capital to average assets, each as defined in the regulations. Management believes, as of March 31, 2023, that the Company and the Bank meet all capital adequacy requirements to which they are subject.
Financial institutions are categorized as well capitalized based on total risk-based, Tier 1 risk-based, CET1 and Tier 1 leverage ratios. As shown in the table below, the Company’s and Bank’s capital ratios exceeded the regulatory definition of well capitalized as of March 31, 2023 and December 31, 2022. The regulatory authorities can apply changes in the classification of assets and such changes may retroactively subject the Company and the Bank to changes in capital ratios. Any such change
15
could reduce one or more capital ratios below well capitalized status. In addition, a change may result in imposition of additional assessments by the Federal Deposit Insurance Corporation (“FDIC”) or could result in regulatory actions that could have a material effect on the Bank’s condition and results of operations.
Because the Bank had less than $15.0 billion in total consolidated assets as of December 31, 2009, it is allowed to continue to classify the trust preferred securities, all of which were issued prior to May 19, 2010, as Tier 1 capital.
At the beginning of each of the last five years of the life of the Bank-issued fixed rate subordinated notes due 2026, the amount that is eligible to be included in Tier 2 capital is reduced by 20% of the original amount of the notes (net of redemptions). In 2023, the amount of the notes that qualify as Tier 2 capital has been reduced by 60%.
The table below summarizes the Company’s and the Bank’s actual and required capital ratios under the Basel III Capital Rules. The ratios presented below include the effects of the election to utilize the five-year CECL transition described above.
ActualMinimum Capital Required(2)Capital Required to be Well Capitalized
(dollars in thousands)Capital AmountRatioCapital AmountRatioCapital AmountRatio
March 31, 2023
CET1
Company$3,157,937 12.42 %$1,779,755 7.00 %N/AN/A
Bank3,454,486 13.61 %1,776,757 7.00 %1,649,845 6.50 %
Total capital (to risk-weighted assets)
Company4,285,396 16.86 %2,669,633 10.50 %2,542,507 10.00 %
Bank4,010,488 15.80 %2,665,135 10.50 %2,538,224 10.00 %
Tier 1 capital (to risk-weighted assets)
Company3,567,937 14.03 %2,161,131 8.50 %1,525,504 6.00 %
Bank3,614,486 14.24 %2,157,490 8.50 %2,030,579 8.00 %
Tier 1 capital (to average assets)(1)
Company3,567,937 12.03 %1,186,723 4.00 %N/AN/A
Bank3,614,486 12.20 %1,185,349 4.00 %1,481,686 5.00 %
December 31, 2022
CET1
Company$3,180,208 13.00 %$1,712,608 7.00 %N/AN/A
Bank3,408,178 13.95 %1,710,056 7.00 %1,587,909 6.50 %
Total capital (to risk-weighted assets)
Company4,331,098 17.70 %2,568,912 10.50 %2,446,583 10.00 %
Bank3,987,720 16.32 %2,565,083 10.50 %2,442,937 10.00 %
Tier 1 capital (to risk-weighted assets)
Company3,590,208 14.67 %2,079,595 8.50 %1,467,950 6.00 %
Bank3,568,178 14.61 %2,076,496 8.50 %1,954,349 8.00 %
Tier 1 capital (to average assets)(1)
Company3,590,208 11.54 %1,244,494 4.00 %N/AN/A
Bank3,568,178 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 March 31, 2023 and December 31, 2022.
(8) Stock-Based Compensation
We have long-term incentive plans under which stock-based compensation awards are granted to employees and directors by the Company’s board of directors or its designated committee. Grants are subject to vesting requirements and may include, among other things, nonqualified stock options, stock appreciation rights, restricted stock units (“RSUs”), restricted stock and performance units, or any combination thereof.
16
The table below summarizes our stock-based compensation expense:
 Three Months Ended March 31,
(in thousands)20232022
Stock-settled awards:
RSUs$8,438 $5,407 
Cash-settled units— 181 
Total$8,438 $5,588 
 
(in thousands except period data)March 31, 2023
Unrecognized compensation expense related to unvested stock-settled awards$46,870 
Weighted average period over which expense is expected to be recognized, in years2.5
(9) Fair Value Disclosures
The Company determines the fair market values of its assets and liabilities measured at fair value on a recurring and nonrecurring basis using the fair value hierarchy as prescribed in ASC 820. See Note 1 - Operations and Summary of Significant Accounting Policies in our 2022 Form 10-K for information regarding the fair value hierarchy and a description of the methods and significant assumptions used by the Company in estimating its fair value disclosures for financial statements.
Assets and liabilities measured at fair value are as follows:
 Fair Value Measurements Using
(in thousands)Level 1Level 2Level 3
March 31, 2023
Available-for-sale debt securities:(1)
U.S. Treasury securities$623,312 $— $— 
U.S. government agency securities— 104,117 — 
Residential mortgage-backed securities— 2,654,936 — 
CRT securities— — 11,928 
Equity securities(1)(2)21,548 11,166 — 
Loans held for investment(3)— — 35,458 
Derivative assets(4)— 19,401 — 
Derivative liabilities(4)— 70,220 — 
Non-qualified deferred compensation plan liabilities(4)19,778 — — 
December 31, 2022
Available-for-sale debt securities:(1)
U.S. Treasury securities$670,582 $— $— 
U.S. government agency securities— 102,154 — 
Residential mortgage-backed securities— 1,831,047 — 
CRT securities— — 11,861 
Equity securities(1)(2)22,879 11,077 — 
Derivative assets(4)— 13,504 — 
Derivative liabilities(4)— 91,758 — 
Non-qualified deferred compensation plan liabilities(4)21,177 — — 
(1)Investment securities are measured at fair value on a recurring basis, generally monthly.
(2)Equity securities consist of investments that qualify for consideration under the regulations implementing the Community Reinvestment Act and investments related to non-qualified deferred compensation plan.
(3)Includes certain collateral-dependent loans held for investment for which a specific allocation of the allowance for credit losses is based upon the fair value of the loan’s underlying collateral. These loans held for investment are measured on a nonrecurring basis, generally annually or more often as warranted by market and economic conditions.
(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.
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Level 3 Valuations
The following table presents a reconciliation of the level 3 fair value category measured at fair value on a recurring basis:
Net Gains/(Losses)
(in thousands)Balance at Beginning of PeriodPurchases / AdditionsSales / ReductionsRealizedUnrealizedBalance at End of Period
Three Months Ended March 31, 2023
Available-for-sale debt securities:(1)
CRT securities$11,861 $— $— $— $67 $11,928 
Three Months Ended March 31, 2022
Available-for-sale debt securities:(1)
Tax-exempt asset-backed securities$180,033 $— $(3,736)$— $(10,452)$165,845 
CRT securities11,846 — — — 55 11,901 
Loans held for sale(2)7,658 1,327 (571)— (329)8,085 
(1)Unrealized gains/(losses) on available-for-sale debt securities are recorded in AOCI. Realized gains/(losses) are recorded in other non-interest income on the consolidated statements of income and other comprehensive income/(loss).
(2)Realized and unrealized gains/(losses) on loans held for sale are recorded in other non-interest income on the consolidated statements of income and other comprehensive income/(loss).
CRT securities
The fair value of CRT securities is based on a discounted cash flow model, which utilizes Level 3, or unobservable, inputs, the most significant of which were a discount rate and weighted-average life. At March 31, 2023, the discount rates utilized ranged from 5.43% to 11.37% and the weighted-average life ranged from 4.84 years to 8.42 years. On a combined amortized cost weighted-average basis a discount rate of 7.44% and a weighted-average life of 6.05 years were utilized to determine the fair value of these securities at March 31, 2023. At December 31, 2022, the combined weighted-average discount rate and weighted-average life utilized were 8.24% and 6.26 years, respectively.
Loans held for investment
Certain collateral-dependent loans held for investment are reported at fair value when, based upon an individual evaluation, the specific allocation of the allowance for credit losses that is deducted from the loan's amortized cost is based upon the fair value of the loan's underlying collateral. The $35.5 million fair value of loans held for investment at March 31, 2023 reported above includes impaired loans with a carrying value of $39.8 million that were reduced by specific allowance allocations totaling $4.3 million based on collateral valuations utilizing Level 3 inputs. There were no collateral-dependent loans held for investment reported at fair value at December 31, 2022.
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Fair Value of Financial Instruments
A summary of the carrying amounts and estimated fair values of financial instruments is as follows:
Carrying
Amount		Estimated Fair Value
(in thousands)TotalLevel 1Level 2Level 3
March 31, 2023
Financial assets:
Cash and cash equivalents$3,649,705 $3,649,705 $3,649,705 $— $— 
Available-for-sale debt securities3,394,293 3,394,293 623,312 2,759,053 11,928 
Held-to-maturity debt securities918,962 811,531 — 811,531 — 
Equity securities32,714 32,714 21,548 11,166 — 
Loans held for sale27,608 27,208 — 27,208 — 
Loans held for investment, net19,814,139 19,755,693 — — 19,755,693 
Derivative assets19,401 19,401 — 19,401 — 
Financial liabilities:
Total deposits22,179,697 22,184,982 — — 22,184,982 
Short-term borrowings2,100,000 2,100,000 — 2,100,000 — 
Long-term debt932,119 866,529 — 866,529 — 
Derivative liabilities70,220 70,220 — 70,220 — 
December 31, 2022
Financial assets:
Cash and cash equivalents$5,012,260 $5,012,260 $5,012,260 $— $— 
Available-for-sale debt securities2,615,644 2,615,644 670,582 1,933,201 11,861 
Held-to-maturity debt securities935,514 816,914 — 816,914 — 
Equity securities33,956 33,956 22,879 11,077 — 
Loans held for sale36,357 36,357 — — 36,357 
Loans held for investment, net19,033,871 18,969,922 — — 18,969,922 
Derivative assets13,504 13,504 — 13,504 — 
Financial liabilities:
Total deposits22,856,880 22,857,949 — — 22,857,949 
Short-term borrowings1,201,142 1,201,142 — 1,201,142 — 
Long-term debt931,442 881,716 — 881,716 — 
Derivative liabilities91,758 91,758 — 91,758 — 
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(10) Derivative Financial Instruments
The notional amounts and estimated fair values of derivative positions outstanding are presented in the following table.
 March 31, 2023December 31, 2022
Estimated Fair ValueEstimated Fair Value
(in thousands)Notional
Amount		Asset DerivativeLiability DerivativeNotional
Amount		Asset DerivativeLiability Derivative
Derivatives designated as hedges
Cash flow hedges:
Interest rate contracts:
Swaps hedging loans$3,100,000 $1,658 $65,090 $3,000,000 $— $86,378 
Non-hedging derivatives
Customer-initiated and other derivatives:
Foreign currency forward contracts2,682 13 — — — — 
Interest rate contracts:
Swaps4,527,001 70,881 70,881 4,396,367 83,529 83,529 
Caps and floors written168,065 — 2,238 220,142 — 2,583 
Caps and floors purchased168,065 2,238 — 220,142 2,583 — 
Forward contracts4,486,001 12,755 12,167 1,569,326 4,431 4,053 
Gross derivatives87,545 150,376 90,543 176,543 
Netting adjustment - offsetting derivative assets/liabilities(14,038)(14,038)(5,164)(5,164)
Netting adjustment - cash collateral received/posted(54,106)(66,118)(71,875)(79,621)
Net derivatives included on the consolidated balance sheets$19,401 $70,220 $13,504 $91,758 
The Company’s credit exposure on derivative instruments is limited to the net favorable value and interest payments by each counterparty. In some cases, collateral may be required from the counterparties involved if the net value of the derivative instruments exceeds a nominal amount. The Company’s credit exposure associated with these instruments, net of any collateral pledged, was approximately $19.4 million at March 31, 2023 and approximately $13.5 million at December 31, 2022. Collateral levels are monitored and adjusted on a regular basis for changes in the value of derivative instruments. At March 31, 2023, the Company had $135.6 million in cash collateral pledged to counterparties included in interest bearing cash and cash equivalents on the consolidated balance sheet and $57.0 million in cash collateral received from counterparties included in interest bearing deposits on the consolidated balance sheet. The comparative amounts at December 31, 2022, were $89.2 million in cash collateral pledged to counterparties and $72.5 million cash collateral received from counterparties.
The Company also enters into credit risk participation agreements with financial institution counterparties for interest rate swaps related to loans in which the Company is either a participant or a lead bank. The risk participation agreements entered into by the Company as a participant bank provide credit protection to the financial institution counterparty should the borrower fail to perform on its interest rate derivative contract with that financial institution. The Company is party to 18 risk participation agreements where it acts as a participant bank with a notional amount of $336.9 million at March 31, 2023, compared to 19 risk participation agreements with a notional amount of $291.2 million at December 31, 2022. The maximum estimated exposure to these agreements, assuming 100% default by all obligors, was approximately $6.6 million at March 31, 2023 and $8.9 million at December 31, 2022. The fair value of these exposures was insignificant to the consolidated financial statements at both March 31, 2023 and December 31, 2022. Risk participation agreements entered into by the Company as the lead bank provide credit protection should the borrower fail to perform on its interest rate derivative contract. The Company is party to 9 risk participation agreements where the Company acts as the lead bank having a notional amount of $124.7 million at March 31, 2023, compared to 18 agreements having a notional amount of $222.0 million at December 31, 2022.
Derivatives Designated as Cash Flow Hedges
The Company enters into interest rate derivative contracts that are designated as qualifying cash flow hedges to hedge the exposure to variability in expected future cash flows attributable to changes in a contractually specified interest rate.
During the three months ended March 31, 2023, the Company recorded $13.5 million in unrealized losses to adjust its cash flow hedges to fair value, which was recorded net of tax to AOCI, and reclassified $11.1 million from AOCI into interest income on loans. Based on current market conditions, the Company estimates that during the next 12 months, an additional $50.3 million will be reclassified from AOCI as a decrease to interest income. As of March 31, 2023, the maximum length of time over which forecasted transactions are hedged is 3.50 years.
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(11) Accumulated Other Comprehensive Income
The following table provides the change in AOCI by component:
(in thousands)Cash Flow HedgesAvailable-for-Sale SecuritiesHeld-to-Maturity SecuritiesTotal
Three Months Ended March 31, 2023
Beginning balance$(66,394)$(304,309)$(48,240)$(418,943)
Change in unrealized gain/(loss)13,528 29,425 — 42,953 
Amounts reclassified into net income11,129 — 1,844 12,973 
Total other comprehensive income/(loss)24,657 29,425 1,844 55,926 
Income tax expense/(benefit)5,179 6,179 387 11,745 
Total other comprehensive income/(loss), net of tax19,478 23,246 1,457 44,181 
Ending balance$(46,916)$(281,063)$(46,783)$(374,762)
Three Months Ended March 31, 2022
Beginning balance$— $(47,715)$— $(47,715)
Change in unrealized gain/(loss)— (131,454)(69,165)(200,619)
Amounts reclassified into net income— — 986 986 
Total other comprehensive income/(loss)— (131,454)(68,179)(199,633)
Income tax expense/(benefit)— (27,605)(14,318)(41,923)
Total other comprehensive income/(loss), net of tax— (103,849)(53,861)(157,710)
Ending balance$— $(151,564)$(53,861)$(205,425)
(12) New Accounting Standards
ASU 2023-01, “Leases (Topic 842) - Common Control Arrangements” (“ASU 2023-01”) requires entities to determine whether a related party arrangement between entities under common control is a lease. If the arrangement is determined to be a lease, an entity must classify and account for the lease on the same basis as an arrangement with a related party (on the basis of legally enforceable terms and conditions). ASU 2023-01 is effective January 1, 2024 and is not expected to have an impact on our financial statements.
ASU 2023-02 “Investments - Equity Method and Join Ventures (Topic 323) - Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method” (“ASU 2023-02”) permits reporting entities to elect to account for their tax equity investments, regardless of the tax credit program from which the income tax credits are received, using the proportional amortization method if certain conditions are met. ASU 2023-02 is effective January 1, 2024 and is not expected to have an impact on our financial statements.
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ITEM 3.     MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of the Company’s financial condition and results of operations for the three months ended March 31, 2023 and 2022 should be read in conjunction with its audited consolidated financial statements and the related notes to the consolidated financial statements included in its Annual Report on Form 10-K for the year ended December 31, 2022 (the “2022 Form 10-K”). Operating results for the three months ended March 31, 2023 are not necessarily indicative of the results for the year ending December 31, 2023 or any future period.
Forward-Looking Statements
This report contains “forward-looking statements” within the meaning of and pursuant to the Private Securities Litigation Reform Act of 1995 regarding, among other things, the Company’s financial condition, results of operations, business plans, strategies, future performance and business and industry outlook. These statements are not historical in nature and may often be identified by the use of words such as “believes,” “projects,” “expects,” “may,” “estimates,” “should,” “plans,” “targets,” “intends” “could,” “would,” “anticipates,” “potential,” “confident,” “optimistic” or the negative thereof, or other variations thereon, or comparable terminology, or by discussions of strategy, objectives, estimates, trends, guidance, expectations and future plans.
Because forward-looking statements relate to future results and occurrences, they are subject to inherent and various uncertainties, risks, and changes in circumstances that are difficult to predict, may change over time, are based on management’s expectations and assumptions at the time the statements are made and are not guarantees of future results. Numerous risks and other factors, many of which are beyond management’s control, could cause actual results to differ materially from future results expressed or implied by such forward-looking statements. While there can be no assurance that any list of risks is complete, important risk and other factors that could cause actual results to differ materially from those contemplated by forward-looking statements include, but are not limited to, credit quality and risk, the 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 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, recession, the threat of recession, and market conditions in Texas, the United States or 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 from banks and other financial service providers in the Company’s markets, 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, terrorism, global conflict, a material worsening of the COVID-19 pandemic or other health emergencies or other external 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, we disclaim any obligation to update such factors or to publicly announce the results of any revisions to any of the forward-looking statements included herein to reflect future events or developments.
Overview
Recent Industry Developments
During the first quarter 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 decreased by 3% as compared to December 31, 2022, to $22.2 billion at March 31, 2023 as we experienced minimal deposit outflow in the first quarter. The Company also took a number of preemptive actions, which included pro-active outreach to clients and actions to maximize its funding sources in response to these recent developments. Furthermore, the Company’s capital remains at historically high levels with CET1 and Total Capital ratios of 12.4% and 16.9%, respectively, as of March 31, 2023.
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Results of Operations
Selected income statement data and key performance indicators are presented in the table below:
Three Months Ended March 31,
(dollars in thousands except per share data)20232022
Net interest income$235,345 $183,546 
Provision for credit losses28,000 (2,000)
Non-interest income37,403 20,283 
Non-interest expense194,027 153,092 
Income before income taxes50,721 52,737 
Income tax expense12,060 13,087 
Net income38,661 39,650 
Preferred stock dividends4,313 4,313 
Net income available to common stockholders$34,348 $35,337 
Basic earnings per common share$0.71 $0.70 
Diluted earnings per common share$0.70 $0.69 
Net interest margin3.33 %2.23 %
Return on average assets (“ROA”)0.53 %0.47 %
Return on average common equity (“ROE”)5.06 %4.97 %
Non-interest income to average earning assets0.54 %0.25 %
Efficiency ratio(1)71.1 %75.1 %
Non-interest expense to average earning assets2.78 %1.86 %
(1)    Non-interest expense divided by the sum of net interest income and non-interest income.
Three months ended March 31, 2023 compared to three months ended March 31, 2022
The Company reported net income of $38.7 million and net income available to common stockholders of $34.3 million for the three months ended March 31, 2023, compared to net income of $39.7 million and net income available to common stockholders of $35.3 million for the same period in 2022. On a fully diluted basis, earnings per common share were $0.70 for the three months ended March 31, 2023, compared to $0.69 for the same period in 2022. ROE was 5.06% and ROA was 0.53% for the three months ended March 31, 2023, compared to 4.97% and 0.47%, respectively, for the same period in 2022. The decrease in net income for the three months ended March 31, 2023 compared to the same period in 2022 resulted primarily from increases in provision for credit losses and non-interest expense, partially offset by increases in net interest income and non-interest income.
Details of the changes in the various components of net income are discussed below.

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Taxable Equivalent Net Interest Income Analysis(1)
Three Months Ended March 31, 2023Three Months Ended March 31, 2022
(dollars in thousands)Average
Balance		Revenue /
Expense		Yield /
Rate		Average
Balance		Revenue /
Expense		Yield /
Rate
Assets
Investment securities(2)$4,060,456 $25,292 2.31 %$3,669,257 $17,743 1.91 %
Interest bearing cash and cash equivalents5,541,341 62,436 4.57 %8,552,300 3,571 0.17 %
Loans held for sale43,472 938 8.75 %7,633 113 6.01 %
Loans held for investment, mortgage finance
3,286,804 28,528 3.52 %5,732,901 43,466 3.07 %
Loans held for investment(3)15,598,854 268,131 6.97 %15,686,319 144,133 3.73 %
Less: Allowance for credit losses on loans252,727 — — 212,612 — — 
Loans held for investment, net
18,632,931 296,659 6.46 %21,206,608 187,599 3.59 %
Total earning assets28,278,200 385,325 5.45 %33,435,798 209,026 2.54 %
Cash and other assets1,041,745 819,486 
Total assets$29,319,945 $34,255,284 
Liabilities and Stockholders’ Equity
Transaction deposits$776,500 $3,853 2.01 %$2,432,687 $3,962 0.66 %
Savings deposits11,195,402 105,707 3.83 %10,420,545 8,583 0.33 %
Time deposits1,430,657 10,534 2.99 %1,038,722 1,085 0.42 %
Total interest bearing deposits13,402,559 120,094 3.63 %13,891,954 13,630 0.40 %
Short-term borrowings1,242,881 14,744 4.81 %1,770,781 758 0.17 %
Long-term debt931,796 14,983 6.52 %929,005 10,595 4.63 %
Total interest bearing liabilities15,577,236 149,821 3.90 %16,591,740 24,983 0.61 %
Non-interest bearing deposits10,253,731 14,235,749 
Other liabilities436,621 243,141 
Stockholders’ equity3,052,357 3,184,654 
Total liabilities and stockholders’ equity$29,319,945 $34,255,284 
Net interest income$235,504 $184,043 
Net interest margin3.33 %2.23 %
Net interest spread1.55 %1.93 %
(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.

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Volume/Rate Analysis
The following table presents the changes in taxable equivalent net interest income and identifies the changes due to differences in the average volume of earning assets and interest bearing liabilities and the changes due to differences in the average interest rate on those assets and liabilities.
Three Months Ended March 31, 2023/2022
 Net
Change		Change Due To(1)
(in thousands)VolumeYield/Rate(2)
Interest income
Investment securities$7,549 $1,842 $5,707 
Interest bearing cash and cash equivalents58,865 (1,262)60,127 
Loans held for sale825 531 294 
Loans held for investment, mortgage finance(14,938)(18,517)3,579 
Loans held for investment123,998 (803)124,801 
Total interest income176,299 (18,209)194,508 
Interest expense
Transaction deposits(109)(2,695)2,586 
Savings deposits97,124 631 96,493 
Time deposits9,449 406 9,043 
Short-term borrowings13,986 (221)14,207 
Long-term debt4,388 32 4,356 
Total interest expense124,838 (1,847)126,685 
Net interest income$51,461 $(16,362)$67,823 
(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 $235.3 million for the three months ended March 31, 2023, compared to $183.5 million for the same period in 2022. The increase was primarily due to an increase in yields on average earnings assets, partially offset by rising funding costs and a decrease in total average earning assets.
Average earning assets decreased $5.2 billion for the three months ended March 31, 2023, compared to the same period in 2022, which included decreases of $3.0 billion in average interest-bearing cash and cash equivalents and $2.5 million in loans held for investment, mortgage finance. Average interest-bearing liabilities decreased $1.0 billion for the three months ended March 31, 2023, compared to the same period in 2022, primarily due to decreases of $489.4 million in average interest-bearing deposits and $527.9 million in average short-term borrowings. Average demand deposits for the three months ended March 31, 2023 decreased to $10.3 billion from $14.2 billion for the same period in 2022.
Net interest margin for the three months ended March 31, 2023 was 3.33%, compared to 2.23% for the same period of 2022. The increase was primarily due to the effect of rising interest rates on earning asset yields and a shift in earning asset composition, partially offset by higher funding costs, also as a result of rising interest rates, compared to the same period in 2022.
The yield on total loans held for investment increased to 6.46% for the three months ended March 31, 2023, compared to 3.59% for the same period in 2022, and the yield on earning assets increased to 5.45% for the three months ended March 31, 2023, compared to 2.54% for the same period in 2022. Total cost of deposits increased to 2.06% for the three months ended March 31, 2023 from 0.20% for the same period in 2022 and total funding costs, including all deposits, long-term debt and stockholders' equity, increased to 2.10% for the three months ended March 31, 2023, compared to 0.30% for the same period in 2022.
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Non-interest Income 
Three Months Ended March 31,
(in thousands)20232022
Service charges on deposit accounts$5,022 $6,115 
Wealth management and trust fee income3,429 3,912 
Brokered loan fees1,895 3,970 
Investment banking and trading income18,768 4,179 
Other8,289 2,107 
Total non-interest income$37,403 $20,283 
Non-interest income increased by $17.1 million during the three months ended March 31, 2023 to $37.4 million, compared to $20.3 million for the same period in 2022. The increase was primarily due to increases in investment banking and trading income and other non-interest income, partially offset by a decrease in brokered loans fees.
Non-interest Expense 
Three Months Ended March 31,
(in thousands)20232022
Salaries and benefits$128,670 $99,859 
Occupancy expense9,619 8,885 
Marketing9,044 4,977 
Legal and professional14,514 10,302 
Communications and technology17,523 14,700 
Federal Deposit Insurance Corporation insurance assessment2,170 3,981 
Other12,487 10,388 
Total non-interest expense$194,027 $153,092 
Non-interest expense for the three months ended March 31, 2023 increased $40.9 million compared to the same period in 2022, primarily due to an increase in salaries and benefits expense, resulting from an increase in headcount, as well as increases in marketing, legal and professional, and communications and technology expenses.
Analysis of Financial Condition
Loans Held for Investment
The following table summarizes the Company’s loans held for investment on a gross basis by portfolio segment. See Note 1 - Operations and Summary of Significant Accounting Policies included in the 2022 Form 10-K for details of these portfolio segments.
(in thousands)March 31, 2023December 31, 2022
Commercial$9,514,781 $8,902,948 
Energy1,294,671 1,159,296 
Mortgage finance4,060,570 4,090,033 
Real estate5,272,443 5,198,643 
Gross loans held for investment$20,142,465 $19,350,920 
Gross loans held for investment were $20.1 billion at March 31, 2023, an increase of $791.5 million from December 31, 2022. The Company experienced broad-based loan growth across all loan categories, except for mortgage finance loans, as it has continued to execute on its long-term strategy. Mortgage finance loans relate to the mortgage warehouse lending operations in which the Company purchases mortgage loan ownership interests that are typically sold within 10 to 20 days and represent 20% of total loans held for investment at March 31, 2023 compared to 21% at December 31, 2022. Volumes fluctuate based on the level of market demand for the product and the number of days between purchase and sale of the loans, which can be affected by changes in overall market interest rates, and tend to peak at the end of each month. Mortgage finance loan balances have declined as compared to December 31, 2022 as interest rates have continued to rise during 2023.
The Company originates a substantial majority of all loans held for investment. The Company also participates in syndicated loan relationships, both as a participant and as an agent. As of March 31, 2023, the Company had $4.3 billion in syndicated loans, $1.2 billion of which the Company administered as agent. All syndicated loans, whether the Company acts as agent or participant, are underwritten to the same standards as all other loans the Company originates. As of March 31, 2023, $3.2 million of syndicated loans were on non-accrual.
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Portfolio Concentrations
Although more than 50% of the Company’s total loan exposure is outside of Texas and more than 50% of deposits are sourced outside of Texas, Texas concentration remains significant. As of March 31, 2023, a majority of the loans held for investment, excluding mortgage finance and other national lines of business, were to businesses with headquarters or operations in Texas. This geographic concentration subjects the Company’s loan portfolio to the general economic conditions within this state. The risks created by this concentration have been considered by management in the determination of the appropriateness of the allowance for credit losses.
Non-performing Assets
Non-performing assets include non-accrual loans and leases and repossessed assets. The table below summarizes non-accrual loans by type and by type of property securing the credit.
(dollars in thousands)March 31, 2023December 31, 2022
Non-accrual loans held for investment
Commercial:
Business assets$86,020 $41,448 
Accounts receivable and inventory859 1,405 
Other61 564 
Total commercial86,940 43,417 
Energy:
Oil and gas properties3,477 3,658 
Total energy3,477 3,658 
Real estate:
Business assets— — 
Commercial property3,534 1,263 
Single family residences— — 
Total real estate3,534 1,263 
Total non-accrual loans held for investment$93,951 $48,338 
Non-accrual loans held for sale— — 
Other real estate owned (“OREO”)— — 
Total non-performing assets$93,951 $48,338 
Non-accrual loans held for investment to total loans held for investment0.47 %0.25 %
Total non-performing assets to total assets0.33 %0.17 %
Allowance for credit losses on loans to non-accrual loans held for investment2.8x5.2x
Loans held for investment past due 90 days and accruing$3,098 $131 
Loans held for investment past due 90 days to total loans held for investment0.02 %— %
Loans held for sale past due 90 days and accruing$— $— 
Summary of Credit Loss Experience
The provision for credit losses, comprised of a provision for loans and off-balance sheet credit losses, is a charge to earnings to maintain the allowance for credit losses at a level consistent with management’s assessment of expected losses at each balance sheet date. Below is a discussion of provision for credit losses on loans. 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 $27.4 million provision for credit losses on loans for the three months ended March 31, 2023 compared to a negative provision of $1.2 million for the three months ended March 31, 2022. The $27.4 million provision for credit losses on loans resulted from updated views on the downside risks to the economic forecast and increases in net charge-offs and criticized loans. The Company recorded $19.9 million in net charge-offs, related primarily to a single commercial loan, during the three months ended March 31, 2023 compared to $512,000 in net recoveries during the same period in 2022. Criticized loans totaled $561.1 million at March 31, 2023, compared to $513.2 million and $476.1 million at December 31, 2022 and March 31, 2022, respectively.
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The table below presents key metrics related to the Company’s credit loss experience: 
March 31, 2023March 31, 2022
Allowance for credit losses on loans to total loans held for investment1.30 %0.97 %
Allowance for credit losses on loans to average total loans held for investment(1)1.38 %0.99 %
Total allowance for credit losses to total loans held for investment1.41 %1.05 %
Total provision for credit losses to average total loans held for investment(1)(2)0.60 %(0.04)%
(1)    Ratios are calculated using average balance for the three months ended March 31, 2023 and 2022, respectively.
(2) Ratios are annualized utilizing provision for credit losses for the three months ended March 31, 2023 and 2022, respectively.
The table below details net charge-offs/(recoveries) as a percentage of average total loans by loan category:
Three Months Ended March 31,
20232022
Net
Charge-offs		Net Charge-offs
to Average
Loans(1)		Net
Charge-offs		Net Charge-offs
to Average
Loans(1)
Commercial$19,916 0.88 %$(107)— %
Energy(6)— %(755)(0.40)%
Mortgage finance— — %— — %
Real Estate— — %350 0.03 %
Total$19,910 0.43 %$(512)(0.01)%
(1)Ratios are annualized utilizing net charge-offs for the three months ended March 31, 2023 and 2022, respectively.
Liquidity and Capital Resources
Liquidity
In general terms, liquidity is a measurement of the Company’s ability to meet its cash needs. The Company’s objectives in managing its liquidity are to maintain the ability to meet loan commitments, repurchase investment securities and repay deposits and other liabilities in accordance with their terms, without an adverse impact on current or future earnings. The Company’s liquidity strategy is guided by policies, formulated and monitored by senior management and the Asset and Liability Management Committee (“ALCO”), which take into account the demonstrated marketability of the Company’s assets, the sources and stability of its funding and the level of unfunded commitments. The Company regularly evaluates all of its various funding sources with an emphasis on accessibility, stability, reliability and cost-effectiveness. The Company’s principal source of funding is customer deposits, supplemented by short-term borrowings, primarily from federal funds purchased and FHLB borrowings, which are generally used to fund mortgage finance assets and long-term debt. The Company also relies on the availability of the mortgage secondary market provided by Ginnie Mae and the government sponsored entities to support the liquidity of mortgage finance assets.
The following table summarizes the Company’s interest bearing cash and cash equivalents:
(dollars in thousands)March 31, 2023December 31, 2022
Interest bearing cash and cash equivalents$3,385,494 $4,778,623 
Interest bearing cash and cash equivalents as a percent of:
Total loans held for investment16.9 %24.8 %
Total earning assets12.3 %17.4 %
Total deposits15.3 %20.9 %
Liquidity to support growth in loans held for investment has been fulfilled primarily through growth in customer deposits. The Company’s goal is to obtain as much of its funding for loans held for investment and other earning assets as possible from customer deposits, which are generated principally through development of long-term customer relationships, with a significant focus on treasury management products. As of March 31, 2023, estimated uninsured deposits represented 45% of total deposits. In addition, the Company also has access to deposits through brokered channels. The following table summarizes period-end total deposits:
(dollars in thousands)March 31, 2023December 31, 2022
Balance% of TotalBalance% of Total
Customer deposits$20,795,335 93.8 %$21,247,999 93.0 %
Brokered deposits1,384,362 6.2 %1,608,881 7.0 %
Total deposits$22,179,697 100.0 %$22,856,880 100.0 %
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The Company has short-term borrowing sources available to supplement deposits and meet its funding needs. Such borrowings are generally used to fund mortgage finance loans, due to their liquidity, short duration and interest spreads available. These borrowing sources include federal funds purchased from downstream correspondent bank relationships (which consist of banks that are smaller than the Bank) and from upstream correspondent bank relationships (which consist of banks that are larger than the Bank), customer repurchase agreements and advances from the FHLB and the Federal Reserve. The following table summarizes short-term borrowings, all of which mature within one year:
(in thousands)March 31, 2023December 31, 2022
Repurchase agreements$— $1,142 
FHLB borrowings2,100,000 1,200,000 
Total short-term and other borrowings$2,100,000 $1,201,142 
The following table summarizes the Company’s short-term borrowing capacities net of balances outstanding:
(in thousands)March 31, 2023December 31, 2022
FHLB borrowing capacity relating to loans and pledged securities$3,175,863 $2,621,218 
FHLB borrowing capacity relating to unencumbered securities2,635,859 3,539,297 
Total FHLB borrowing capacity(1)$5,811,722 $6,160,515 
Unused federal funds lines available from commercial banks$1,471,000 $1,479,000 
Unused Federal Reserve borrowings capacity$3,858,755 $3,574,762 
Unused revolving line of credit(2)$100,000 $75,000 
(1)FHLB borrowings are collateralized by a blanket floating lien on certain real estate secured loans, mortgage finance assets and certain pledged securities.
(2)Unsecured revolving, non-amortizing line of credit with maturity date of February 8, 2024. Proceeds may be used for general corporate purposes, including funding regulatory capital infusions into the Bank. The loan agreement contains customary financial covenants and restrictions. No borrowings were made against this line of credit during the three months ended March 31, 2023.
The Company has long-term debt outstanding of $932.1 million as of March 31, 2023, comprised of trust preferred securities, subordinated notes and senior unsecured credit linked notes with maturity dates ranging from September 2024 to December 2036. See Note 5 - Short-Term Borrowings and Long-Term Debt in the accompanying notes to the consolidated financial statements included elsewhere in this report for additional information. The Company may consider raising additional capital, if needed, in public or private offerings of debt or equity securities to supplement deposits and meet its long-term funding needs.
As the Company is a holding company and is a separate operating entity from the Bank, the Company’s primary sources of liquidity are dividends received from the Bank and borrowings from outside sources. Banking regulations may limit the amount of dividends that may be paid by the Bank. See Note 7 - Regulatory Ratios and Capital in the accompanying notes to the consolidated financial statements included elsewhere in this report for additional information regarding dividend restrictions and “Liquidity Risks” included in Part I, Item 1A of the 2022 Form 10-K.
Periodically, based on market conditions and other factors, and subject to compliance with applicable laws and regulations and the terms of its existing indebtedness, the Company may repay, repurchase, exchange or redeem outstanding indebtedness, or otherwise enter into transactions regarding debt or capital structure. For example, the Company periodically evaluates and may engage in liability management transactions, including repurchases or redemptions of outstanding subordinated notes, which may be funded by the issuance of, or exchanges of, newly issued unsecured borrowings to actively manage the debt maturity profile and interest cost.
Capital Resources
The Company’s equity capital averaged $3.1 billion for the three months ended March 31, 2023 compared to $3.2 billion for the same period in 2022. The decrease relates to the shares of Company stock that have been repurchased during the previous 12 months. The Company has not paid any cash dividends on common stock since operations commenced and has no plans to do so in the foreseeable future.
In January 2023, the Company completed the full $150,0 million of repurchases authorized by the Company’s board of directors on April 19, 2022. On January 18, 2023, the Company’s board of directors authorized a new share repurchase program under which the Company may repurchase up to $150.0 million in shares of outstanding common stock. Any repurchases under the repurchase program have been made in accordance with applicable securities laws in open market or private transactions. The extent to which the Company repurchases shares, and the timing of such repurchases, will be at management’s discretion and will depend upon a variety of factors, including market conditions, capital position and amount of retained earnings, regulatory requirements and other considerations. No time limit was set for the completion of the share repurchase program, and the program may be suspended or discontinued at any time. During the three months ended March 31, 2023, the Company repurchased 1,011,909 shares of its common stock for an aggregate purchase price of $59.7 million, at a weighted average price
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of $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.
For additional information on the Company’s capital and stockholders’ equity, see Note 7 - Regulatory Ratios and Capital in the accompanying notes to the consolidated financial statements included elsewhere in this report.
Critical Accounting Estimates
SEC guidance requires disclosure of “critical accounting estimates.” The SEC defines “critical accounting estimates” as those estimates made in accordance with generally accepted accounting principles that involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on the financial condition or results of operations of the registrant.
The Company follows financial accounting and reporting policies that are in accordance with accounting principles generally accepted in the United States. The more significant of these policies are summarized in Note 1 - Operations and Summary of Significant Accounting Policies in the notes to the consolidated financial statements included elsewhere in this report. Not all significant accounting policies require management to make difficult, subjective or complex judgments. However, the policy noted below could be deemed to meet the SEC’s definition of a critical accounting policy.
Allowance for Credit Losses
Management considers the policies related to the allowance for credit losses as the most critical to the financial statement presentation. The total allowance for credit losses includes activity related to allowances calculated in accordance with Accounting Standards Codification 326, Credit Losses. The allowance for credit losses is established through a provision for credit losses charged to current earnings. The amount maintained in the allowance reflects management’s continuing evaluation of the credit losses expected to be recognized over the life of the loans in the Company’s portfolio. The allowance for credit losses on loans is a valuation account that is deducted from the loans' amortized cost basis to present the net amount expected to be collected on the loans. For purposes of determining the allowance for credit losses, the loan portfolio is segregated by product types in order to recognize differing risk profiles among categories, and then further segregated by credit grades. Loans that do not share risk characteristics are evaluated on an individual basis and are not included in the collective 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 to historical loss information are made to incorporate the reasonable and supportable forecast of future losses at the portfolio segment level, as well as any necessary qualitative adjustments using a Portfolio Level Qualitative Factor (“PLQF”) and/or a Portfolio Segment Level Qualitative Factor (“SLQF”). 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 March 31, 2023, the quantitative estimate of the allowance for credit loss would increase by approximately $143.0 million under sole consideration of the most severe downside scenario. The quoted sensitivity calculation reflects the sensitivity of the modeled allowance estimate to macroeconomic forecast data, but is absent of qualitative overlays and other qualitative adjustments that are part of the quarterly reserving process and does not necessarily reflect the nature and extent of future changes in the allowance for reasons including increases or decreases in qualitative adjustments, changes in the risk profile and size of the portfolio, changes in the severity of the macroeconomic scenario and the range of scenarios under management consideration.
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ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Market risk represents the potential economic loss on trading and non-trading portfolios and financial instruments due to adverse price movements in markets including interest rates, foreign exchange rates, credit spreads, commodity prices and equity and related implied volatility levels.
The Company is subject to market risk primarily through the effect of changes in interest rates on its portfolio of assets held for purposes other than trading and interest rate derivative instruments that are used for managing interest rate risk.
In addition, the Company has exposure to market risk through its trading desk that engages in fixed income and equity securities, derivatives and foreign exchange transactions to support the investing and hedging activities of customers. The Company uses Value-at-Risk (“VaR”) as a means to measure, monitor, and limit aggregate market risk on the trading portfolio. VaR is a statistical risk measure estimating potential loss at the 95th percentile based on a one-year history of market risk factors associated with the trading portfolio. VaR provides a consistent cross-asset measure for risk profiles and allows for diversification benefit based on historical correlations across market moves. All statistical models involve a degree of uncertainty and VaR is calculated at a statistical confidence interval of the 95th percentile based on one-year daily historic market moves. Larger economic losses are possible, particularly during stressed macroeconomic and market conditions.
The responsibility for managing market risk rests with the ALCO, which operates under policy guidelines established by the Company’s board of directors. Oversight of the Company’s compliance with the guidelines is the ongoing responsibility of the ALCO, with exceptions reported to the Executive Risk Committee and the board of directors, if necessary, on a quarterly basis.
Interest Rate Risk Management
The Company’s interest rate sensitivity as of March 31, 2023 is illustrated in the following table. The table reflects rate-sensitive positions as of March 31, 2023 and is not necessarily indicative of positions on other dates. The table does take into account the effect of the Company’s derivatives designated as cash flow hedges. The balances of interest rate sensitive assets and liabilities are presented in the periods in which they next reprice to market rates or mature and are aggregated to show the interest rate sensitivity gap. The mismatch between repricings or maturities within a time period is commonly referred to as the “gap” for that period. A positive gap (asset sensitive), where interest rate-sensitive assets exceed interest rate sensitive liabilities, generally will result in the net interest margin increasing in a rising rate environment and decreasing in a falling rate environment. A negative gap (liability sensitive) will generally have the opposite results on the net interest margin. Certain variable rate loans have embedded floors which limit the decline in yield on those loans at times when market interest rates are extraordinarily low. The degree of asset sensitivity, spreads on loans and net interest margin may be reduced until rates increase by an amount sufficient to eliminate the effects of floors. The adverse effect of floors as market rates increase may also be offset by the positive gap, the extent to which rates on deposits and other funding sources lag increasing market rates for loans and changes in composition of funding.
(in thousands)0-3 months4-12 months1-3 years3+ yearsTotal
Assets
Interest bearing cash and cash equivalents$3,385,494 $— $— $— $3,385,494 
Investment securities(1)45,030 244,602 261,821 3,794,516 4,345,969 
Variable loans18,436,757 263,569 31,497 289,861 19,021,684 
Fixed loans22,392 81,532 160,731 883,734 1,148,389 
Total loans(2)18,459,149 345,101 192,228 1,173,595 20,170,073 
Total interest sensitive assets$21,889,673 $589,703 $454,049 $4,968,111 $27,901,536 
Liabilities
Interest bearing customer deposits$11,260,363 $— $— $— $11,260,363 
CDs520,805 837,973 59,784 189 1,418,751 
Total interest bearing deposits11,781,168 837,973 59,784 189 12,679,114 
Short-term borrowings2,100,000 — — — 2,100,000 
Long-term debt386,400 — 174,262 371,457 932,119 
Total borrowings2,486,400 — 174,262 371,457 3,032,119 
Total interest sensitive liabilities$14,267,568 $837,973 $234,046 $371,646 $15,711,233 
GAP$7,622,105 $(248,270)$220,003 $4,596,465 $— 
Cumulative GAP$7,622,105 $7,373,835 $7,593,838 $12,190,303 $12,190,303 
Non-interest bearing deposits9,500,583 
Stockholders’ equity3,079,974 
Total$12,580,557 
(1)Available-for-sale debt securities and equity securities based on fair market value.
(2)Total loans include gross loans held for investment and loans held for sale.
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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 non-interest bearing deposits and stockholders’ equity. Management performs a sensitivity analysis to identify interest rate risk exposure on net interest income. Management also quantifies and measures interest rate risk exposure using a model to dynamically simulate the effect of changes in net interest income relative to changes in interest rates over the next twelve months based on three interest rate scenarios. These are a static rate scenario and two “shock test” scenarios.
These scenarios are based on interest rates as of the last day of a reporting period published by independent sources and incorporate relevant spreads of instruments that are actively traded in the open market. The Federal Reserve’s federal funds target affects short-term borrowing; the prime lending rate, SOFR, Bloomberg Short Term Yield Index and other alternative indexes are the basis for most of the variable-rate loan pricing. The 10-year treasury rate is also monitored because of its effect on prepayment speeds for mortgage-backed securities. These are the Company’s primary interest rate exposures. Interest rate derivative contracts may be used to manage exposure to adverse fluctuations in these primary interest rate exposures as is discussed in more detail under the heading Use of Derivatives to Manage Interest Rate and Other Risks below.
For modeling purposes, the “shock test” scenarios as of March 31, 2023 assume immediate, sustained 100 and 200 basis point increases in interest rates as well as 100 and 200 basis point decreases in interest rates. As of March 31, 2022, the scenarios assumed a sustained 100 and 200 basis point increase in interest rates. As short-term rates remained low during the first quarter of 2022, the Company did not believe that analysis of an assumed decrease in interest rates would provide meaningful results. The Company will continue to evaluate these scenarios as interest rates change.
During the first quarter of 2023, the Company’s interest rate risk exposure model incorporated updated assumptions regarding the level of interest rate, including indeterminable maturity deposits (non-interest bearing deposits, interest bearing transaction accounts and savings accounts) and loan and security prepayments behaviors for a given level of market rate change. In the current environment of changing short-term rates, deposit pricing can vary by product and customer. These assumptions have been developed through a combination of historical analysis and projection of future expected pricing behavior. Changes in prepayment behavior of mortgage-backed securities, residential and commercial mortgage loans in each rate environment are captured using industry estimates of prepayment speeds for various coupon segments of the portfolio. The impact of these changes is factored into the simulation model results for 2023. This modeling indicated interest rate sensitivity as follows:
 Anticipated Impact Over the Next Twelve Months as Compared to Most Likely Scenario
  
March 31, 2023March 31, 2022
IncreaseDecreaseIncrease
(in thousands)100 bps200 bps100 bps200 bps100 bps200 bps
Change in net interest income$33,709 $67,032 $(46,393)$(93,297)$70,943 $149,105 
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 15 - Derivative Financial Instruments in the accompanying notes to the consolidated financial statements included elsewhere in this report.
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LIBOR Transition
In 2017, the U.K. Financial Conduct Authority announced that it would no longer compel banks to submit rates for the calculation of LIBOR after 2021. The administrator of LIBOR extended publication of the most commonly used U.S. dollar LIBOR settings to June 30, 2023 and ceased publishing other LIBOR settings on December 31, 2021. The U.S. federal banking agencies issued guidance strongly encouraging banking organizations to cease using U.S. dollar LIBOR as a reference rate in new contracts as soon as practicable and in any event by December 31, 2021. On March 15, 2022, President Biden signed into law the “Adjustable Interest Rate (LIBOR) Act,” as part of the Consolidated Appropriations Act, 2022, which provides for a statutory transition to a replacement rate selected by the Federal Reserve based on the SOFR for contracts referencing LIBOR that contain no fallback provisions or ineffective fallback provisions, unless a replacement rate is selected by a determining person as outlined in the statute. On December 16, 2022, the Federal Reserve adopted a final rule implementing the Adjustable Interest Rate (LIBOR) Act by identifying benchmark rates based on SOFR that will replace LIBOR in certain financial contracts after June 30, 2023. The Company has significant but declining exposure to financial instruments with attributes that are either directly or indirectly dependent on LIBOR to establish their interest rate and/or value, some of which mature after June 30, 2023. The Company established a working group, consisting of key stakeholders from throughout the company, to monitor developments relating to LIBOR changes and to guide the Bank’s response. This team has worked to successfully ensure that technology systems are prepared for the transition, loan documents that reference LIBOR-based rates have been appropriately amended to reference other methods of interest rate determinations and internal and external stakeholders have been apprised of the transition. Based on the transition progress to date, the Company ceased originating LIBOR-based products and began originating alternative indexed products in December 2021. The Company will continue to transition all remaining LIBOR-based products to an alternative benchmark. The Company will also continue to evaluate the transition process and align its trajectory with regulatory guidelines regarding the cessation of LIBOR as well as monitor new developments for transitioning to alternative reference rates.
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ITEM 4.    CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our management, with the supervision and participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the design and operation of our 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 concluded that, as of the end of such period, our 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 or submit under the Exchange Act and were effective in ensuring that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to the Company's management, including our 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 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 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
Other than the risk factors set forth below, there have been no material changes in the risk factors previously disclosed in the 2022 Form 10-K.
Recent negative developments affecting the banking industry, and resulting media coverage, have eroded customer confidence in the banking system. The recent high-profile bank failures involving Silicon Valley Bank and Signature Bank have generated significant market volatility among publicly traded bank holding companies and, in particular, regional banks like the Company. These market developments have negatively impacted customer confidence in the safety and soundness of regional banks. As a result, customers may choose to maintain deposits with larger financial institutions or invest in higher yielding short-term fixed income securities, all of which could materially adversely impact the Company’s liquidity, loan funding capacity, net interest margin, capital and results of operations. While the Department of the Treasury, the Federal Reserve, and the FDIC have made statements ensuring that depositors of these recently failed banks would have access to their deposits, including uninsured deposit accounts, there is no guarantee that such actions will be successful in restoring customer confidence in regional banks and the banking system more broadly.
Rising interest rates have decreased the value of the Company’s held-to-maturity securities portfolio, and the Company would realize losses if it were required to sell such securities to meet liquidity needs. As a result of inflationary pressures and the resulting rapid increases in interest rates over the last year, the trading value of previously issued government and other fixed income securities has declined significantly. These securities make up a majority of the securities portfolio of most banks in the U.S., including the Company’s, resulting in unrealized losses embedded in the held-to-maturity portion of U.S. banks’ securities portfolios. While the Company does not currently intend to sell these securities, if the Company were required to sell such securities to meet liquidity needs, it may incur losses, which could impair the Company’s capital, financial condition, and results of operations and require the Company to raise additional capital on unfavorable terms, thereby negatively impacting its profitability. While the Company has taken actions to maximize its funding sources, there is no guarantee that such actions will be successful or sufficient in the event of sudden liquidity needs. Furthermore, while the Federal Reserve Board has announced a Bank Term Funding Program available to eligible depository institutions secured by U.S. treasuries, agency debt and mortgage-backed securities, and other qualifying assets as collateral at par, to mitigate the risk of potential losses on the sale of such instruments, there is no guarantee that such programs will be effective in addressing liquidity needs as they arise.
Any regulatory examination scrutiny or new regulatory requirements arising from the recent events in the banking industry could increase the Company’s expenses and affect the Company’s operations. The Company also anticipates increased regulatory scrutiny – in the course of routine examinations and otherwise – and new regulations directed towards banks of similar size to the Bank, designed to address the recent negative developments in the banking industry, all of which may increase the Company’s costs of doing business and reduce its profitability. Among other things, there may be an increased focus by both regulators and investors on deposit composition and the level of uninsured deposits. As primarily a commercial bank, the Bank has a high degree of uninsured deposits compared to larger national banks or smaller community banks with a stronger focus on retail deposits. As a result, the Bank could face increased scrutiny or be viewed as higher risk by regulators and the investor community.
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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 three months ended March 31, 2023 as follows:
Total Number ofApproximate Dollar Value
Shares Purchased as Partof Shares That May Yet
Total Number ofAverage Price Paidof Publicly AnnouncedBe Purchased Under the
Shares Purchasedper Share(2)Plans or Programs(1)Plans or Programs(1)
January 2023564,206 $61.50 564,206 $150,000,000 
February 2023— — — 150,000,000 
March 2023447,703 55.80 447,703 125,019,420 
Total1,011,909 $58.98 1,011,909 $125,019,420 
(1)    On April 19, 2022, the Company’s board of directors authorized a share repurchase program under which the Company could repurchase up to $150.0 million in shares of its outstanding common stock. In January 2023, the Company completed the full $150.0 million of repurchases authorized under this plan. On January 18, 2023, the Company’s board of directors authorized a new share repurchase program under which the Company may repurchase up to $150.0 million in shares of its outstanding common stock. Any repurchases under the repurchase program will be made in accordance with applicable securities laws from time to time in open market or private transactions. The extent to which the Company repurchases shares, and the timing of such repurchases, will be at management’s discretion and will depend upon a variety of factors, including market conditions, the Company’s capital position and amount of retained earnings, regulatory requirements and other considerations. No time limit was set for the completion of the share repurchase program, and the program may be suspended or discontinued at any time.
(2)    The aggregate purchase price and weighted average price per share does not include the effect of excise tax expense incurred on net stock repurchases. For the quarter ended March 31, 2023, excise tax expense totaled $540,000.
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ITEM 6.     EXHIBITS, FINANCIAL STATEMENT SCHEDULES
(a) Exhibits

10.1
10.2
10.3
31.1
31.2
32.1
32.2
101.INSXBRL 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.SCHXBRL Taxonomy Extension Schema Document*
101.CALXBRL Taxonomy Extension Calculation Linkbase Document*
101.DEFXBRL Taxonomy Extension Definition Linkbase Document*
101.LABXBRL Taxonomy Extension Label Linkbase Document*
101.PREXBRL Taxonomy Extension Presentation Linkbase Document*
104Cover 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: April 20, 2023
/s/ J. Matthew Scurlock
J. Matthew Scurlock
Chief Financial Officer
(Duly authorized officer and principal financial officer)
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