Texas Capital Bancshares (NASDAQ: TCBI) outlines 2025 capital strength, Texas focus and key risks
Filing Impact
Filing Sentiment
Form Type
10-K
Rhea-AI Filing Summary
Texas Capital Bancshares, Inc., the parent of Texas Capital Bank and Texas Capital Securities, files its annual report describing a Texas‑focused, full‑service commercial banking and capital markets platform. The company serves business, entrepreneur and individual clients primarily in major Texas cities and select national niches such as mortgage finance and homebuilder finance.
Management emphasizes a strategy of being a leading Texas‑based financial services firm while maintaining strong liquidity, reserves and capital; as of December 31, 2025, the bank reports capital ratios above “well‑capitalized” regulatory thresholds. The filing details extensive regulatory oversight, capital and liquidity rules, consumer protection, cybersecurity, anti‑money‑laundering and CRA obligations.
The report also outlines a broad risk framework, including intense competition, concentration in Texas (including exposure to real estate and the energy‑linked economy), credit quality, interest rate and market risks, operational and technology risks such as AI and cyber threats, and evolving legal and regulatory requirements. As of December 31, 2025, the company employed 1,785 people, with most based in Texas, and had an aggregate non‑affiliate market value of approximately $3.57 billion as of June 30, 2025 and 44,176,837 common shares outstanding on February 9, 2026.
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
| Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. | |||||
For the fiscal year ended December 31 , 2025
| 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)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification Number) | |||||||
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| (Address of principal executive offices) | (Zip Code) | |||||||||||||||||||
(Registrant’s telephone number, including area code)
Securities registered under Section 12(b) of the Exchange Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||||||||
Securities registered under Section 12(g) of the Exchange Act: None
Indicate by check mark if the issuer is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐
Indicate by check mark if the issuer is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
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):
| x | 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 has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. Yes ☒ No ☐
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by an of the registrant’s executive officers during the relevant recovery period pursuant to Section 240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of June 30, 2025, the last business day of the registrant’s most recently completed second fiscal quarter, the aggregate market value of the shares of common stock held by non-affiliates, based on the closing price per share of the registrant’s common stock as reported on The Nasdaq Global Select Market, was approximately $3,569,474,000 .
There were 44,176,837 shares of the registrant’s common stock outstanding on February 9, 2026.
Document Incorporated by Reference
Parts of the registrant’s Proxy Statement for the registrant’s 2026 Annual Meeting of Stockholders are incorporated by reference into Part III of this Annual Report on Form 10-K.
TABLE OF CONTENTS
| PART I | ||||||||
Forward-Looking Statements | 3 | |||||||
| Item 1. | Business | 4 | ||||||
| Item 1A. | Risk Factors | 14 | ||||||
| Item 1B. | Unresolved Staff Comments | 28 | ||||||
| Item 1C. | Cybersecurity | 28 | ||||||
| Item 2. | Properties | 29 | ||||||
| Item 3. | Legal Proceedings | 30 | ||||||
| Item 4. | Mine Safety Disclosures | 30 | ||||||
| PART II | ||||||||
| Item 5. | Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities | 30 | ||||||
| Item 6. | Reserved | 31 | ||||||
| Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 32 | ||||||
| Item 7A. | Quantitative and Qualitative Disclosure About Market Risk | 45 | ||||||
| Item 8. | Financial Statements and Supplementary Data | 47 | ||||||
| Item 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosures | 83 | ||||||
| Item 9A. | Controls and Procedures | 83 | ||||||
| Item 9B. | Other Information | 85 | ||||||
| Item 9C. | Disclosure Regarding Foreign Jurisdictions that Prevent Inspections | 85 | ||||||
| PART III | ||||||||
| Item 10. | Directors, Executive Officers and Corporate Governance | 85 | ||||||
| Item 11. | Executive Compensation | 85 | ||||||
| Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters | 85 | ||||||
| Item 13. | Certain Relationships and Related Transactions, and Director Independence | 85 | ||||||
| Item 14. | Principal Accounting Fees and Services | 85 | ||||||
| PART IV | ||||||||
| Item 15. | Exhibits, Financial Statement Schedules | 85 | ||||||
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Forward-Looking Statements
Certain statements and financial analysis contained in this report that are not historical facts may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, regarding, among other things, the Company’s financial condition, results of operations, business plan and future performance. These forward-looking statements are based on beliefs, assumptions and expectations of future performance taking into account all information available to us at the time such statements are made. Forward-looking statements may often be identified by the use of words such as “believes,” “projects,” “expects,” “may,” “estimates,” “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, guidance, expectations and future plans.
Because forward-looking statements relate to future results and occurrences, they are subject to inherent and various uncertainties, risks, and changes in circumstances that are difficult to predict, may change over time, are based on management’s expectations and assumptions at the time the statements are made and are not guarantees of future results. Numerous risks and other factors, many of which are beyond management’s control, could cause actual results to differ materially from future results expressed or implied by such forward-looking statements. While there can be no assurance that any list of risks is complete, important risks and other factors that could cause actual results to differ materially from those contemplated by forward-looking statements include, but are not limited to: economic or business conditions in Texas, the United States or globally that impact the Company or its customers; negative credit quality developments arising from the foregoing or other factors, including recent trade policies and their impact on the Company’s customers; increased or expanded competition from banks and other financial service providers in the Company’s markets; the Company’s ability to effectively manage its liquidity and maintain adequate regulatory capital to support its businesses; the Company’s ability to pursue and execute upon growth plans, whether as a function of capital, liquidity or other limitations; the Company’s ability to successfully execute its business strategy, including its strategic plan and developing and executing new lines of business and new products and services and potential strategic acquisitions; the extensive regulations to which the Company is subject and its ability to comply with applicable governmental regulations, including legislative and regulatory changes; the Company’s ability to effectively manage information technology systems, including third party vendors, cyber or data privacy incidents or other failures, disruptions or security breaches; the Company’s ability to use technology to provide products and services to its customers; risks related to the development and use of artificial intelligence; changes in interest rates, including the impact of interest rates on the Company’s securities portfolio and funding costs, as well as related balance sheet implications stemming from the fair value of the Company’s assets and liabilities; the effectiveness of the Company’s risk management processes strategies and monitoring; fluctuations in commercial and residential real estate values, especially as they relate to the value of collateral supporting the Company’s loans; the failure to identify, attract and retain key personnel and other employees; adverse developments in the banking industry and the potential impact of such developments on customer confidence, liquidity and regulatory responses to these developments, including in the context of regulatory examinations and related findings and actions; negative press and social media attention with respect to the banking industry or the Company, in particular; claims, litigation or regulatory investigations and actions that the Company may become subject to; and severe weather, natural disasters, climate change, acts of war, terrorism, global or other geopolitical conflicts, or other external events, as well as related legislative and regulatory initiatives.
These statements are not guarantees of future performance and are subject to future events, risks and uncertainties - many of which are beyond the Company’s control, dependent on the actions of third parties, or are currently unknown to the Company - as well as potentially inaccurate assumptions that could cause actual results to differ materially from the Company’s historical experience and the Company’s expectations and projections. These risks and uncertainties include, but are not limited to, those described in Part I, Item 1A. Risk Factors, and elsewhere in this report and also as described from time to time in reports subsequently filed with the U.S. Securities and Exchange Commission (“SEC”). You should read such information in conjunction with the Company’s consolidated financial statements and related notes and Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. The factors discussed herein are not intended to be a complete summary of all risks and uncertainties that may affect the Company’s businesses. There also may be other factors that the Company cannot anticipate or that are not described herein, generally because the Company does not currently perceive them to be material. Such factors could cause results to differ materially from the Company’s expectations. Forward-looking statements included herein speak only as of the date hereof and should not be relied upon as representing the Company’s expectations or beliefs as of any date subsequent to the date of this report. Except as required by law, the Company undertakes no obligation to revise any forward-looking statements contained in this report, whether as a result of new information, future events or otherwise. You are advised, however, to review any further disclosures the Company make on related subjects in filings with the SEC and in other public statements.
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ITEM 1. BUSINESS
Background
Texas Capital Bancshares, Inc. (“TCBI” or the “Company”) is a registered bank holding company and a full-service financial services firm that delivers customized solutions to businesses, entrepreneurs and individual customers. TCBI is headquartered in Dallas, with primary banking offices in Austin, Dallas, Fort Worth, Houston and San Antonio, and has built a network of clients across the country.
The Company’s business activities are conducted primarily through its wholly-owned bank subsidiary Texas Capital Bank (the “Bank”) and its wholly-owned non-bank subsidiary, TCBI Securities Inc., doing business as Texas Capital Securities. The Bank is a Texas state-chartered bank. Texas Capital Securities is a registered broker-dealer with the SEC and a member of the Financial Industry Regulatory Authority (“FINRA”) and Municipal Securities Rulemaking Board (“MSRB”).
The Company was incorporated as a Delaware corporation in 1996 and commenced banking operations in 1998.
Effective September 19, 2025, the Bank became a member of the Federal Reserve System. As a result, the Board of Governors of the Federal Reserve System assumed the role as the Bank’s primary federal regulator, succeeding the Federal Deposit Insurance Corporation. The Texas Department of Banking continues to serve as the Bank’s primary state regulator.
Business Strategy and Markets
The Company was founded with an entrepreneurial culture and a mission to build a commercial banking presence across Texas. Drawing on the banking experience and business and community ties of management, the Company’s strategy has evolved to become the leading Texas-based full-service financial services firm that can seamlessly serve the best clients in its markets through the entirety of their life cycles. A core tenet of this strategy is the maintenance of financial resiliency through market and rate cycles enabling the Company to serve its clients, access markets, and support its communities through changing market conditions. The Company is well positioned with a wide range of relevant products and services and seeks to maintain best-in-class levels of liquidity, credit reserves and capital.
Competition
The Company’s business is concentrated in Texas which is a highly competitive market for banking and other financial services. TCBI primarily competes with global, national, regional, and local bank holding companies and commercial banks. The largest banking organizations operating in Texas are headquartered outside of the state and are controlled by out-of-state organizations. TCBI also competes with other providers of financial services, such as non-bank financial institutions, commercial finance and leasing companies, consumer finance companies, financial technology companies, securities firms, insurance companies, full-service brokerage firms and discount brokerage firms, credit unions and savings and loan associations. As a tenet of TCBI’s strategic plan, the Company believes that commercial businesses, entrepreneurs and professionals are interested in banking with a company both headquartered and with decision-making authority based in Texas.
The Company’s banking centers in its target markets are served by experienced bankers with expertise in the specific industries found in their market areas and established community ties. The Company believes it is positioned to offer clients more responsive, comprehensive and personalized service and advice than its competitors. By providing effective service to these customers, the Company strives to establish and maintain “first call” relationships, and provide services and solutions responsive to the banking needs of its customers, thereby strengthening its market presence and financial returns.
While the Texas market continues to be central to its growth and success, the Company has built several lines of business that offer specialized solutions, products and services to businesses and individuals regionally and nationwide, including mortgage finance, homebuilder finance, corporate and investment banking and Bask Bank. Bask Bank is an online division of the Bank that offers depositors American Airlines AAdvantage® miles in lieu of cash interest as well as traditional interest bearing deposit products, such as checking accounts, savings accounts and certificates of deposit. The Company believes these business lines offer profitable opportunities outside of Texas.
Products and Services
The Company offers a variety of loan, deposit account and other financial products and services to its customers.
Business Customers. The Company offers an extensive range of products and services oriented to the needs of its business customers, including commercial loans; real estate term and construction loans; mortgage warehouse lending and mortgage finance services; treasury management services and solutions, including online banking, foreign exchange and debit and credit card services; investment banking and advisory services; and letters of credit.
Individual Customers. The Company also provides comprehensive banking services for its individual customers including personal wealth management and trust services; certificates of deposit; interest bearing and non-interest bearing checking
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accounts; traditional money market and savings accounts; loans, both secured and unsecured; online and mobile banking; investment banking and advisory services; and Bask Bank.
Lending Activities
The Bank targets its lending to commercial businesses, entrepreneurs and professionals who meet certain desired client characteristics and credit standards. The credit standards are set by a Credit Policy Committee under the leadership of the Chief Credit Officer, who is charged with ensuring that all loans in the portfolio meet the Bank’s credit standards. The Credit Policy Committee is comprised of senior Bank officers, including the Chief Risk Officer, the Chief Credit Officer and other Bank officers as deemed appropriate, and is subject to oversight by the Risk Committee of the Company's board of directors. The Company believes it maintains an appropriately diversified loan portfolio. Credit policies and underwriting guidelines are tailored to address the unique risks associated with each industry represented in the portfolio. Of note, the Company’s mortgage finance business encounters seasonal demands for credit, surges and declines in consumer demand driven by changes in interest rates and month-end upticks of residential mortgage closings.
The credit standards for commercial borrowers are based on numerous criteria with respect to the borrower, including historical and projected financial information, strength of management, acceptable collateral and associated advance rates, and market conditions and trends in the borrower’s industry. In addition, prospective loans are analyzed based on current industry concentrations in the loan portfolio to identify and manage the risks presented by concentration of loans in any particular industry. The Company believes its credit standards are consistent with achieving its business objectives in the markets it serves and are an important part of the Company’s risk mitigation strategy. The Company believes that it is differentiated from its competitors by its client selection, focus on and targeted marketing to its core customers and by its ability to tailor its products to the individual needs of its customers.
The Company generally extends variable rate loans in which the interest rate fluctuates with a specified reference rate and may provide for a minimum floor rate. The use of variable rate loans is designed to protect the Company from risks associated with interest rate fluctuations since the rates of interest earned will automatically reflect such fluctuations.
Treasury Solutions and Deposit Products
The Bank offers treasury solutions and deposit products to meet its customers’ evolving needs. For commercial business customers, the Bank offers a full suite of deposit solutions including checking, money market savings, and sweep accounts with competitive industry rates. Treasury products offered include payment and receivables solutions ranging from instant payments, wire, ACH, commercial card, merchant, and lockbox solutions underpinned by a digital platform that supports a broad range of payment capabilities, information reporting and liquidity management solutions.
Personal banking deposit products offered by the Bank include checking accounts, savings accounts, money market accounts and certificates of deposit. Personal banking deposit customers have online and mobile access to fully manage their accounts leveraging features that include funds transfers, peer-to-peer payments, bill pay, wire transfer requests, remote check deposit and more.
Private Banking
The Bank offers a comprehensive suite of private banking services, including investment management, lending solutions, depository products, financial planning, insurance services and trust and estate planning services. Private Banking Advisors work with clients to define financial objectives, develop long-term strategies and coordinate services. Investment Advisors work alongside clients to develop an individually tailored investment program that aligns with each client’s unique financial goals, aspirations and risk tolerance. These services are supported by ongoing financial planning services, enabling clients to monitor progress towards achieving long-term financial objectives.
Investment Banking
The Company offers a full suite of investment banking products and services to clients. Investment banking professionals provide financial advisory, securities underwriting, sales and trading, research and other services by leveraging their knowledge of industry dynamics, transaction structures and market conditions complemented by a network of investors, buyers, lenders and other capital sources, to assist clients in completing a variety of transactions. Additionally, the Company offers services to manage interest rate and foreign exchange risks, and enable market access by offering sales, trading and other institutional services.
Human Capital
The Company desires to attract, develop, engage and retain the best talent in its markets, based on qualifications, skills and experience, and to plan for succession of key talent and executives to achieve its strategic objectives. The Company regularly evaluates the resources available to employees to address professional, financial and health-related matters, by seeking employee input through surveys. The Compensation and Human Capital Committee of the Company’s board of directors
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provides oversight of human capital management, including talent management, executive succession planning, and company culture and engagement.
The Company culture is performance-driven where decisions regarding hiring, promotions, compensation, and other opportunities are made with an emphasis on merit and individual contributions. Equally important, creating and maintaining a respectful workplace is a priority where the Company strives to foster a culture where all individuals feel safe and appreciated for who they are and the value they bring to the organization. This means treating everyone – colleagues, clients, and partners – with professionalism and courtesy, regardless of differences in personal background, perspectives, or experiences. Communication and collaboration is promoted across all levels of the organization, encouraging employees to share their ideas and insights. The Company believes that a respectful culture is one where every individual feels respected and where healthy dialogue helps drive innovation, creativity, and quality results. To reinforce this culture, all employees are expected to act with integrity, exhibit professionalism, and respect their coworkers.
The Company offers a comprehensive benefits program to its employees and designs compensation programs to attract, retain and motivate employees that align with Company performance. The Company’s performance management process is designed to foster succession planning deeper into the organization. The Company utilizes feedback from exit interviews to drive improvements where possible.
The Company has training and development programs, which include job profiles for roles across the Company with skills, knowledge, and abilities to empower employees to focus on targeted skill development and career ownership. Further, the Company uses leadership models that identify the critical skills and behaviors necessary to be successful at the Company, and success profiles that describe the critical knowledge, skills and abilities needed for each role.
To help employees be successful in their roles, the Company utilizes a human capital management system, which among other things, facilitates streamlined Human Resources (“HR”) processes, creating a more favorable employee experience and engagement in HR-related activities.
At December 31, 2025, the Company had 1,785 employees, nearly all of whom are full time. Due to the Company’s significant Texas-based operations, the majority of its employees are based in Texas.
None of the Company’s employees are represented by a collective bargaining agreement, and management considers relations with employees to be good, with good engagement.
Regulation and Supervision
General. The Company is subject to extensive federal and state laws and regulations that impose specific requirements and provide regulatory oversight of virtually all aspects of its operations. These laws and regulations generally are intended for the protection of depositors, the Deposit Insurance Fund (“DIF”) of the Federal Deposit Insurance Corporation (“FDIC”) and the stability of the U.S. banking system as a whole, rather than for the protection of stockholders and creditors.
The following discussion summarizes certain laws, regulations and policies to which the Company is subject. It does not address all applicable laws, regulations and policies that affect the Company currently or might affect it in the future. This discussion is qualified in its entirety by reference to the full texts of the laws, regulations and policies described.
TCBI’s activities are governed by the Bank Holding Company Act of 1956, as amended (the “BHCA”). It is subject to primary regulation, supervision and examination by the Board of Governors of the Federal Reserve System (the “Federal Reserve”) pursuant to the BHCA. The Company files quarterly reports and other information with the Federal Reserve. As a public company, the Company also files reports with the SEC and is subject to its regulatory authority, including the disclosure and regulatory requirements of the Securities Act of 1933, as amended (the “Securities Act”), and the Securities Exchange Act of 1934, as amended (the “Exchange Act”), with respect to the Company’s securities, financial reporting and certain governance matters. Because TCBI’s securities are listed on the Nasdaq Global Select Market (“Nasdaq”), the Company is subject to Nasdaq's rules for listed companies, including rules relating to corporate governance.
The Bank is organized as a Texas state-chartered member bank, and is subject to primary regulation, supervision and examination by the Texas Department of Banking and the Federal Reserve. The Bank’s activities are also subject to regulation by the FDIC, which provides insurance for certain of the Bank’s deposits as permitted by law, the Consumer Financial Protection Bureau (the “CFPB”) and by certain other federal and state agencies.
Texas Capital Securities is subject to the jurisdiction of several regulatory bodies, including the SEC, FINRA, MSRB and state securities regulators. The SEC and FINRA have active enforcement functions that oversee broker-dealers and investment advisers and can bring actions that result in fines, restitution, limitation on permitted activities, disqualification to continue to conduct certain activities and an inability to rely on certain favorable exemptions. In addition, certain changes in the activities of a broker-dealer require approval from FINRA, and FINRA considers a variety of factors in acting upon applications for such approval, including internal controls, capital levels, management experience and quality, prior enforcement and disciplinary history, and supervisory concerns.
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Bank Holding Company Regulation. The BHCA limits the Company’s business to banking, managing or controlling banks and other activities that the Federal Reserve has determined to be closely related to banking or managing or controlling banks as to be a proper incident thereto. The Gramm-Leach-Bliley Act of 1999, as amended (the “GLB”), allows bank holding companies meeting certain management, capital and Community Reinvestment Act standards to elect to be treated as a financial holding company that may offer customers a more comprehensive array of financial products and services. The Company qualifies for and has elected to register with the Federal Reserve as a financial holding company. This authorizes it to engage in any activity that is either (i) financial in nature or incidental to such financial activity, as determined by the Federal Reserve, or (ii) complementary to a financial activity, so long as the activity does not pose a substantial risk to the safety and soundness of the Bank or the financial system generally, as determined by the Federal Reserve. Examples of non-banking activities that are financial in nature include securities underwriting and dealing, insurance underwriting, providing investment and financial advice, leasing personal property and making merchant banking investments.
As a financial holding company, the Company is permitted to conduct permissible new financial activities or acquire permissible non-bank financial companies with after-the-fact notice to the Federal Reserve. In order for the Company to undertake certain new activities permitted by the BHCA and the GLB, the Company must be considered “well capitalized” (as defined below) and well managed, the Bank must have received a rating of at least “satisfactory” in its most recent examination under the Community Reinvestment Act, and must notify the Federal Reserve within 30 days of engaging in the new activity.
Under the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), TCBI is expected to act as a source of financial strength to the Bank and to commit resources to its support. Such support may be required even at times when a holding company may not be in a financial position, or otherwise inclined, to provide such resources or when doing so is not in the interest of the bank holding company or its shareholders or creditors. Additionally, regulators may require a bank holding company to make capital injections into a troubled subsidiary bank and may charge the bank holding company with engaging in unsafe and unsound practices if the bank holding company fails to commit resources to such a subsidiary bank or if it undertakes actions that the Federal Reserve believes might jeopardize the bank holding company’s ability to commit resources to such subsidiary bank. TCBI could in certain circumstances be required to guarantee the capital restoration plan of the Bank if it became undercapitalized. Capital loans by the Company to the Bank would be subordinate in right of payment to deposits and certain other debts of the Bank. In the event of the Company’s bankruptcy, any commitment by the Company to a federal bank regulatory agency to maintain the capital of the Bank would be assumed by the bankruptcy trustee and entitled to a priority of payment.
It is the policy of the Federal Reserve that bank holding companies may maintain their existing rate of cash dividends on common stock only out of net income available over the past year and only if the prospective rate of earnings retention is consistent with the organization’s expected future capital needs, asset quality and financial condition. As a general matter, the Federal Reserve expects a bank holding company’s board of directors to inform it and to eliminate, defer or significantly reduce the bank holding company’s dividends if (i) the bank holding company’s net income available to stockholders for the past four quarters, net of dividends previously paid during that period, is not sufficient to fully fund the dividends, (ii) the bank holding company’s prospective rate of earnings retention is not consistent with the company’s capital needs and overall current and prospective financial condition or (iii) the bank holding company will not meet, or is in danger of not meeting, its minimum regulatory capital adequacy ratios. The policy provides that bank holding companies may not pay cash dividends in an amount that would undermine the holding company’s ability to serve as a source of strength to its banking subsidiary.
With certain limited exceptions, the BHCA and the Change in Bank Control Act of 1978, as amended (the “CIBC Act”), together with regulations promulgated thereunder, prohibit a person or company or a group of persons deemed to be an association or “acting in concert” from, directly or indirectly, acquiring 10% or more (5% or more if the acquirer is a bank holding company) of any class of the Company’s voting stock or obtaining the ability to control in any manner the election of a majority of the Company’s directors or otherwise direct the management or policies of the Company without prior notice or application to and the approval of the Federal Reserve.
If, in the opinion of the applicable federal bank regulatory authorities, a depository institution or holding company is engaged in or is about to engage in an unsafe or unsound practice (which could include the payment of dividends or repurchase or redemptions of securities), such authority may require, generally after notice and hearing, that such institution or holding company cease and desist such practice. The federal banking agencies have indicated that paying dividends that deplete a depository institution’s or holding company’s capital base to an inadequate level would be such an unsafe or unsound banking practice. Declaring or paying dividends that exceed its earnings for the relevant period could result in supervisory findings by the Federal Reserve. Federal Reserve regulations require that the Company, under certain circumstances, provide prior notice or obtain prior approval for redemptions or repurchases of its equity securities. Under such regulations, the Federal Reserve may disapprove such actions if the Federal Reserve finds that they would constitute an unsafe or unsound practice or violate any law or Federal Reserve order.
Regulation of the Bank by the Texas Department of Banking and the Federal Reserve. Pursuant to applicable Texas and federal law, Texas state-chartered banks are permitted to engage in any activity permissible for national banks, including non-
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banking activities that are permissible for national banks. In addition, Texas state-chartered banks may engage in financial activities or activities incidental or complementary to a financial activity with prior approval.
The Bank is subject to continuous regulation, supervision and examination by the Texas Department of Banking and the Federal Reserve. The regulators monitor all areas of the Bank’s operations, including security devices and procedures, adequacy of capitalization and loss reserves, accounting treatment and impact on capital determinations, loans, investments, borrowings, deposits, liquidity, mergers, issuances of securities, payment of dividends, interest rate risk management, establishment of branches, corporate reorganizations, maintenance of books and records, and adequacy of staff training to carry on safe and sound lending and deposit gathering practices. Among other things, the Bank is required by its regulators to maintain specified capital ratios, file quarterly reports of its financial condition and results of operations and to obtain an annual audit of its financial statements.
Regulation of the Bank by the CFPB. The CFPB has regulation, supervision and examination authority over the Bank with respect to substantially all federal statutes and regulations protecting the interests of consumers of financial services, including but not limited to the Equal Credit Opportunity Act, the Fair Credit Reporting Act, the Truth in Lending Act, the Home Mortgage Disclosure Act, the Real Estate Settlement Procedures Act, the Fair Debt Collection Practices Act, the Truth in Savings Act, the Right to Financial Privacy Act and the Electronic Funds Transfer Act and their respective related regulations. Penalties for violating these laws and regulations could subject the Bank to lawsuits and administrative penalties, including civil monetary penalties, payments to affected consumers and orders to halt or materially change the Bank’s consumer banking activities. Notwithstanding ongoing, legal, budgetary and structural challenges affecting the CFPB, the CFPB remains an active federal regulatory agency with continuing supervisory and enforcement authority and retains its broad authority to pursue enforcement actions, including investigations, civil actions and cease and desist proceedings. The CFPB may also refer civil and criminal findings to the Department of Justice for prosecution. The Bank is also subject to other federal and state consumer protection laws and regulations that, among other things, prohibit unfair, deceptive and abusive, corrupt or fraudulent business practices, untrue or misleading advertising and unfair competition.
Capital Adequacy Requirements. The Company and the Bank are required under federal law implementing the Basel III Capital Rules to maintain certain minimum capital levels based on ratios of capital to total assets and capital to risk-weighted assets. The required capital ratios are minimums, and the Federal Reserve may determine that a banking organization based on its size, complexity, or risk profile must maintain a higher level of capital in order to operate in a safe and sound manner. Risks such as concentration of credit risks and the risk arising from nontraditional activities, as well as the institution’s exposure to a decline in the economic value of its capital due to changes in interest rates, and an institution’s ability to manage those risks, are important factors that are to be taken into account in assessing an institution’s overall capital adequacy. The following is a brief description of the relevant provisions of these capital rules and their potential impact on our capital levels.
The Company and the Bank are subject to the following risk-based capital ratios: a CET1 risk-based capital ratio, a Tier 1 risk-based capital ratio, which includes CET1 and additional Tier 1 capital, and a total risk-based capital ratio, which includes Tier 1 and Tier 2 capital. CET1 is primarily comprised of the sum of common stock instruments and related surplus net of treasury stock plus retained earnings less certain adjustments and deductions, including with respect to goodwill, intangible assets, mortgage servicing assets, and deferred tax assets subject to temporary timing differences. Additional Tier 1 capital is primarily comprised of non-cumulative perpetual preferred stock. Tier 2 capital consists of instruments disqualified from Tier 1 capital, including qualifying subordinated debt and a limited amount of loan loss reserves up to a maximum of 1.25% of risk-weighted assets, subject to certain eligibility criteria. The capital rules also define the risk-weights assigned to assets and off-balance sheet items to determine the risk-weighted asset components of the risk-based capital rules, including, for example, certain “high volatility” commercial real estate, past due assets, structured securities, and equity holdings.
The leverage capital ratio, which serves as a minimum capital standard, is the ratio of Tier 1 capital to quarterly average total consolidated assets net of goodwill, certain other intangible assets, and certain required deduction items. The required minimum leverage ratio for all banks and bank holding companies is 4%.
In addition, effective January 1, 2019, the capital rules required a capital conservation buffer of 2.5% above each of the minimum risk-based capital ratio requirements (CET1, Tier 1, and total capital), which is designed to absorb losses during periods of economic stress. These buffer requirements must be met for a bank or bank holding company to be able to pay dividends, engage in share buybacks, or make discretionary bonus payments to executive management without restriction.
The Federal Deposit Insurance Corporation Improvement Act of 1991 (“FDICIA”), among other things, requires the federal bank regulatory agencies to take “prompt corrective action” regarding depository institutions that do not meet minimum capital requirements. FDICIA establishes five regulatory capital tiers: “well capitalized,” “adequately capitalized,” “undercapitalized,” “significantly undercapitalized,” and “critically undercapitalized.” A depository institution’s capital tier will depend upon how its capital levels compare to various relevant capital measures and certain other factors, as established by regulation. FDICIA generally prohibits a depository institution from making any capital distribution (including payment of a dividend) or paying any management fee to its holding company if the depository institution would thereafter be undercapitalized. The FDICIA imposes progressively more restrictive restraints on operations, management, and capital distributions depending on the
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category in which an institution is classified. Undercapitalized depository institutions are subject to restrictions on borrowing from the Federal Reserve System. In addition, undercapitalized depository institutions may not accept brokered deposits absent a waiver from the FDIC, are subject to growth limitations, and are required to submit capital restoration plans for regulatory approval. A depository institution's holding company must guarantee any required capital restoration plan up to an amount equal to the lesser of 5% of the depository institution's assets at the time it becomes undercapitalized or the amount of the capital deficiency when the institution fails to comply with the plan. Federal banking agencies may not accept a capital plan without determining, among other things, that the plan is based on realistic assumptions and is likely to succeed in restoring the depository institution's capital. If a depository institution fails to submit an acceptable plan, it is treated as if it is significantly undercapitalized.
To be well-capitalized, the Bank must maintain at least the following capital ratios:
•6.5% CET1 to risk-weighted assets;
•8.0% Tier 1 capital to risk-weighted assets;
•10.0% Total capital to risk-weighted assets; and
•5.0% leverage ratio.
The Federal Reserve has not yet revised the well-capitalized standard for bank holding companies to reflect the higher capital requirements imposed under the current capital rules applicable to banks. For purposes of the Federal Reserve’s Regulation Y, including determining whether a bank holding company meets the requirements to be a financial holding company, bank holding companies, such as the Company, must maintain a Tier 1 risk-based capital ratio of 6.0% or greater and a total risk-based capital ratio of 10.0% or greater to be well-capitalized. The Federal Reserve may require bank holding companies, including the Company, to maintain capital ratios substantially in excess of mandated minimum levels depending upon general economic conditions and a bank holding company’s particular condition, risk profile, and growth plans. If the Federal Reserve were to apply the same or a similar well-capitalized standard to bank holding companies as are applicable to the Bank, the Company’s capital ratios as of December 31, 2025 would exceed such revised well-capitalized standard.
Failure to be well-capitalized or to meet minimum capital requirements could result in certain mandatory and possible additional discretionary actions by regulators that, if undertaken, could have a material adverse effect on our operations or financial condition. Failure to meet minimum capital requirements could also result in restrictions on the Company’s or the Bank’s ability to pay dividends or otherwise distribute capital or to receive regulatory approval of applications or other restrictions on its growth.
The Company and the Bank have met the capital adequacy requirements under the Basel III Capital Rules on a fully phased-in basis since it commenced filing of the applicable reports with its federal banking regulators, and as of December 31, 2025 the Bank's CET1 risk-based capital ratio, Tier 1 risk-based capital ratio, total risk-based capital ratio, and leverage ratio were in excess of the amounts required for the Bank to be classified as “well capitalized” for purposes of the FDIC’s prompt corrective action regulations.
Because the Company had less than $15 billion in total consolidated assets as of December 31, 2009, it is allowed to continue to classify its trust preferred securities, all of which were issued prior to May 19, 2010, as Tier 1 capital up to 25% of that measure. However, the treatment of existing trust preferred securities as capital may be subject to further regulatory change prior to their maturity, which could require the Company to seek additional capital. As a non-advanced approaches banking organization, the Company has elected to exclude the effects of certain accumulated other comprehensive income (“AOCI”) items included in stockholders’ equity for the determination of regulatory capital and capital ratios under the Basel III Capital Rules.
In August 2020, the U.S. federal banking agencies adopted a final rule altering the definition of eligible retained income in their respective capital rules. Under this rule, eligible retained income is the greater of a firm’s (i) net income for the four preceding calendar quarters, net of any distributions and associated tax effects not already reflected in net income, and (ii) average net income over the preceding four quarters. An institution’s eligible retained income, when considered in conjunction with capital ratios and the capital conservation buffer, provides limitations on capital distributions (including dividends and share repurchases) and certain executive compensation arrangements for the quarter following the calculation. As of December 31, 2025, the Company was permitted to use 100% of its eligible retained income for these purposes in the first quarter of 2026.
Regulators may change capital and liquidity requirements, including previous interpretations of practices related to risk weights, which could require an increase to the allocation of capital to assets held by the Bank. Regulators could also require the Company to make retroactive adjustments to financial statements to reflect such changes. A regulatory capital ratio or category may not constitute an accurate representation of a financial institution’s overall financial condition or prospects. The Company’s regulatory capital status is addressed in more detail under the heading “Liquidity and Capital Resources” within Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations and in Note 10 - Regulatory Ratios and Capital in the accompanying notes to the consolidated financial statements included elsewhere in this report.
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Federal bank regulators may set capital requirements for a particular banking organization that are higher than the minimum ratios when circumstances warrant. Federal banking guidelines provide that banking organizations experiencing significant growth or making acquisitions will be expected to maintain strong capital positions substantially above the minimum supervisory levels, without significant reliance on intangible assets. Concentration of credit risks, interest rate risk (imbalances in rates, maturities or sensitivities) and risks arising from non-traditional activities, as well as an institution’s ability to manage these risks, are important factors taken into account by regulatory agencies in assessing an organization’s overall capital adequacy.
The risk-based and leverage capital ratios established by federal banking regulators are minimum supervisory ratios generally applicable to banking organizations that meet specified criteria, assuming that they otherwise have received the highest regulatory ratings in their most recent examinations. Banking organizations not meeting these criteria are expected to operate with capital positions in excess of the minimum ratios. Regulators can, from time to time, change their policies or interpretations of banking practices to require changes in risk weights assigned to the Bank's assets or changes in the factors considered in order to evaluate capital adequacy, which may require the Bank to obtain additional capital to support existing asset levels or future growth or reduce asset balances in order to meet minimum acceptable capital ratios.
Liquidity Requirements. U.S. capital rules implementing the standards under the Basel III Capital Rules also include two quantitative liquidity tests for certain large banking organizations. One of the liquidity tests, referred to as the liquidity coverage ratio (“LCR”), is designed to ensure that a banking entity maintains an adequate level of unencumbered high-quality liquid assets equal to the entity’s expected net cash outflow for a 30-day time horizon (or, if greater, 25% of its expected total cash outflow) under an acute liquidity stress scenario.
The other test, referred to as the net stable funding ratio (“NSFR”), is designed to promote more medium- and long-term funding of the assets and activities of banking entities over a one-year time horizon. These requirements encourage the covered banking entities to increase their holdings of U.S. Treasury securities and other sovereign debt as a component of assets and to increase the use of long-term debt as a funding source.
While the LCR and NSFR tests are not currently applicable to the Company or the Bank, other relevant measures of liquidity are monitored by management and are reported to the board of directors. Regulators may change capital and liquidity requirements, including previous interpretations of practices related to risk weights, which could require an increase in liquid assets or in the necessary capital to support the assets held by the Bank. Regulators could also require the Company to make retroactive adjustments to financial statements and reported capital ratios to reflect such changes.
Stress Testing. Pursuant to the Dodd-Frank Act and regulations published by the federal bank regulatory agencies, the Company was required to conduct an annual “stress test” of capital and consolidated earnings and losses under a base case and two severely adverse stress scenarios provided by federal bank regulatory agencies from the years 2016 to 2018. In response to this requirement, the Company developed dedicated staffing, economic models, policies and procedures to implement stress testing on an annual basis, the results of which were furnished to regulators. The Economic Growth, Regulatory Relief and Consumer Protection Act, enacted in 2018 (the “Regulatory Relief Act”) terminated TCBI’s stress testing requirements, however, the Company created its own stress testing framework and continues to perform certain stress tests as a matter of good governance and risk management and has incorporated the economic models and information developed through the stress testing program into the Company’s risk management and business, capital and liquidity planning activities, which are subject to continuing regulatory oversight.
Privacy and Data Security. The financial privacy provisions of the GLB (and state law equivalents) generally prohibit financial institutions, including the Bank, from disclosing non-public personal financial information about customers to non-affiliated third parties unless customers have the opportunity to “opt out” of the disclosure and have not elected to do so. The Bank is required to comply with state laws regarding consumer privacy if they are more protective than the GLB.
The federal banking agencies have adopted guidelines for safeguarding confidential, personal customer information. The guidelines require each financial institution, under the supervision and ongoing oversight of its board of directors or an appropriate committee thereof, to create, implement and maintain a comprehensive written information security program designed to ensure the security and confidentiality of customer information, protect against any anticipated threats or hazards to the security or integrity of such information and protect against unauthorized access to or use of such information that could result in substantial harm or inconvenience to any customer. In addition, various U.S. regulators have increased their focus on cyber security through guidance, examinations and regulations. Banking organizations are required to notify their primary federal regulator within 36 hours of becoming aware of a “computer-security incident” that rises to the level of a “notification incident.”
In February 2018, the SEC published interpretive guidance to assist public companies in preparing disclosures about cybersecurity risks and incidents. These SEC guidelines, and any other regulatory guidance, are in addition to notification and disclosure requirements under state and federal banking law and regulations.
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In July 2023, the SEC issued a final rule to enhance and standardize disclosures regarding cybersecurity risk management, strategy, governance, and incident reporting by public companies that are subject to the reporting requirements of the Exchange Act. Specifically, the final rule requires current reporting about material cybersecurity incidents, periodic disclosures about a registrant’s policies and procedures to identify and manage cybersecurity risk, management’s role in implementing cybersecurity policies and procedures, and the board of directors’ cybersecurity expertise, if any, and its oversight of cybersecurity risk. See Item 1C. Cybersecurity for a discussion of the Company’s cybersecurity risk management, strategy and governance.
Privacy and data security areas, including cybersecurity, are expected to receive increased attention at the federal and state level and an increasing number of state laws and regulations have been enacted in recent years to implement privacy and cybersecurity standards and regulations, including data breach notification and data privacy requirements. Recently, several states have adopted regulations requiring certain financial institutions to implement cybersecurity programs that meet specified requirements. In addition, other jurisdictions in which customers do business, such as the European Union, have adopted similar requirements. This trend of activity is expected to continue to expand, requiring continual monitoring of developments in the states and nations in which the Company’s customers are located and ongoing investments in its information systems and compliance capabilities.
Community Reinvestment Act. The Community Reinvestment Act of 1977 (the “CRA”) requires depository institutions to assist in meeting the credit needs of their market areas consistent with safe and sound banking practice. Under the CRA, each depository institution is required to help meet the credit needs of its market areas by, among other things, providing credit, making investments and providing community development services to low- and moderate-income individuals and communities. Depository institutions are periodically examined for compliance with the CRA and are assigned one of four ratings. As with other regulatory matters, for purposes of the CRA the Bank is subject to examination by the Federal Reserve. In order for a financial holding company to commence new activity permitted by the BHCA, each insured depository institution subsidiary of the financial holding company must have received a rating of at least “satisfactory” in its most recent examination under the CRA. The Bank's strategic focus on serving commercial customers in regional and national markets from a limited number of branches makes it more challenging for it to satisfy CRA requirements as compared to banks of comparable size that focus on providing retail banking services in markets where they maintain a network of full-service branches.
On October 24, 2023, the Office of the Comptroller of the Currency (“OCC”), Federal Reserve, and FDIC issued a final rule to modernize their respective CRA regulations. The revised rules would have substantially altered the methodology for assessing compliance with the CRA, and likely would have made it more challenging and/or costly for the Bank to receive a rating of at least “satisfactory” on its CRA exam. Following its finalization on March 29, 2024, the 2023 modernization rule became subject to an ongoing injunction. On July 16, 2025, the OCC, Federal Reserve and the FDIC issued a joint proposal to rescind the 2023 modernization rule. The agencies continue to apply the CRA rules as they existed before the 2023 modernization, considering the injunction and pending finalization of the rescission of the modernization rule.
The USA PATRIOT Act, the International Money Laundering Abatement and Financial Anti-Terrorism Act and the Bank Secrecy Act. A major focus of U.S. government policy regarding financial institutions in recent years has been combating money laundering, terrorist financing and other illegal payments. The USA PATRIOT Act of 2001 (the “USA PATRIOT Act”) and Title III of the USA PATRIOT Act, known as the International Money Laundering Abatement and Financial Anti-Terrorism Act of 2001 substantially broadened the scope of U.S. anti-money laundering laws and penalties, specifically related to the Bank Secrecy Act of 1970 (“BSA”), and expanded the extra-territorial jurisdiction of the U.S. government in this area. Regulations issued under these laws impose obligations on financial institutions to maintain appropriate policies, procedures and controls to detect, prevent and report money laundering and terrorist financing and other suspicious activity and to verify the identity of their customers and apply additional scrutiny to customers considered to present greater than normal risk. Failure of a financial institution to maintain and implement adequate programs to combat money laundering and terrorist financing, or to comply with relevant laws or regulations, could have serious legal, reputational and financial consequences for the institution, and can include criminal pleas. Because of the significance of regulatory emphasis on these requirements, the Company has expended, and expects to continue to expend, significant staffing, technology and financial resources to maintain programs designed to ensure compliance with applicable laws and regulations and an effective audit function for testing BSA compliance on an ongoing basis.
The Anti-Money Laundering Act of 2020 (“AMLA”), which amends the BSA, was enacted in January 2021. The AMLA is intended to be a comprehensive reform and modernization to U.S. bank secrecy and anti-money laundering laws. Among other things, it codifies a risk-based approach to anti-money laundering compliance for financial institutions; requires the development of standards for evaluating technology and internal processes for BSA compliance; and expands enforcement- and investigation-related authority, including increasing available sanctions for certain BSA violations and instituting BSA whistleblower incentives and protections.
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In addition to the possible legal, reputational and financial consequences associated with an institution’s failure to comply with these laws, regulators evaluate the effectiveness of an applicant in combating money laundering when determining whether to approve a proposed bank merger, acquisition, restructuring or other expansionary activity.
Office of Foreign Assets Control. The U.S. Treasury Department’s Office of Foreign Assets Control (“OFAC”) is responsible for administering and enforcing economic and trade sanctions against specified foreign parties, including countries and regimes, foreign individuals and other foreign organizations and entities. OFAC publishes lists of prohibited parties that are regularly consulted by the Bank in the conduct of its business in order to ensure compliance. The Company is responsible for, among other things, blocking accounts of, and transactions with, prohibited parties identified by OFAC, avoiding unlicensed trade and financial transactions with such parties and reporting blocked transactions after their occurrence. Failure to comply with OFAC requirements could have serious legal, financial and reputational consequences for the Company.
Safe and Sound Banking Practices; Enforcement. Banks and bank holding companies are prohibited from engaging in unsafe and unsound banking practices. Bank regulators have broad authority to prohibit and penalize activities of bank holding companies and their subsidiaries which represent unsafe and unsound banking practices or which constitute violations of laws, regulations or written directives of or agreements with regulators. Regulators have considerable discretion in identifying what they deem to be unsafe and unsound practices and in pursuing enforcement actions in response to them.
The Federal Deposit Insurance Act (“FDIA”) requires federal bank regulatory agencies to prescribe, by regulation or guideline, operational and managerial standards for all insured depository institutions that relate to, among other things: (i) internal controls, information systems and audit systems; (ii) loan documentation; (iii) credit underwriting; (iv) interest rate exposure; (v) asset growth and quality; and (vi) compensation and benefits. Federal banking agencies have adopted regulations and Interagency Guidelines Prescribing Standards for Safety and Soundness to implement these requirements, which regulators use to identify and address problems at insured depository institutions before capital becomes impaired. If a regulator determines that a bank fails to meet any standards prescribed by the guidelines, the bank may be required to submit an acceptable plan to achieve compliance and agree to specific deadlines for the submission to and review by the regulator of reports confirming progress in implementing the safety and soundness compliance plan. Failure to implement such a plan may result in an enforcement action against the bank.
Enforcement actions against the Company, the Bank and their respective officers and directors may include the issuance of a written directive, the issuance of a cease-and-desist order that can be judicially enforced, the imposition of civil money penalties, the issuance of directives to increase capital, the issuance of formal and informal agreements, the issuance of removal and prohibition orders against officers or other institution-affiliated parties, the imposition of restrictions and sanctions under prompt corrective action regulations, the termination of deposit insurance (in the case of the Bank) and the appointment of a conservator or receiver for the Bank. Civil money penalties can be over $2 million for each day a violation continues.
Transactions with Affiliates and Insiders. The Bank is subject to Section 23A of the Federal Reserve Act, as amended (the “FRA”), which places limits on, among other covered transactions, the amount of loans or extensions of credit to affiliates that may be made by the Bank. Extensions of credit to affiliates must be adequately collateralized by specified amounts and types of collateral. Section 23A also limits the amount of loans or advances made by the Bank to third party borrowers that are collateralized by securities or obligations of the Bank’s affiliates. The Bank is also subject to Section 23B of the FRA, which, among other things, prohibits an institution from engaging in transactions with affiliates unless the transactions are on terms substantially the same, or at least as favorable to such institution or its subsidiaries, as those prevailing at the time for comparable transactions with non-affiliates. Generally, covered transactions with any affiliate are limited to 10% of the Bank’s capital stock and surplus and covered transactions with all affiliates are limited to 20% of the Bank’s capital stock and surplus.
The Company is subject to restrictions on extensions of credit to insiders (namely executive officers, directors, and 10% stockholders) and their related interests. These restrictions are contained in the FRA and Federal Reserve Regulation O and apply to all insured depository institutions as well as their subsidiaries and holding companies. These restrictions include limits on loans to any individual insider and such insider's related interests and certain conditions that must be met before such loans can be made. There is also an aggregate limitation on all loans to insiders and their related interests, which cannot exceed the institution’s total unimpaired capital and surplus, unless the FDIC determines that a lesser amount is appropriate. Insiders are subject to enforcement actions for knowingly accepting loans in violation of applicable restrictions.
Restrictions on Payment of Dividends by the Bank. TCBI is a legal entity separate and distinct from its subsidiaries and depends in part upon dividends received from its direct and indirect subsidiaries, including the Bank, to fund its activities. The sole source of funding of TCBI’s financial obligations has consisted of proceeds of capital markets transactions and cash payments from the Bank. The Bank is subject to federal banking law requirements concerning the payment of dividends, including, under the FDICIA, the Bank may not pay any dividend if it is undercapitalized or if payment would cause it to become undercapitalized. Certain contractual restrictions also may limit the ability of the Bank to pay dividends to the Company. No assurances can be given that the Bank will, in any circumstances, pay dividends to the Company.
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Limits on Compensation. The Federal Reserve, OCC and FDIC in 2010 issued comprehensive final guidance on incentive compensation policies for executive management of banks and bank holding companies. This guidance was intended to ensure that the incentive compensation policies of banking organizations do not undermine their safety and soundness by encouraging excessive risk-taking. The objective of the guidance is to ensure that incentive compensation arrangements (i) provide incentives that do not encourage excessive risk-taking, (ii) are compatible with effective internal controls and risk management and (iii) are supported by strong corporate governance, including oversight by the board of directors. In 2016, as required by the Dodd-Frank Act, the Federal Reserve, the FDIC and the SEC proposed rules that would, depending upon the assets of the institution, directly regulate incentive compensation arrangements and would require enhanced oversight and recordkeeping. As of December 31, 2025, these rules have not been implemented. In 2024, the FDIC, OCC, Federal Housing Finance Agency (“FHFA”) and National Credit Union Administration issued a proposed rule designed to implement Section 956 of the Dodd-Frank Act; however, this proposed rule was rescinded by the applicable agencies on March 3, 2025.
Deposit Insurance. The Bank’s deposits are insured through the DIF, which is administered by the FDIC, up to limits established by applicable law, currently $250,000 per depositor, per account ownership category, per bank. The FDIC determines quarterly deposit insurance assessments consisting of a percentage of an assessment base equal to the Bank’s average consolidated total assets less average tangible equity capital and the assignment of one of four risk categories based on supervisory evaluations, regulatory capital levels and certain other factors. The FDIC has the discretion to adjust an institution’s risk rating and may terminate its insurance of deposits upon a finding that the institution engaged or is engaging in unsafe and unsound practices, is in an unsafe or unsound condition to continue operations, or violated any applicable law, regulation, rule, order or condition imposed by the FDIC or written agreement entered into with the FDIC. The FDIC may also prohibit any FDIC-insured institution from engaging in any activity it determines to pose a serious risk to the DIF.
The FDIC assigns assessment rates based on a scorecard considering CAMELS component ratings, financial measures used to measure a bank's ability to withstand asset-related and funding-related stress, and a measure of loss severity that estimates the relative magnitude of potential losses to the FDIC in the event of the bank's failure, all subject to certain adjustments. As of June 30, 2020, the DIF reserve ratio fell to 1.30%, below the statutory minimum of 1.35%. The FDIC, as required under the FDIA, established a plan on September 15, 2020 to restore the DIF reserve ratio to meet or exceed the statutory minimum of 1.35% within eight years. On October 18, 2022, the FDIC adopted an amended restoration plan to increase the likelihood that the reserve ratio would be restored to at least 1.35% by September 30, 2028. The FDIC’s amended restoration plan increases the initial base deposit insurance assessment rate schedules uniformly by 2 basis points, which began the first quarterly assessment period of 2023.
In November 2023, the FDIC approved a final rule to implement a special assessment to recover the loss to the DIF associated with several bank failures that occurred during early 2023. The assessment base for the special assessment was equal to estimated uninsured deposits reported as of December 31, 2022, adjusted to exclude the first $5 billion, to be collected at an annual rate of approximately 13.4 basis points for an anticipated total of eight quarterly assessment periods, which began with the first quarterly assessment period of 2024. The FDIC could further increase the deposit insurance assessments for certain insured depository institutions, including the Bank, if the DIF reserve ratio was not restored as projected. Notwithstanding the FDIC’s ability to increase the special assessment, on December 16, 2025, the FDIC approved an interim final rule to amend the collection of the special assessment to recover the loss to the DIF arising from the 2023 bank failures. Through the first six quarterly collections of the special assessment, the FDIC collected $12.7 billion and anticipates collecting another $2.1 billion for the seventh quarter of the initial collection period. The interim final rule reduces the special assessment rate for the eighth collection quarter from 3.36 basis points to 2.97 basis points and is designed to allow for a full recovery to the FDIC and DIF while minimizing any amounts collected in excess of the estimated losses.
The Volcker Rule. The Dodd-Frank Act amended the BHCA to require the federal financial regulatory agencies to adopt rules that prohibit banks and their affiliates from engaging in proprietary trading in designated types of financial instruments and from investing in and sponsoring certain hedge funds and private equity funds. The Volcker Rule has not had a material effect on the Company’s operations. Unanticipated effects of the Volcker Rule’s provisions or future interpretations may have an adverse effect on business or services provided to the Bank by other financial institutions.
Debit Card Interchange Fees. Dodd-Frank includes a set of rules requiring that interchange transaction fees for electronic debit transactions be reasonable and proportional to certain costs associated with processing the transactions. Pursuant to the rules implemented by the Federal Reserve, interchange fees for electronic debit transactions are limited to 21 cents plus 0.05% of the transaction, plus an additional one cent per transaction fraud adjustment. These rules impose requirements regarding routing and exclusivity of electronic debit transactions, and generally require that debit cards be usable in at least two unaffiliated networks. On October 25, 2023, the Federal Reserve proposed to lower the maximum interchange fee that a large debit card issuer can receive for a debit card transaction. The proposal would also establish a regular process for updating the maximum amount every other year going forward. The Company continues to monitor the development of these proposed rule revisions.
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Broker-Dealer and Investment Advisor Regulation. TCBI’s broker-dealer and investment adviser subsidiary, Texas Capital Securities, is subject to regulation by the SEC and FINRA, who is the primary self-regulatory organization for Texas Capital Securities. The SEC and FINRA have active enforcement functions that oversee broker-dealers and investment advisers and can bring actions that result in fines, restitution, limitation on permitted activities, disqualification to continue to conduct certain activities and an inability to rely on certain favorable exemptions. In addition, certain changes in the activities of a broker-dealer require approval from FINRA for which FINRA considers a variety of factors in acting upon applications for such approval, including internal controls, capital levels, management experience and quality, prior enforcement and disciplinary history and supervisory concerns.
Future Legislation and Regulation. Laws, regulations and policies are continually under review by Congress, state legislatures and federal and state regulatory agencies. In addition to the specific legislation and regulations described above, future legislation and regulations or changes to existing statutes, regulations or regulatory policies applicable to the Company and its subsidiaries may affect the business, financial condition and results of operations in adverse and unpredictable ways and increase reporting requirements and compliance costs. The substance or impact of pending or future legislation or regulation, or the application thereof, cannot be predicted.
Available Information
Under the Exchange Act, the Company is required to file annual, quarterly and current reports, proxy statements and other information with the SEC. The SEC maintains a website at www.sec.gov that contains reports, proxy and information statements and other information that we file electronically with the SEC.
The primary address for the Company’s website is www.texascapital.com. The Company makes available, free of charge, on the Investor Relations section of its website, reports on Forms 10-K, 10-Q and 8-K, and amendments to those reports, as soon as reasonably practicable after such reports are filed with or furnished to the SEC. The information posted on the Company’s website is not incorporated by reference into this Annual Report on Form 10-K.
ITEM 1A. RISK FACTORS
The Company is subject to risk. The following discussion, along with management’s discussion and analysis and the financial statements and footnotes, sets forth the most significant risks and uncertainties that management believes could adversely affect the business, financial condition or results of operations. Additional risks and uncertainties that management is not aware of or that management currently deems immaterial may also have a material adverse effect on the business, financial condition or results of operations. There is no assurance that this discussion covers all potential risks that the Company faces. The occurrence of the described risks could cause results to differ materially from those described in its forward-looking statements included elsewhere in this report or in other filings with the SEC, and could have a material adverse impact on the business, financial condition or results of operations.
Summary of Risk Factors
The following is a summary of the most significant risks and uncertainties that management believes could adversely affect the business, financial condition or results of operations. In addition to the following summary, you should consider the other information set forth in this “Risk Factors” section and the other information contained in this report before investing in the Company’s securities.
Strategic Risks
•The Company competes with many banks and other traditional, non-traditional, brick and mortar and online financial service providers.
•The Company must effectively execute its business strategy in order to continue asset and earnings growth.
•The Company must be effective in developing and executing new lines of business and new products and services while managing associated risks, including the ability to use technology to provide products and services that will satisfy customer demands.
•The Company may pursue bank and non-bank acquisition opportunities as they arise. However, even if the Company identifies attractive acquisition opportunities, it may not be able to consummate such acquisitions on favorable terms, if at all, or realize the anticipated benefits from such acquisitions.
•If the Company does not respond to intense competition and rapid changes in the financial services industry or otherwise adapt to changing customer preferences, its financial performance may suffer.
•Industry adoption of real-time payments networks could negatively impact financial performance through reductions in product profitability, increased liquidity reserves and the potential for increased fraud losses, among other risks.
Credit Risks
•The Company must effectively manage its credit risks.
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•A significant portion of the Company’s assets consists of commercial loans, which may involve a higher degree of credit risk.
•The Company is subject to risks arising from conditions in the real estate market, as a significant portion of its loans are secured by commercial and residential real estate.
•Future profitability depends, to a significant extent, upon commercial business customers.
•The Company’s business is concentrated in Texas and exposure to the Texas economy, including the energy industry, could adversely affect its performance.
•The Company must maintain an appropriate allowance for credit losses.
•The Company must effectively manage its counterparty risk.
Liquidity Risks
•The Company must effectively manage its liquidity risk.
•The Company’s growth plans are dependent on the availability of capital and funding.
•The Company is dependent on funds obtained from borrowing or capital transactions or from the Bank and its other subsidiaries to fund its obligations.
Market Risks
•The Company must effectively manage its interest rate risk.
•Changes in interest rates affect the value of the Company’s securities portfolio, and the Company may realize losses if it were to sell such securities at a time when interest rates are higher than the yield on the Company’s securities portfolio.
•The Company must effectively manage market risk associated primarily with sales and trading activities.
Operational Risks
•The Company must continue to attract, retain and develop key personnel.
•The Company and its vendors and customers must effectively manage information systems and cyber risk and threats which may result in disruptions, failures or breaches in security, including a cyber-attack, which could cause significant harm to the Company and its clients and customers.
•The Company’s operations rely extensively on a broad range of external vendors.
•The development and use of AI presents risks and challenges that may adversely impact the Company’s business.
•The Company’s accounting estimates and risk management processes rely on management judgment, which may prove inadequate, wrong or be adversely impacted by inaccurate or mistakes in assumptions or models.
•The risk management strategies and processes may not be effective and the Company’s controls and procedures, including disclosure controls and procedures and internal control over financial reporting, may fail or be circumvented.
•The business is susceptible to fraud and conduct risk.
Legal, Regulatory and Compliance Risks
•The Company is subject to extensive government regulation and supervision and interpretations thereof.
•The Company must maintain adequate regulatory capital to support its business objectives and strategy.
•The Company is subject to claims and litigation in the ordinary course of its business, including claims that may not be covered by insurance.
•The Company could face serious negative consequences if its third-party service providers, business partners, customers or investments fail to comply with applicable laws, rules or regulations.
•Deposit insurance premiums levied against the Bank could increase.
Other Risks Affecting the Business
•The business faces unpredictable economic and business conditions.
•The soundness of other financial institutions could adversely affect the business.
•Negative developments affecting the banking industry, “contagion effects,” and resulting media coverage, have eroded customer confidence in the banking system.
•The Company is subject to environmental liability risk associated with lending activities.
•Severe weather, earthquakes, other natural disasters, climate change, pandemics, acts of war or terrorism and other external and geopolitical events could significantly impact the business.
•Negative public opinion could damage the Company’s reputation and adversely affect its earnings.
Risk Factors Associated with the Business
Strategic Risks
The Company competes with many banks and other traditional, non-traditional, brick and mortar and online financial service providers. Competition among providers of financial services in regional and national markets, and especially in Texas, is
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intense. The Company competes with other financial and bank holding companies, state, regional and national commercial banks, savings and loan associations, consumer finance companies, credit unions, securities brokerages, insurance companies, mortgage banking companies, money market mutual funds, asset-based non-bank lenders, government sponsored or subsidized lenders, financial technology companies and other financial services providers. Many of these competitors have greater financial resources, lending limits and technological resources and larger branch networks than the Company does and are able to offer a broader range of products and services than the Company can. Many competitors offer lower interest rates and more liberal loan terms that appeal to borrowers but adversely affect net interest margin and assurance of repayment. The Company is increasingly faced with competition in many of its products and services by non-bank providers who may have competitive advantages of size, access to potential customers and fewer regulatory requirements. Failure to compete effectively for deposit, loan and other banking customers in any of the lines of business could cause the Company to lose market share, slow or reverse growth rate or suffer adverse effects on financial condition, results of operations or profitability.
The Company must effectively execute its business strategy in order to continue asset and earnings growth. The Company’s core strategy is to become the leading full-service financial services firm in Texas by offering a differentiated banking experience to companies in high-value business segments. Its prospects for continued growth must be considered in light of the risks, expenses and difficulties frequently encountered by growing companies. In order to execute the Company’s business strategy successfully, the Company must, among other things:
•continue to identify and expand into suitable markets and lines of business, in Texas, regionally and nationally;
•develop new products and services and execute the full range of products and services more efficiently and effectively;
•attract and retain qualified front-line personnel in each of the targeted market segments to build and maintain and a strong customer base;
•respond to market opportunities promptly and nimbly while balancing the demands of risk management and compliance with regulatory requirements;
•expand loan portfolio in an intensely competitive environment while maintaining credit quality;
•attract sufficient deposits and capital to fund expected and anticipated loan growth and satisfy regulatory requirements;
•compete effectively for investment banking and broker-dealer customers;
•control expenses; and
•acquire and maintain sufficient qualified staffing and information technology and operational resources to support growth and compliance with regulatory requirements.
Failure to effectively execute the business strategy could have a material adverse effect on the business, future prospects, financial condition, results of operations or profitability.
The Company must be effective in developing and executing new lines of business and new products and services while managing associated risks, including the ability to use technology to provide products and services that will satisfy customer demands. The Company’s business strategy involves developing and growing new lines of business and offering new products and services, including through the introduction of new technologies, within existing lines of business to grow its client base, retain existing clients and realize strategic priorities for revenue growth. Substantial costs, risks and uncertainties are associated with these efforts, particularly in instances where the markets are not fully developed. Developing and marketing new activities requires that the Company invest significant time and resources before new sources of revenues, funding and profits can be realized. Timetables for the development and launch of new activities may not be achieved and price and profitability targets may not prove feasible, or their realization may be delayed. External factors, such as compliance with regulations, receipt of necessary licenses or permits, competitive alternatives and shifting market preferences, may also adversely impact the successful execution of new activities. New activities necessarily entail additional risks and may present additional risks to the effectiveness of the Company’s system of internal controls and risk management strategies. All service offerings, including current offerings and new activities, may become more risky due to changes in economic, competitive and market conditions beyond the Company’s control. Regulators could determine that the Company’s, the Bank’s or Texas Capital Securities’ risk management practices are not adequate or the Company’s, the Bank’s or Texas Capital Securities’ capital levels are not sufficiently in excess of well capitalized or adequately capitalized levels and take action to restrain growth. Failure to successfully manage these risks, generally and to the satisfaction of regulators, in the development and implementation of new lines of business or new products or services could have a material adverse effect on the business, results of operations and financial condition. Additionally, many of the Company’s larger competitors invest substantially greater resources in technological capabilities than the Company does. The Company may not be able to effectively protect, develop and manage mission critical systems and IT infrastructure to support strategic business initiatives, which could impair its ability to achieve financial, operational, compliance and strategic objectives and negatively affect the business, results of operations, financial condition or profitability.
The Company may pursue bank and non-bank acquisition opportunities as they arise. However, even if the Company identifies attractive acquisition opportunities, it may not be able to consummate such acquisitions on favorable terms, if at all, or realize the anticipated benefits from such acquisitions. While the Company continues to grow organically, it may pursue attractive bank or non-bank acquisition and consolidation opportunities that arise in the Company’s core markets and beyond. In the event
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that attractive acquisition opportunities arise, the Company would likely face competition for such acquisitions from other banking and financial companies, many of which have significantly greater resources and may offer more attractive valuations. This competition could either prevent the Company from being able to consummate attractive acquisition opportunities or increase the cost of potential acquisitions, which could reduce the Company’s potential returns and reduce the attractiveness of these opportunities. Furthermore, even if the Company is able to identify and complete acquisitions, the terms of such acquisitions may not be favorable to the Company or it may fail to realize the anticipated benefits from such acquisitions.
Acquisitions involve numerous risks and uncertainties, including inaccurate financial and operational assumptions. While the Company seeks to mitigate risks and liabilities in transactions through due diligence, there may be risks and liabilities that its due diligence efforts fail to discover, that are not accurately or completely disclosed to the Company or that are inadequately assessed. In addition, the Company may not be able to fully integrate the operations of any future acquired businesses within its own operations in an efficient and cost-effective manner or without significant disruption to the Company or the acquired companies’ existing operations. Moreover, acquisitions involve other significant risks and uncertainties, including difficulties integrating acquired personnel and corporate cultures into the Company’s business, the potential loss of key employees, changes in relationships with customers and other counterparties, difficulties in integrating information technology and accounting systems, the diversion of management attention and resources from existing operations and the possibility of litigation or other disputes.
The Company must satisfy a number of meaningful federal and state regulatory approvals before completing an acquisition of another bank, and if the Company were unable, or there was a perception that the Company would be unable, to obtain such approvals for any reason, including due to any actual or perceived capital, liquidity, profitability or regulatory compliance issues, it would prevent the Company’s ability to complete the acquisition and to consummate acquisitions in the future. Furthermore, an inability to satisfy other conditions necessary to consummate an acquisition transaction, such as third-party litigation, a judicial order blocking the transaction, or lack of shareholder approval, could also prevent the Company from completing an announced acquisition. Any acquisition could also be dilutive to the Company’s earnings and shareholders’ equity per share of the Company’s common stock.
If the Company does not respond to intense competition and rapid changes in the financial services industry or otherwise adapt to changing customer preferences, its financial performance may suffer. The Company’s ability to deliver strong financial performance and returns on investment to shareholders will depend in part on its ability to expand the scope of available financial services to meet the needs and demands of its customers. In addition to the challenge of competing against other banks in attracting and retaining customers for traditional banking services, the Company’s competitors also include securities dealers, brokers, investment advisors and specialty finance, telecommunications, technology and insurance companies as well as large retailers who seek to offer one-stop financial services in addition to other products and services desired by consumers that may include services that banks have not been able or allowed to offer to their customers in the past or may not be currently able or allowed to offer. Many of these other firms may be significantly larger than the Company and may have access to customers and financial resources that are beyond the Company’s capability. The Company competes with these firms with respect to capital, access to capital, revenue generation, products, services, transaction execution, innovation, reputation, talent and price. Further, as a result of the GENIUS Act, passed in 2025 to provide a regulatory framework for stablecoins in the U.S., increased competition may emerge from issuers of stablecoins and providers of related technology.
Industry adoption of real-time payments networks could negatively impact financial performance through reductions in product profitability, increased liquidity reserves and the potential for increased fraud losses, among other risks. With the launch of real-time payments networks, such as RTP® from The Clearing House and FedNow® from the Federal Reserve, instantaneous cash settlement capabilities are available 24 hours a day and 7 days a week. The implications of the new settlement capabilities are far reaching and have not yet significantly affected the banking industry. As market adoption increases, the Company may be required to hold more liquidity reserves in cash to facilitate cash settlement activity outside of traditional business hours. Additionally, instantaneous settlement will likely reduce float benefits associated with providing deposit and banking services, as well as pose incremental fraud risk due to a reduced ability to reverse fraudulent transactions due to the speed of money movement.
Credit Risks
The Company must effectively manage its credit risks. The risk of non-payment of loans is inherent in commercial banking, which may result from many factors, including:
•Adverse changes in local, U.S. and global economic and industry conditions, and other geopolitical events;
•Declines in the value of collateral, including asset values that are directly or indirectly related to external factors such as commodity prices, real estate values, interest rates or geopolitical risks;
•Concentrations of credit associated with specific loan categories, industries or collateral types; and
•Exposures to individual borrowers and to groups of entities that may be affiliated on some basis that individually and/or collectively represent a larger percentage of the Company’s total loans or capital than might be considered common at other banks of similar size.
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Although the Company attempts to manage its credit risk by carefully monitoring the concentration of its loans within specific loan categories and industries and through prudent loan approval and monitoring practices in all categories of lending, the Company cannot assure that its approval and monitoring procedures will reduce these lending risks. The Company’s significant number of large credit relationships (above $20 million) could exacerbate credit problems precipitated by a regional or national economic downturn. Competitive pressures could erode underwriting standards, leading to a decline in general credit quality and increases in credit defaults and non-performing asset levels. If the Company’s credit portfolio management routines, policies and procedures are not able to adequately adapt to changes in economic, competitive or other conditions that affect customers and the quality of the loan portfolio, the Company may incur increased losses that could adversely affect its financial results and lead to increased regulatory scrutiny, restrictions on its lending activity or financial penalties. Furthermore, the Company relies heavily on information provided by third parties when originating and monitoring loans. If this information is intentionally or negligently misrepresented and the Company does not detect such misrepresentations, the credit risk associated with the transaction may be increased.
A significant portion of the Company’s assets consists of commercial loans, which may involve a higher degree of credit risk. The Company generally invests a greater proportion of its assets in commercial loans to business customers than other banking institutions of its size, and its business plan calls for continued efforts to increase its assets invested in these loans. Commercial loans may involve a higher degree of credit risk than other types of loans due, in part, to their larger average size, the effects of changing economic conditions on the businesses of the Company’s commercial loan customers, the dependence of borrowers and counterparties on operating cash flow to service debt and the Company’s reliance upon collateral which may not be readily marketable. Due to the greater proportion of these commercial loans in its portfolio and because the balances of these loans are, on average, larger than other categories of loans, losses incurred on a relatively small number of commercial loans could have a materially adverse impact on results of operations and financial condition.
The Company is subject to risks arising from conditions in the real estate market, as a significant portion of its loans are secured by commercial and residential real estate. The Company’s real estate lending activities and its exposure to fluctuations in real estate collateral values are significant and may increase as its assets increase. The market value of real estate can fluctuate significantly in a relatively short period of time as a result of market conditions in the geographic area in which the real estate is located, in response to factors such as economic downturns, changes in the economic health of industries heavily concentrated in a particular area and in response to changes in market interest rates, which influence capitalization rates used to value revenue-generating commercial real estate. If the value of real estate serving as collateral for loans declines materially, a significant part of the loan portfolio could become under-collateralized and losses incurred upon borrower defaults would increase. Conditions in certain segments of the real estate industry, including homebuilding, lot development and mortgage lending, may have an effect on the values of real estate pledged as collateral for loans. The inability of purchasers of real estate, including residential real estate, to obtain financing may weaken the financial condition of borrowers who are dependent on the sale or refinancing of property to repay their loans. Changes in the economic health of certain industries can have a significant impact on other sectors or industries which are directly or indirectly associated with those industries and may impact the value of real estate in areas where such industries are concentrated.
Future profitability depends, to a significant extent, upon commercial business customers. The Company’s future profitability depends, to a significant extent, upon revenue it receives from commercial business customers, and their ability to continue to meet their loan obligations. Adverse economic conditions or other factors affecting this market segment, and the Company’s failure to timely identify and react to unexpected economic downturns, may have a greater adverse effect than other financial institutions that have a more diversified customer base. Additionally, the Company’s inability to grow its commercial business customer base in a highly competitive market could affect its future growth and profitability.
The Company’s business is concentrated in Texas and exposure to the Texas economy, including the energy industry, could adversely affect its performance. Although more than 50% of the Company’s loan exposure is outside of Texas and more than 50% of its deposits are sourced outside of Texas, the Texas concentration remains significant compared to peer banks. A majority of the loans held for investment, excluding mortgage finance loans and other national lines of business, are to businesses with headquarters or operations in Texas. As a result, the Company’s financial condition and results of operations may be strongly affected by any prolonged period of economic recession or other adverse business, economic or regulatory conditions affecting Texas businesses and financial institutions. Furthermore, while the Texas economy is increasingly more diversified, the energy sector and related industries continue to play an important role in the overall Texas economy and represent a significant part of the economies in some of the primary markets in which the Company operates. The Company’s portfolio of energy loans consists primarily of producing reserve-based loans to exploration and production companies, with a smaller portion of loan balances attributable to royalty owners, midstream operators, saltwater disposal and other service companies whose businesses primarily relate to production, not exploration and development, of oil and gas. These businesses are significantly affected by volatility in oil and natural gas prices, reserve depletion curves, material declines in the level of drilling and production activity in Texas and in other areas of the United States and material fluctuations in investor interest in oil and gas exploration and production investments. There is no assurance that the Company will not be materially adversely
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impacted by the direct and indirect effects of current and future economic conditions in the energy sector and in Texas, generally.
The Company must maintain an appropriate allowance for credit losses. Management’s experience in the banking industry indicates that some portion of the Company’s loans will become delinquent, and some may only be partially repaid or may never be repaid at all. The Company maintains an allowance for credit losses on loans, which is a reserve established through a provision for credit losses charged to expense each quarter, that is consistent with management’s assessment of the collectability of the loan portfolio in light of the amount of loans committed and outstanding and current and future economic conditions and market trends. When specific loan losses are identified, the amount of the expected loss is removed, or charged off, from the allowance. Management’s methodology for establishing the appropriateness of the allowance for credit losses on loans depends on subjective application of risk grades as indicators of each borrower’s ability to repay specific loans, together with an assessment of how actual or projected changes in competitor underwriting practices, competition for borrowers and depositors and other conditions in markets are likely to impact improvement or deterioration in the collectability of loans as compared to historical experience.
The Company has a substantially larger percentage of commercial, real estate and other categories of business loans relative to total assets than most other banks in the market and individual loans are generally larger as a percentage of the Company’s total earning assets than other banks. As a result, the Company’s business model may make it more vulnerable to changes in the underlying business credit quality than other entities with which the Company competes. The failure to maintain above-peer credit quality metrics could have a material adverse impact on growth and profitability.
If management’s assessment of inherent risk and losses in the loan portfolio is inaccurate, or geopolitical, economic and market conditions or borrowers' financial performance experience material unanticipated changes, the allowance may become inadequate, requiring larger provisions for loan losses that can materially decrease the Company’s earnings or profitability. Federal regulators periodically review the Company’s allowance for credit losses and based on their judgments or interpretations, which may be different than management’s, may require the Company to change classifications or grades of loans, increase the allowance for credit losses or recognize further loan charge-offs. Any increase in the allowance for credit losses or in the amount of loan charge-offs required by the Company’s methodology or regulatory agencies could have a negative effect on results of operations and financial condition.
The Company must effectively manage its counterparty risk. Financial services institutions are interrelated as a result of trading, clearing, counterparty and other relationships. The Company has exposure to many different industries and counterparties, and routinely executes transactions with counterparties in the financial services industry, including commercial banks, brokers and dealers, investment banks, and other financial market participants. Many of these transactions expose the Company to credit risk in the event a counterparty is unable to satisfy a margin demand or following a default by a counterparty or client. In addition, the Company’s credit risk may be increased when the collateral securing its loans cannot be realized upon or is liquidated at prices not sufficient to recover the full amount of its credit or derivative exposure. Any such losses could have a material adverse effect on the business, financial condition, results of operations or profitability.
Liquidity Risks
The Company must effectively manage its liquidity risk. The Company requires liquidity in the form of available funds to meet deposit, debt and other obligations as they come due, borrower requests to draw on committed credit facilities including unexpected demands for cash payments. While neither the Company nor the Bank is subject to Basel III liquidity regulations, the adequacy of its liquidity is a matter of regulatory interest given the significant portion of the balance sheet represented by loans as opposed to securities and other more marketable investments. The Company’s principal source of funding consists of customer deposits, supplemented by its short-term and long-term borrowings, including federal funds purchased and Federal Home Loan Bank (“FHLB”) borrowings. Recently proposed changes to the FHLB system could adversely impact the Company’s access to FHLB borrowings or increase the cost of such borrowings. The Company also relies on the availability of the mortgage secondary market provided by Ginnie Mae and the government sponsored entities (“GSEs”) to support the liquidity of its residential mortgage assets. A substantial majority of the Company’s liabilities consist of demand, savings, checking and money market deposits, which are payable on demand or upon relatively short notice. By comparison, a substantial portion of the assets are loans, most of which, excluding mortgage finance loans, cannot be collected or sold in so short a time frame, creating the potential for an imbalance in the availability of liquid assets to satisfy depositors and loan funding requirements.
An inability to raise funds through deposits, borrowings, the sale of securities and loans and other sources, or an inability to access the capital markets, could have a substantial negative effect on the Company’s liquidity. Furthermore, such funding sources, even if available could become more expensive, which could negatively impact the Company’s profitability and net interest margin. The Company actively manages its available sources of funds to meet expected or anticipated needs under normal and financially stressed conditions, but there is no assurance that the Company will be able to make new loans, meet ongoing funding commitments to borrowers, or replace maturing deposits and advances as necessary under all possible circumstances. The Company’s ability to obtain funding, including on attractive terms, could be impaired by factors beyond its
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control, such as disruptions in financial markets, negative expectations regarding the financial services industry generally or in the markets or negative perceptions of the Company, including credit ratings.
The Company sources a significant volume of its non-interest bearing deposits from its commercial clients, creating concentrations of deposits that may carry a greater risk of unexpected material withdrawals. These customers are more likely to actively monitor the Company’s financial condition and results of operations and could withdraw their deposits quickly upon the occurrence of a material adverse development affecting the Company or its businesses or based on market rumors regarding the Company or other regional banks. In response to this and other risks, the Company continuously assesses its liquidity and monitors changes in liquidity and capital, but there is no assurance that the Company will maintain or have access to sufficient funding and capital to fully mitigate its liquidity risk.
One potential source of liquidity for the Company is brokered deposits arranged by brokers acting as intermediaries, typically larger money-center financial institutions. The Company receives these deposits from certain of its customers in connection with its delivery of other financial services to them or their customers. The deposits are subject to regulatory classification as brokered deposits, which are generally considered to be more sensitive to interest rates, with a higher risk of withdrawal than other deposits if the rates offered are not competitive with rates offered by the Bank’s competitors. Furthermore, banks with higher levels of brokered deposits may be viewed as having higher liquidity risks, which may lead to further deposit outflow.
If the Bank does not maintain regulatory capital above the level required to be well capitalized the Bank would be required to obtain FDIC consent for it to continue to accept, renew or roll over most deposits classified as brokered deposits, and there can be no assurance that the FDIC would consent under any circumstances. The Bank could also be required to suspend or eliminate deposit gathering from any source classified as brokered deposits. The FDIC can change the definition of brokered deposits or extend the classification to deposits not currently classified as brokered deposits. These non-traditional deposits are subject to greater operational and reputational risk of unexpected withdrawal than traditional demand and time deposits, particularly those provided by consumers.
The Company’s growth plans are dependent on the availability of capital and funding. The Company’s historical ability to raise capital through the sale of capital stock and debt securities may be affected by economic and market conditions or regulatory changes that are beyond its control. Adverse changes in its operating performance or financial condition could make raising additional capital difficult or more expensive or limit access to customary sources of funding, including inter-bank borrowings, repurchase agreements and borrowings from the Federal Reserve Bank of Dallas (“Reserve Bank”) or the FHLB. Unexpected changes in requirements for capital resulting from regulatory actions could require the Company to raise capital at a time, and at a price, that might be unfavorable, or could require that the Company forego continuing growth or reduce its then current loan portfolio. The Company cannot offer assurance that capital and funding will be available to it in the future, in needed amounts, upon acceptable terms or at all. The Company’s efforts to raise capital could require the issuance of securities at times and with maturities, conditions and rates that are disadvantageous, and which could have a dilutive impact on its then or current stockholders. Factors that could adversely affect the Company’s ability to raise additional capital or necessary funding include conditions in the capital markets, its financial performance, its credit ratings, regulatory actions and general economic conditions. Increases in cost of capital, including dilution and increased interest or dividend requirements, could have a direct adverse impact on the Company’s operating performance and its ability to achieve its growth objectives.
The Company’s mortgage finance business has experienced, and will likely continue to experience, highly variable usage of the Company’s funding capacity resulting from seasonal demands for credit, changes in consumer demand driven by changes in interest rates, housing affordability and supply and month-end “spikes” of residential mortgage closings. These spikes could also result in the Company and the Bank having capital ratios that are below internally targeted levels or even levels that could cause the Bank to not be well capitalized and could affect liquidity levels. At the same time, managing this risk by declining to respond fully to the needs of customers could severely impact the business. The Company has historically responded to these variable funding demands by, among other things, increasing the extent of participations sold in its mortgage loan interests, as needed, and by maintaining a substantial borrowing relationship with the FHLB. Its mortgage finance customers have also provided significant deposit balances associated with the borrower escrow accounts created at the time certain mortgage loans are funded, which have benefited liquidity and net interest margin. In response to competitive pressures, the Company sometimes finds it necessary to pay interest on some of these accounts, as regulations allow or require and this trend may continue, which can affect its costs of funds. Individual escrow account balances also experience significant variability monthly as principal and interest payments, including ad valorem taxes and insurance premiums, are paid periodically. While the short average holding period of its mortgage interests of approximately 20 days will allow the Company, if necessitated by a funding shortfall, to rapidly decrease the size of the portfolio and its associated capital and funding requirements, any such action might significantly damage the business and important mortgage finance relationships.
The Company is dependent on funds obtained from borrowing or capital transactions or from the Bank and its other subsidiaries to fund its obligations. The Company is a financial holding company engaged in the business of managing, controlling and operating its subsidiaries. The Company conducts no material business or other activity at the parent company level other than activities incidental to holding equity and debt investments in its subsidiaries. As a result, the Company relies
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on the proceeds of capital transactions, borrowings under its revolving line of credit, payments of interest and principal on loans made to its subsidiaries and dividends from the Bank and its other subsidiaries to pay its operating expenses, to satisfy its obligations to debt holders and to pay dividends on its preferred stock. The profitability of the Bank, the Company’s largest operating subsidiary, is subject to fluctuation based upon, among other things, the cost and availability of funds, changes in interest rates and economic conditions in general. The Bank’s ability to pay dividends to the Company is subject to regulatory limitations that can, under certain adverse circumstances, prohibit the payment of dividends to it. The Company’s right to participate in any distribution from the liquidation or sale of the Bank’s or its other subsidiaries’ assets is subject to the prior claims of the creditors of the Bank and the Company’s other subsidiaries.
If the Company is unable to access funds from capital transactions, borrowing under its revolving line of credit or dividends or interest on loan payments from the Bank, the Company may be unable to satisfy its obligations to creditors or debtholders or pay dividends on its preferred stock.
Market Risks
The Company must effectively manage its interest rate risk. The Company’s profitability is dependent to a large extent on its net interest income, which is the difference between the interest income paid on its loans and investments and the interest the Company pays to third parties such as its depositors, lenders and debtholders. Periods of volatile interest rates may have a material effect on the Company’s earnings. Changes in interest rates can impact profits and the fair values of certain assets and liabilities. Models that the Company uses to forecast and plan for the impact of rising and falling interest rates may be incorrect or fail to consider the impact of competition and other conditions affecting loans and deposits.
Interest rate risk can also result from mismatches between the dollar amounts of repricing or maturing assets and liabilities and from mismatches in the timing and rates at which the assets and liabilities reprice. An increase in interest rates on loans is generally associated with a lower volume of loan originations, which may reduce our earnings. Following an increase in the general level of interest rates, our ability to maintain a positive net interest margin is dependent on our ability to increase our loan offering rates, replace loan maturities with new originations, minimize increases on our deposit rates and maintain an acceptable level and mix of funding. The Company actively monitors and manages the balances of maturing and repricing assets and liabilities to reduce the adverse impact of changes in interest rates, but there can be no assurance that the Company will be able to avoid material adverse effects on net interest margin in all market conditions.
Rising interest rates in prior periods have increased interest expense, with a commensurate positive effect on net interest income; however, interest rates began to decrease in 2024 with three cuts to the Federal Funds rate by the Federal Reserve in 2024 followed by three cuts in 2025. Rapid and unexpected volatility in interest rates creates additional uncertainty and potential for adverse financial effects. There can be no assurance that the Company will not be materially adversely affected by future changes in interest rates.
Changes in interest rates affect the value of the Company’s securities portfolio, and the Company may realize losses if it were to sell such securities at a time when interest rates are higher than the yield on the Company’s securities portfolio. As a result of inflationary pressures and the resulting rapid increases in interest rates in prior periods, the trading value of previously issued government and other fixed income securities 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 U.S. banks’ securities portfolios. If the Company were to sell securities with embedded unrealized losses, 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.
The Company must effectively manage market risk associated primarily with sales and trading activities. In addition to interest rate risk, the Company is exposed to market risk, principally related to trading activities conducted to support customer transactions or to provide customers with liquidity. The Company typically seeks to manage the market risks of its positions with offsetting positions that eliminate or reduce market risk to fall within acceptable tolerances.
The Company uses VaR as a primary risk measure to aggregate, monitor and limit risks at the portfolio level across all trading activities. VaR is calculated based on one-year historical moves in key market risk factors relevant to the financial asset and any associated portfolio and estimates potential loss on subject positions at 95th percentile confidence interval.
Operational Risks
The Company must continue to attract, retain and develop key personnel. The Company’s success depends to a significant extent upon its ability to attract, develop and retain experienced personnel in each of its lines of business and markets including managers in operational areas, compliance and other support areas to build and maintain the infrastructure and controls required to support continuing growth. Competition for the best people in the industry can be intense, and there is no assurance that the Company will continue to attract or retain talent or develop personnel. Factors that affect its ability to attract, develop and retain key employees include compensation and benefits programs, profitability, ability to establish appropriate succession plans for
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key talent, reputation for rewarding and promoting qualified employees and market competition for employees with certain skills, including information systems development and security. The cost of employee compensation is a significant portion of operating expenses and can materially impact results of operations or profitability, especially during periods of wage inflation. The unanticipated loss of the services of key personnel could have an adverse effect on the business.
The Company and its vendors and customers must effectively manage information systems and cyber risk and threats which may result in disruptions, failures or breaches in security, including a cyber-attack, which could cause significant harm to the Company and its clients and customers. The Company, its vendors and customers all rely heavily on communications and information systems to conduct their respective businesses, store sensitive data and work effectively together. The financial services industry is undergoing rapid technological changes with frequent introductions of new technology-driven products and services, which in turn create further dependencies on critical third-party service providers and vendors.
Communications and information systems and those of the Company’s vendors and customers remain vulnerable to unexpected disruptions, failures and cyber-attacks. Any disruptions, failures or breaches in security of these systems could result in significant disruption to the Company’s operations. Information security breaches and cyber-security-related incidents include, but are not limited to, attempts to access information, theft of information, credentials or other intellectual property, including customer and company information, malicious code, computer viruses and denial of service attacks that could result in unauthorized access, data breaches resulting in misuse, loss or destruction of data (including confidential customer and employee information), ransomware attacks, account takeovers, unavailability of service or other events. These types of threats may derive from human error, fraud or malice on the part of external or internal parties or may result from accidental technological failure. The risk, frequency and intensity of such attacks is escalating, including as a result of remote working arrangements, the use of the internet and telecommunications technologies to conduct financial transactions, and the increased sophistication of these threats. Material failures or interruptions of these systems could impair the Company’s ability to serve customers and to operate the business and could damage the Company’s reputation, result in a loss of business, subject the Company or the Bank to additional regulatory scrutiny or enforcement or exposure to civil litigation, criminal penalties or financial liability. While the Company has developed extensive recovery plans, the Company cannot assure that those plans will be effective to prevent adverse effects resulting from system failures.
The use of the Company’s cloud technologies is also critical to the operation of systems, and its reliance on cloud technologies is growing. Service disruptions in cloud technologies may lead to delays in accessing, or the loss of, data that is important to the businesses and may hinder clients’ access to products and services.
The Company collects and stores sensitive data, including personally identifiable information of its customers and employees and in the ordinary course of business must allow certain vendors access to that data. Breaches of the systems or vendors' or customers’ systems, thefts of data and other breaches and criminal activity result in significant costs to respond or remediate losses if the Company or its vendors are at fault, damage to the Company’s customer relationships, regulatory scrutiny and enforcement and loss of future business opportunities due to reputational damage. Even the most well-protected information, networks, systems and facilities remain potentially vulnerable because attempted security breaches, particularly cyber-attacks and intrusions, or disruptions have occurred and will occur in the future, and because the techniques used in such attempts are rapidly and constantly evolving and may not be recognized until launched, can originate from a wide variety of sources, including the Company’s own employees, cyber-criminals, “hacktivists” (i.e., individuals or groups that use technology to promote a political agenda or social change), groups linked to terrorist organizations or hostile countries, or third parties whose objective is to disrupt the operations of financial institutions more generally, and in some cases are designed not to be detected and, in fact, may not be detected for a period of time or at all. The Company does not have control over the cybersecurity of the systems of the large number of clients, customers, counterparties and third-party service providers with which it does business, and it is possible that a third party, after establishing a foothold on an internal network without being detected, might obtain access to other networks and systems. Accordingly, the Company may be unable to anticipate or be prepared for these techniques or to implement adequate security barriers or other preventative measures, and thus it is impossible for the Company to entirely mitigate this risk.
Breaches are generally perpetrated by unknown third parties, but could also be facilitated by employees either inadvertently or by consciously attempting to create disruption or certain acts of fraud. The Company’s customers and employees have been, and will continue to be, targeted by parties using fraudulent e-mails and other communications in attempts to misappropriate passwords, bank account information or other personal information or to introduce viruses or other malware through “Trojan horse” programs to the Company’s information systems, the information systems of merchants or third-party service providers and/or customers' computers. Although the Company, with the help of third-party service providers, will continue to implement information security technology solutions and establish operational procedures to address such attacks and breaches, and protect sensitive data, there can be no assurance that these measures will be effective. The Company advises, or alerts and provides some guidance to customers and evaluates and imposes security requirements on vendors regarding protection of their respective information systems, but there is no assurance that these actions have had or will have the intended positive effects or will be effective to prevent losses or attacks. Successful cyber-attacks on the Company, vendors or customers may affect the
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Company’s reputation, and failure to meet customer expectations could have a material impact on the Company’s ability to attract and retain deposits as a primary source of funding.
A security breach or other significant disruption of information systems or those related to customers, merchants and third-party vendors, including as a result of cyber-attacks, could (i) disrupt the proper functioning of networks and systems and therefore the operations and/or those of certain customers; (ii) result in the unauthorized access to, and destruction, loss, theft, misappropriation or release of confidential, sensitive or otherwise valuable information; (iii) result in a violation of applicable privacy, data breach and other laws, subjecting the Company to additional regulatory scrutiny and exposure to civil litigation, criminal penalties, governmental fines or financial liability; (iv) require significant management attention and resources to respond, remediate or remedy the damages that result; or (v) harm the reputation or cause a decrease in the number of customers that choose to do business with the Company.
The risk of a security breach due to a cyber-attack could increase in the future due to factors such as: the Company’s ongoing expansion of its mobile and digital banking and other internet-based product offerings and its internal use of internet-based products and applications and the increased use of remote access to facilitate remote arrangements for employees, vendors and other third parties. In addition, a third party could misappropriate confidential information obtained by intercepting signals or communications from mobile devices used by the Company’s employees. A successful penetration or circumvention of the security of the Company’s systems or the systems of a vendor, governmental body or another market participant could cause serious negative consequences, including: significant disruption of the Company’s operations and those of its clients, customers and counterparties, including losing access to operational systems, misappropriation of confidential information of the Company or that of its clients, customers, counterparties, employees or regulators, disruption of or damage to the Company’s systems and those of its clients, customers and counterparties, the inability, or extended delays in the ability, to fully recover and restore data that has been stolen, manipulated or destroyed, or the inability to prevent systems from processing fraudulent transactions, allegations or violations by the Company of applicable privacy and other laws, financial loss to the Company or to its clients, customers, counterparties or employees, loss of confidence in the Company’s cybersecurity and business resiliency measures, dissatisfaction among the Company’s clients, customers or counterparties, significant exposure to litigation and regulatory fines, penalties or other sanctions, and harm to the Company’s reputation.
The extent of a particular cyber-attack and the steps that the Company may need to take to investigate the attack may not be immediately clear, and it may take a significant amount of time before such an investigation or determination, judicial or otherwise, can be completed. While such an investigation is ongoing, the Company may not necessarily know the full extent of the harm caused by the cyber-attack, and that damage may continue to spread. These factors may inhibit the Company’s ability to provide rapid, full and reliable information about the cyber-attack to its clients, customers, counterparties and regulators, and the public. Furthermore, it may not be clear how best to contain and remediate the harm caused by the cyber-attack, and certain errors or actions could be repeated or compounded before they are discovered and remediated. Any or all of these factors could further increase the costs and consequences of a cyber-attack. The occurrence of any of the foregoing could have a material adverse effect on the business, financial condition, results of operations or profitability.
The Company’s operations rely extensively on a broad range of external vendors. The Company relies on a large number of vendors to provide products and services necessary to maintain the day-to-day operations, particularly in the areas of operations, treasury management systems, information technology and security. This reliance exposes the Company to the risk that these vendors will not perform as required by agreements including risks resulting from disruptions in communications with vendors, cyber-attacks and security breaches at vendors, failure of a vendor to provide services for other reasons and poor performance of services. An external vendor’s failure to perform in any of these areas could be disruptive to the business and operations, which could have a material adverse impact on the business, financial condition, results of operations or profitability, including causing reputational damage. External vendors who must have access to the Company’s information systems in order to provide their services have been identified as significant sources of information technology security risk and are monitored. While the Company has implemented an active program of oversight to address this risk, there can be no assurance that the Company will not experience material security breaches associated with vendors or other third parties.
The development and use of AI presents risks and challenges that may adversely impact the Company’s business. The Company or its third-party (or fourth party) vendors, clients or counterparties may develop or incorporate AI technology in certain business processes, services, or products. The development and use of AI presents a number of risks and challenges to the Company’s business. The legal and regulatory environment relating to AI is uncertain and rapidly evolving, both in the U.S. and internationally, and includes regulatory schemes targeted specifically at AI as well as provisions in intellectual property, privacy, consumer protection, employment, and other laws applicable to the use of AI. These evolving laws and regulations could require changes in the Company’s implementation of AI technology and increase the Company’s compliance costs and the risk of non-compliance. AI models, particularly generative AI models, may produce output or take action that is incorrect, that reflects biases included in the data on which they are trained, that results in the release of private, confidential, or proprietary information, that infringes on the intellectual property rights of others, or that is otherwise harmful. In addition, the complexity of many AI models makes it difficult to understand why they are generating particular outputs. This limited transparency increases the challenges associated with assessing the proper operation of AI models, understanding and
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monitoring the capabilities of the AI models, reducing erroneous output, eliminating bias, and complying with regulations that require documentation or explanation of the basis on which decisions are made. Further, the Company may rely on AI models developed by third parties, and, to that extent, would be dependent in part on the manner in which those third parties develop and train their models, including risks arising from the inclusion of any unauthorized material in the training data for their models and the effectiveness of the steps these third parties have taken to limit the risks associated with the output of their models, matters over which the Company may have limited visibility. Any of these risks could expose the Company to liability or adverse legal or regulatory consequences and harm the Company’s reputation and the public perception of its business or the effectiveness of its security measures.
The Company’s accounting estimates and risk management processes rely on management judgment, which may prove inadequate, wrong or be adversely impacted by inaccurate or mistakes in assumptions or models. The processes the Company’s uses to estimate expected credit losses for purposes of establishing the allowance for credit losses and to measure the fair value of financial instruments, certain liquidity and capital planning tools, including the processes the Company uses to estimate the effects of changing interest rates and other market measures on its financial condition and results of operations, all depend upon management’s judgment. Management’s judgment and the data relied upon by management may be based on assumptions that prove to be inaccurate, particularly in times of market stress or other unforeseen circumstances. Additionally, the current accounting standard related to the measurement of current expected credit losses (“CECL”) requires the application of greater management judgment that is supported by models and more data elements, including macroeconomic forecasts, than the previous allowance standard. The Company’s adoption of the CECL model has increased the complexity, and associated risk, of the analysis and processes relying on management judgment, which could negatively impact the financial condition, results of operations or profitability of the Company.
The risk management strategies and processes may not be effective and the Company’s controls and procedures, including disclosure controls and procedures and internal control over financial reporting, may fail or be circumvented. The Company continues to invest in the development of risk management techniques, strategies, assessment methods and related controls and monitoring approaches on an ongoing basis. However, these risk management strategies and processes may not be fully effective in mitigating the risk exposure in all economic market environments or against all types of risk. Any failures in risk management strategies and processes to accurately identify, quantify and monitor risk exposure could limit the ability to effectively manage risks. Management regularly reviews and updates internal controls over financial reporting, disclosure controls and procedures, and corporate governance policies and procedures. In particular, any failure to maintain or develop effective internal control over financial reporting and disclosure controls and procedures and/or any difficulties encountered in their implementation or improvement could cause the Company to fail to meet its reporting obligations and may result in a restatement of its financial statements for prior periods. Ineffective disclosure controls and procedures and internal control over financial reporting could also cause investors to lose confidence in the Company’s reported financial and other information, including if the Company were to report a material weakness, which would likely have a negative effect on the trading price of the Company’s common stock. If the Company has a material weakness in its internal control over financial reporting, the Company may not detect errors on a timely basis and its financial statements may be materially misstated. If the Company is unable to maintain effective internal controls over financial reporting and disclosure controls, the Company could become subject to investigations by Nasdaq, the SEC or other regulatory authorities or shareholder litigation, which could require additional management attention and which could adversely affect the Company’s business, financial condition and results of operations.
Any system of controls, however well designed and operated, is based in part on certain assumptions and management judgment and can provide only reasonable, not absolute, assurances that the objectives of the system are met. Any failure or circumvention of controls and procedures or failure to comply with regulations related to controls and procedures could have a material adverse effect on the business, financial condition, results of operations or profitability.
The business is susceptible to fraud and conduct risk. The Company’s business exposes it to fraud risk from loan and deposit customers, the parties they do business with, as well as from employees, contractors and vendors. The Company relies on financial and other data from new and existing customers which could turn out to be fraudulent when accepting such customers, executing their financial transactions and making and purchasing loans and other financial assets. In times of increased economic stress the Company is at increased risk of fraud losses. The Company believes it has underwriting and operational controls in place to prevent or detect such fraud, but cannot provide assurance that these controls will be effective in detecting fraud or that the Company will not experience fraud losses or incur costs or other damage related to such fraud, at levels that adversely affect financial results or reputation. The Company’s lending customers may also experience fraud in their businesses, which could adversely affect their ability to repay their loans or make use of services. The Company’s and its customers’ exposure to fraud may increase the Company’s financial risk and reputation risk as it may result in unexpected loan losses that exceed those that have been provided for in the allowance for credit losses. In addition, the Company is subject to risk from the conduct of its employees, including the negative impact that can result from employee misconduct or failure by employees to conduct themselves in accordance with the Company’s policies. All of which could damage the Company’s reputation and result in loss of customers or other financial loss or expose the Company to increased regulatory or other risk.
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Legal, Regulatory and Compliance Risks
The Company is subject to extensive government regulation and supervision and interpretations thereof. The Company, as a bank holding company and financial holding company, and the Bank, as a Texas state-chartered member bank, are subject to extensive federal and state regulation and supervision and the potential for regulatory enforcement actions, which impact the business on a daily basis. Texas Capital Securities is also subject to the jurisdiction of several regulatory bodies, including the SEC, FINRA, MSRB and state securities regulators. These regulations affect lending practices, permissible products and services and their terms and conditions, customer relationships, capital structure, investment practices, accounting, financial reporting, operations and ability to grow, among other things. These regulations also impose obligations to maintain appropriate policies, procedures and controls to detect, prevent and report money laundering and terrorist financing and to verify the identities of customers. See the discussion above at Business - Regulation and Supervision for additional discussion of the extensive regulation and supervision the Company, the Bank and Texas Capital Securities are subject to.
The level of regulatory scrutiny that the Company, the Bank and Texas Capital Securities are subject to may fluctuate over time, based on numerous factors. In addition, Congress, state legislatures, and federal and state regulatory agencies continually review banking laws, regulations and policies for possible changes. Changes to statutes, regulations or regulatory policies, including changes in interpretation or implementation of statutes, regulations or policies, could affect the Company, the Bank and Texas Capital Securities in substantial and unpredictable ways. Material changes in regulation and requirements imposed on financial institutions, such as the Dodd-Frank Act, Basel III Capital Rules, European Union's General Data Protection Regulations and California Consumer Privacy Act result in additional costs, impose more stringent capital, liquidity and leverage requirements, limit the types of financial services and products the Company may offer and increase the ability of non-bank financial services providers to offer competing financial services and products, among other things. Such changes could result in new regulatory obligations which could prove difficult, expensive or competitively impractical to comply with if not equally imposed upon non-bank financial services providers with whom the Company competes.
The Company is subject to a continuous program and routine of examinations by regulators concerning, among other things, lending practices, reserve methodology, compliance with changing regulations and interpretations, BSA/AMLA compliance, interest rate management, liquidity, capital and operational risk, enterprise risk management, regulatory and financial accounting practices and policies and related matters, which can divert management’s time and attention from focusing on the business. The Company devotes a significant amount of management time and expense to enhancing the infrastructure to support its compliance obligations, which can pose significant regulatory enforcement, financial and reputational risks if not appropriately addressed.
The Company expends substantial effort and incurs costs to maintain and improve its systems, controls, accounting, operations, information security, compliance, audit effectiveness, analytical capabilities, staffing and training in order to satisfy regulatory requirements or recommendations. The Company cannot offer assurance that these efforts will be accepted by regulators as satisfying the applicable legal and regulatory requirements. Failure to comply with relevant laws, regulations, recommendations or policies could result in sanctions by regulatory agencies, civil money penalties and/or reputation damage, which could have a material adverse effect on the business, financial condition and results of operations. While the Company has policies and procedures designed to prevent any such violations, there can be no assurance that such violations will not occur.
The Company must maintain adequate regulatory capital to support its business objectives and strategy. Under regulatory capital adequacy guidelines and other regulatory requirements, the Company must satisfy capital requirements based upon quantitative measures of assets, liabilities and certain off-balance sheet items. Satisfaction of these requirements is subject to qualitative judgments by regulators that may differ materially from management’s and that are subject to being determined retroactively for prior periods. Additionally, regulators can make subjective assessments about the adequacy of capital levels, even if the Company’s and the Bank's reported capital exceeds the “well capitalized” requirements. The Company’s ability to maintain its status as a financial holding company and to continue to operate the Bank as it has in recent periods is dependent upon a number of factors, including the Bank qualifying as “well capitalized” and “well managed” under applicable prompt corrective action regulations and upon the Company qualifying on an ongoing basis as “well capitalized” and “well managed” under applicable Federal Reserve regulations.
Failure to meet regulatory capital standards could have a material adverse effect on the business, including damaging the confidence of customers, adversely impacting the Company’s and the Bank’s reputation and competitive position and retention of key personnel. Any of these developments could limit access to:
•brokered deposits;
•Federal Reserve discount window;
•advances from the FHLB;
•capital markets transactions; and
•development of new financial services.
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Failure to meet regulatory capital standards may also result in higher FDIC assessments. If the Company or the Bank falls below guidelines for being deemed “adequately capitalized” the FDIC or Federal Reserve could impose restrictions on banking activities and a broad range of regulatory requirements in order to effect “prompt corrective action.” The capital requirements applicable to the Company and the Bank are in a process of continuous evaluation and revision by regulators. The Company cannot predict the final form, or the effects, of these regulations on the business, but among the possible effects are requirements that the Company slow the rate of growth or obtain additional capital which could reduce earnings or dilute existing stockholders.
The Company is subject to claims and litigation in the ordinary course of its business, including claims that may not be covered by insurance. Customers and other parties the Company engage with may, on a regular basis, assert claims and take legal action against the Company and the Company regularly takes legal action to collect unpaid borrowers’ obligations, realize on collateral and assert rights in commercial and other contexts. These actions frequently result in counter claims against the Company. Litigation arises in a variety of contexts, including lending activities, employment practices, commercial agreements, fiduciary responsibility related to wealth management services, intellectual property rights and other general business and banking matters.
Claims and legal actions may result in significant legal costs to defend or assert rights and may result in reputational damage that adversely affects existing and future customer relationships. If claims and legal actions are not resolved in a favorable manner, the Company may suffer significant financial liability or adverse effects on its reputation, which could have a material adverse effect on the business, financial condition, results of operations or profitability. See Legal Proceedings below for additional disclosures regarding legal proceedings.
The Company purchases insurance coverage to mitigate a wide range of risks. There is no assurance that insurance will be adequate to protect the Company against material losses in excess of coverage limits or that insurers will perform their obligations under policies without attempting to limit or exclude coverage. The Company could be required to pursue legal actions against insurers to obtain payment of amounts owed, and there is no assurance that such actions, if pursued, would be successful.
The Company could face serious negative consequences if its third-party service providers, business partners, customers or investments fail to comply with applicable laws, rules or regulations. The Company is expected to oversee the legal and regulatory compliance of its business endeavors, including those performed by third-party service providers, business partners, customers, other vendors and certain companies in which the Company has invested. Legal authorities and regulators could hold the Company responsible for failures by these parties to comply with applicable laws, rules or regulations. These failures could expose the Company to significant litigation or regulatory action that could limit its activities or impose significant fines or other financial losses. Additionally, the Company could be subject to significant litigation from consumers or other parties harmed by these failures and could suffer significant losses of business and revenue, as well as reputational harm as a result of these failures.
Deposit insurance premiums levied against the Bank could increase. The DIF is funded by fees assessed on insured depository institutions including the Bank. Future deposit premiums paid by the Bank depend on FDIC rules, which are subject to change, the level of the DIF and the magnitude and cost of future bank failures. The FDIC may further increase the assessment rates or impose additional special assessments in the future, which may require the Bank to pay significantly higher FDIC premiums.
Other Risks Affecting the Business
The business faces unpredictable economic and business conditions. The business is directly impacted by general economic, business and political conditions in Texas, the United States and internationally. The credit quality of the loan portfolio necessarily reflects, among other things, the general economic conditions in the areas in which the Company and its customers conduct their respective businesses. The Company’s financial condition can be affected by other factors that are beyond its control, including:
•geopolitical, national, regional and local economic conditions;
•the value of the U.S. Dollar in relation to the currencies of other advanced and emerging market countries;
•the performance of both domestic and international equity and debt markets and valuation of securities traded on recognized domestic and international exchanges;
•general economic consequences of international conditions and the impact of those conditions on the U.S. and global economies;
•legislative and regulatory changes impacting the banking industry;
•the 2026 congressional and Texas gubernatorial elections and other political conditions;
•the financial health of customers and economic conditions affecting them and the value of collateral, including effects from the continued price volatility of oil and gas and other commodities;
•the incidence of fraud, illegal payments, security breaches and other illegal acts among or impacting the Company, its customers and third parties;
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•structural changes in the markets for origination, sale and servicing of residential mortgages;
•changes in governmental economic and regulatory policies, including the extent and timing of intervention in credit markets by the Federal Reserve or withdrawal from that intervention, generally including changes attributable to presidential and congressional elections;
•trade policies, including tariffs or other customs;
•acts or threats of war;
•changes in the availability of liquidity at a systemic level; and
•material inflation or deflation.
Substantial deterioration in any of the foregoing conditions can have a material adverse effect on prospects and results of operations and financial condition. Declining or adverse economic conditions and adverse changes in investor, consumer and business sentiment generally result in reduced business activity, which may decrease the demand for products and services. Recently, inflation has been at a higher level than experienced in many decades, which has increased costs and impacted operations for the Company and many of its customers. The Company's customer base is primarily commercial in nature, and the Company does not have a significant retail branch network or retail consumer deposit base. In periods of economic downturn, business and commercial deposits may be more volatile than traditional retail consumer deposits. As a result, the financial condition and results of operations could be adversely affected to a greater degree by these uncertainties than competitors having a larger retail customer base. Additionally, the Company’s investment banking revenue is directly related to general economic conditions and corresponding financial market activity. When the outlook for such economic conditions is uncertain or negative, financial market activity generally tends to decrease, which can be expected to reduce the Company’s investment banking revenues and prospects for new business.
The soundness of other financial institutions could adversely affect the business. Financial services institutions are interrelated as a result of trading, clearing, counterparty or other relationships. The Company has exposure to many different industries and counterparties, and the Company routinely executes transactions with counterparties in the financial services industry, including broker-dealers, commercial banks, investment banks and other institutional clients. Many of these transactions expose the Company to credit risk in the event of default of a counterparty or client. In addition, the Company’s credit risk may be exacerbated when the collateral held by the Company cannot be realized upon or is liquidated at prices not sufficient to recover the full amount of the loan or derivative exposure due. There can be no assurance that any such losses would not materially and adversely affect results of operations or profitability.
Negative developments affecting the banking industry, “contagion effects,” and resulting media coverage, have eroded customer confidence in the banking system. Any future bank failures or similar events adversely affecting the banking industry may negatively impact customer confidence in the safety and soundness of regional banks and may generate market volatility among publicly traded bank holding companies and, in particular, regional banks like the Company. 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 historically have taken action to ensure that depositors of failed banks had access to their deposits, including uninsured deposit accounts, there is no guarantee that regional bank failures or bank runs will not occur in the future and, if they were to occur, they may have a material and adverse impact on customer and investor confidence in regional banks negatively impacting the Company’s liquidity, capital, results of operations and stock price.
The Company is subject to environmental liability risk associated with lending activities. A significant portion of the loan portfolio is secured by real property. During the ordinary course of business, the Company may foreclose on and take title to properties securing certain loans. There is a risk that hazardous or toxic substances could be found on these properties, and that the Company may be liable for remediation costs, including personal injury and property damage. Environmental laws may require incurring substantial expenses and may materially reduce the affected property's value by limiting the ability to use or sell it. Although the Company has policies and procedures requiring environmental review before initiating any foreclosure action on real property, these reviews may not be sufficient to detect all potential environmental hazards. The remediation costs and any other financial liabilities associated with an environmental hazard could have a material adverse effect on financial condition, results of operations and profitability. Future laws or regulations or more stringent interpretations or enforcement policies with respect to existing laws and regulations may increase the Company’s exposure to environmental liability.
Severe weather, earthquakes, other natural disasters, climate change, pandemics, acts of war or terrorism and other external and geopolitical events could significantly impact the business. Severe weather, earthquakes, other natural disasters, pandemics, climate change, acts of war or terrorism and other adverse external events could have a significant impact on the Company’s ability to conduct business. Such events could affect the stability of its deposit base, impair the ability of borrowers to repay outstanding loans, impair the value of collateral securing loans, cause significant property damage, result in loss of revenue, cause us to incur additional expenses or disrupt the Company’s operations. In recent years, hurricanes have caused extensive flooding and destruction along the coastal areas of Texas and in other areas in the U.S., including communities where
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the Company conducts business. Climate change has the potential to increase the frequency and severity of these severe weather events in the future. Although management has established disaster recovery policies and procedures, the occurrence of any such events could have a material adverse effect on the business, financial condition, results of operations or profitability.
Furthermore, legislative and regulatory initiatives related to climate change have the potential to disrupt the business and result in operational changes and expenditures that could significantly impact the business and the operations and creditworthiness of the Company’s clients and also increase the compliance burden on the Company.
Negative public opinion could damage the Company’s reputation and adversely affect its earnings. Reputational risk, or the risk to earnings and capital from negative public opinion, is inherent in the business. Negative public opinion can result from the actual or perceived manner in which the Company conducts its business activities; management of actual or potential conflicts of interest and ethical issues; protection of confidential client information; and public scrutiny related to environmental, social and governance issues. The Company’s brand and reputation may also be harmed by actions taken by third parties that it contracts with to provide services to the extent such parties fail to meet their contractual, legal and regulatory obligations or act in a manner that is harmful to clients. If the Company fails to supervise these relationships effectively, it could also be subject to regulatory enforcement, including fines and penalties. Negative public opinion can adversely affect the Company’s ability to keep and attract clients and can expose it to litigation and regulatory action. The Company takes steps to minimize reputation risk, but its efforts may not be sufficient.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 1C. CYBERSECURITY
Cybersecurity Risk Management and Strategy
Cybersecurity risks are constantly evolving and becoming increasingly pervasive across all industries. To mitigate these risks and protect sensitive customer data, financial transactions and the Company’s information systems, the Company has implemented a comprehensive cybersecurity risk management program , which is a component of its overarching enterprise risk management program. Key components of the cybersecurity risk management program include:
•A risk assessment process that identifies and prioritizes material cybersecurity risks; defines and evaluates the effectiveness of controls to mitigate the risks; and reports results to executive management and the board of directors.
•A third-party Managed Detection and Response (“MDR”) service, which monitors the security of the Company’s information systems around-the-clock, including intrusion detection and alerting.
•A dedicated cybersecurity team covering all critical cyber defense functions such as engineering, data protection, identity and access management, insider risk management, security operations, threat emulation and threat intelligence.
•A training program that educates employees about cybersecurity risks, how to protect themselves from cyberattacks and identify and report insider threats.
•An awareness program that keeps employees informed about cybersecurity threats and how to stay safe online.
•An incident response plan that outlines the steps the Company will take to respond to a cybersecurity incident, which is tested on a periodic basis.
The Company engages reputable third-party assessors to conduct various independent risk assessments on a regular basis, including but not limited to maturity assessments and various testing. Following a defense-in-depth strategy, the Company leverages both in-house resources and third-party service providers to implement and maintain processes and controls to manage the identified risks.
The Company’s Third-Party Risk Management program is designed to ensure that its vendors meet its cybersecurity requirements. This includes conducting periodic risk assessments of vendors, requiring vendors to implement appropriate cybersecurity controls and monitoring vendor compliance with the Company’s cybersecurity requirements.
The Company’s cybersecurity risk management program and strategy are designed to ensure the Company's information and information systems are appropriately protected from a variety of threats, both natural and man-made. Periodic risk assessments are performed to validate control requirements and ensure that the Company’s information is protected at a level commensurate with its sensitivity, value, and criticality. Preventative and detective security controls are employed on all media where information is stored, the systems that process it, and infrastructure components that facilitate its transmission to ensure the confidentiality, integrity, and availability of Company information. These controls include, but are not limited to access control, data encryption, data loss prevention, incident response, security monitoring, third party risk management, and vulnerability management.
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The Company's cybersecurity risk management program and strategy are regularly reviewed and updated to ensure that they are aligned with the Company's business objectives and are designed to address evolving cybersecurity threats and satisfy regulatory requirements and industry standards.
Material Effects of Cybersecurity Threats
Governance
Board of Directors Oversight
Management's Role
ITEM 2. PROPERTIES
The Company’s corporate headquarters is located in Dallas, Texas. These facilities, which the Company leases, house its executive and primary administrative offices, as well as the principal banking headquarters of Texas Capital Bank and primary office of supervisory of Texas Capital Securities. The Company also leases other facilities in its primary Texas market regions of Austin, Dallas, Fort Worth, Houston and San Antonio, as well as in California and New York, some of which operate as full-service banking centers. The Company also leases an operations center in Richardson, Texas that houses its loan and deposit operations and customer call center.
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ITEM 3. LEGAL PROCEEDINGS
The Company is subject to various claims and legal actions that may arise in the course of conducting its business. Management does not expect the final disposition or adjudication of any of these matters to have a material adverse impact on the Company’s financial statements or results of operations.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
The Company’s common stock is traded on The Nasdaq Global Select Market under the symbol “TCBI”. On February 9, 2026, there were approximately 115 holders of record of the Company’s common stock. The Company has not paid any cash dividends on its common stock since it commenced operations.
Stock Performance Graph
The following table and graph set forth the cumulative total stockholder return for the Company’s common stock for the five-year period ending on December 31, 2025, compared to an overall stock market index (Russell 2000 Index) and two of the Company’s peer group indexes (Nasdaq Bank Index and KBW Bank Index). The Russell 2000 Index (Bloomberg: RTY), Nasdaq Bank Index (Bloomberg: CBNK) and KBW Bank Index (Bloomberg: BKX) are based on total returns assuming reinvestment of dividends. The graph assumes an investment of $100 on December 31, 2020. The performance graph represents past performance and should not be considered to be an indication of future performance.
| 12/31/2020 | 12/31/2021 | 12/31/2022 | 12/31/2023 | 12/31/2024 | 12/31/2025 | ||||||||||||||||||||||||||||||
| Texas Capital Bancshares, Inc. | $ | 100.00 | $ | 101.26 | $ | 101.36 | $ | 108.62 | $ | 131.43 | $ | 152.17 | |||||||||||||||||||||||
| Russell 2000 Index | 100.00 | 113.65 | 89.54 | 103.21 | 113.35 | 126.12 | |||||||||||||||||||||||||||||
| Nasdaq Bank Index | 100.00 | 139.01 | 113.76 | 107.12 | 124.82 | 129.40 | |||||||||||||||||||||||||||||
| KBW Bank Index | 100.00 | 133.22 | 102.24 | 98.31 | 129.57 | 166.20 | |||||||||||||||||||||||||||||
30
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
The Company repurchased shares of its common stock in the open market during 2025 as follows:
| Total Number of | Approximate Dollar Value | |||||||||||||||||||||||||
| Shares Purchased as Part | of Shares That May Yet | |||||||||||||||||||||||||
| Total Number of | Average Price Paid | of Publicly Announced | Be Purchased Under the | |||||||||||||||||||||||
| Shares Purchased | per Share(1) | Plans or Programs | Plans or Programs(1) | |||||||||||||||||||||||
Total first quarter 2025 | 396,106 | $ | 78.25 | 396,106 | $ | 169,003,778 | ||||||||||||||||||||
Total second quarter 2025 | 317,860 | $ | 65.50 | 317,860 | $ | 148,183,554 | ||||||||||||||||||||
Total third quarter 2025 | 87,087 | $ | 80.49 | 87,087 | $ | 141,174,282 | ||||||||||||||||||||
| Fourth Quarter | ||||||||||||||||||||||||||
October 2025 | 197,237 | $ | 82.70 | 197,237 | $ | 124,862,200 | ||||||||||||||||||||
November 2025 | 998,464 | 85.98 | 998,464 | 39,012,818 | ||||||||||||||||||||||
December 2025 | 249,511 | 93.08 | 249,511 | 200,000,000 | ||||||||||||||||||||||
Total fourth quarter 2025 | 1,445,212 | $ | 86.76 | 1,445,212 | $ | 200,000,000 | ||||||||||||||||||||
Total 2025 | 2,246,265 | $ | 82.01 | 2,246,265 | $ | 200,000,000 | ||||||||||||||||||||
(1) The approximate dollar value of shares that may yet be purchased under the plans or programs and average price paid per share do not include the effect of excise tax expense incurred on net stock repurchases.
On January 22, 2025, the Company’s board of directors authorized a new share repurchase program under which the Company may repurchase up to $200.0 million in shares of its outstanding common stock, excluding the effect of excise tax expense incurred on net stock repurchases. The remaining repurchase authorization under the January 17, 2024 share repurchase program was terminated upon authorization of this new program.
Effective December 12, 2025, the Company’s board of directors authorized a new share repurchase program under which the Company may repurchase up to $200.0 million in shares of its outstanding common stock, excluding the effect of excise tax expense incurred on net stock repurchases. The share repurchase program will expire on December 31, 2026, but may be suspended or discontinued at any time. The remaining repurchase authorization under the January 22, 2025 share repurchase program was terminated upon authorization of this new program.
Any repurchases under the Company’s 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.
ITEM 6. [RESERVED]
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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Selected income statement data and key performance indicators are presented in the table below:
| Year Ended December 31, | ||||||||||||||||||||
| (dollars in thousands except per share data) | 2025 | 2024 | 2023 | |||||||||||||||||
| Net interest income | $ | 1,028,637 | $ | 901,300 | $ | 914,123 | ||||||||||||||
| Provision for credit losses | 55,000 | 67,000 | 72,000 | |||||||||||||||||
| Non-interest income | 227,142 | 31,046 | 161,419 | |||||||||||||||||
| Non-interest expense | 768,069 | 758,285 | 756,947 | |||||||||||||||||
Income before income taxes | 432,710 | 107,061 | 246,595 | |||||||||||||||||
Income tax expense | 102,466 | 29,553 | 57,454 | |||||||||||||||||
Net income | 330,244 | 77,508 | 189,141 | |||||||||||||||||
| Preferred stock dividends | 17,250 | 17,250 | 17,250 | |||||||||||||||||
Net income available to common stockholders | $ | 312,994 | $ | 60,258 | $ | 171,891 | ||||||||||||||
Basic earnings per common share | $ | 6.86 | $ | 1.29 | $ | 3.58 | ||||||||||||||
Diluted earnings per common share | $ | 6.79 | $ | 1.28 | $ | 3.54 | ||||||||||||||
| Net interest margin | 3.35 | % | 3.03 | % | 3.17 | % | ||||||||||||||
| Return on average assets (“ROA”) | 1.04 | % | 0.25 | % | 0.64 | % | ||||||||||||||
| Return on average common equity (“ROE”) | 9.59 | % | 2.04 | % | 6.15 | % | ||||||||||||||
| Efficiency ratio(1) | 61.2 | % | 81.3 | % | 70.4 | % | ||||||||||||||
| Non-interest income to average earning assets | 0.74 | % | 0.11 | % | 0.57 | % | ||||||||||||||
| Non-interest expense to average earning assets | 2.50 | % | 2.57 | % | 2.66 | % | ||||||||||||||
(1) Non-interest expense divided by the sum of net interest income and non-interest income.
Year ended December 31, 2025 compared to year ended December 31, 2024
The Company reported net income of $330.2 million and net income available to common stockholders of $313.0 million for the year ended December 31, 2025, compared to net income of $77.5 million and net income available to common stockholders of $60.3 million for the same period in 2024. On a fully diluted basis, earnings per common share was $6.79 for the year ended December 31, 2025, compared to $1.28 for the same period in 2024. ROE was 9.59% and ROA was 1.04% for the year ended December 31, 2025, compared to 2.04% and 0.25%, respectively, for the same period in 2024. The increase in net income for the year ended December 31, 2025 compared to the same period in 2024 resulted primarily from increases in net interest income and non-interest income. The increase in non-interest income was primarily the result of a $179.6 million loss on sale of available-for-sale debt securities recognized in 2024 in connection with a strategic balance sheet repositioning undertaken by the Company.
Details of the changes in the various components of net income are discussed below.
32
Taxable Equivalent Net Interest Income Analysis - Year to Date(1)
| Year Ended December 31, 2025 | Year Ended December 31, 2024 | Year Ended December 31, 2023 | |||||||||||||||||||||||||||||||||
| (dollars in thousands) | Average Balance | Revenue / Expense | Yield / Rate | Average Balance | Revenue / Expense | Yield / Rate | Average Balance | Revenue / Expense | Yield / Rate | ||||||||||||||||||||||||||
| Assets | |||||||||||||||||||||||||||||||||||
| Investment securities(2) | $ | 4,575,954 | $ | 188,990 | 4.03 | % | $ | 4,386,458 | $ | 148,219 | 3.17 | % | $ | 4,162,931 | $ | 108,294 | 2.37 | % | |||||||||||||||||
| Interest bearing cash and cash equivalents | 3,203,594 | 137,815 | 4.30 | % | 3,940,590 | 203,406 | 5.16 | % | 4,353,911 | 220,976 | 5.08 | % | |||||||||||||||||||||||
Loans held for sale(3) | 95 | 2 | 2.60 | % | 25,855 | 2,432 | 9.41 | % | 33,166 | 2,856 | 8.61 | % | |||||||||||||||||||||||
Loans held for investment, mortgage finance(4) | 5,171,878 | 218,157 | 4.22 | % | 4,612,994 | 179,233 | 3.89 | % | 4,080,263 | 171,366 | 4.20 | % | |||||||||||||||||||||||
Loans held for investment(3)(4) | 17,996,607 | 1,229,207 | 6.83 | % | 16,746,912 | 1,196,673 | 7.15 | % | 16,076,646 | 1,126,843 | 7.01 | % | |||||||||||||||||||||||
| Less: Allowance for credit losses on loans | 276,641 | — | — | % | 263,279 | — | — | % | 249,180 | — | — | ||||||||||||||||||||||||
Loans held for investment, net | 22,891,844 | 1,447,364 | 6.32 | % | 21,096,627 | 1,375,906 | 6.52 | % | 19,907,729 | 1,298,209 | 6.52 | % | |||||||||||||||||||||||
| Total earning assets | 30,671,487 | 1,774,171 | 5.76 | % | 29,449,530 | 1,729,963 | 5.82 | % | 28,457,737 | 1,630,335 | 5.65 | % | |||||||||||||||||||||||
| Cash and other assets | 1,156,587 | 1,163,665 | 1,079,607 | ||||||||||||||||||||||||||||||||
| Total assets | $ | 31,828,074 | $ | 30,613,195 | $ | 29,537,344 | |||||||||||||||||||||||||||||
| Liabilities and Stockholders’ Equity | |||||||||||||||||||||||||||||||||||
| Transaction deposits | $ | 2,275,219 | $ | 55,094 | 2.42 | % | $ | 2,049,720 | $ | 65,215 | 3.18 | % | $ | 1,466,583 | $ | 42,561 | 2.90 | % | |||||||||||||||||
| Savings deposits | 14,051,757 | 541,712 | 3.86 | % | 12,143,539 | 572,126 | 4.71 | % | 10,921,264 | 480,106 | 4.40 | % | |||||||||||||||||||||||
| Time deposits | 2,263,568 | 100,966 | 4.46 | % | 1,946,341 | 98,855 | 5.08 | % | 1,573,294 | 65,108 | 4.14 | % | |||||||||||||||||||||||
| Total interest bearing deposits | 18,590,544 | 697,772 | 3.75 | % | 16,139,600 | 736,196 | 4.56 | % | 13,961,141 | 587,775 | 4.21 | % | |||||||||||||||||||||||
| Short-term borrowings | 328,499 | 14,377 | 4.38 | % | 933,896 | 49,994 | 5.35 | % | 1,323,039 | 70,642 | 5.34 | % | |||||||||||||||||||||||
| Long-term debt | 637,535 | 30,999 | 4.86 | % | 739,136 | 42,060 | 5.69 | % | 882,904 | 57,383 | 6.50 | % | |||||||||||||||||||||||
| Total interest bearing liabilities | 19,556,578 | 743,148 | 3.80 | % | 17,812,632 | 828,250 | 4.65 | % | 16,167,084 | 715,800 | 4.43 | % | |||||||||||||||||||||||
| Non-interest bearing deposits | 8,220,254 | 9,013,038 | 9,814,517 | ||||||||||||||||||||||||||||||||
| Other liabilities | 486,843 | 532,058 | 460,779 | ||||||||||||||||||||||||||||||||
| Stockholders’ equity | 3,564,399 | 3,255,467 | 3,094,964 | ||||||||||||||||||||||||||||||||
| Total liabilities and stockholders’ equity | $ | 31,828,074 | $ | 30,613,195 | $ | 29,537,344 | |||||||||||||||||||||||||||||
| Net interest income | $ | 1,031,023 | $ | 901,713 | $ | 914,535 | |||||||||||||||||||||||||||||
| Net interest margin | 3.35 | % | 3.03 | % | 3.17 | % | |||||||||||||||||||||||||||||
(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. Loan interest income includes loan fees totaling $68.8 million, $54.6 million and $47.2 million for the years ended December 31, 2025, 2024 and 2023, respectively.
(4)In the first quarter of 2024, enhancements were made to the Company’s methodology for applying relationship pricing credits to mortgage client loans. To conform to the current period presentation, certain prior period interest income amounts have been reclassified from loans held for investment, mortgage finance to loans held for investment and related yields have been adjusted accordingly.
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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.
| Years Ended December 31, | |||||||||||||||||||||||||||||||||||
| 2025/2024 | 2024/2023 | ||||||||||||||||||||||||||||||||||
| Net Change | Change Due To(1) | Net Change | Change Due To(1) | ||||||||||||||||||||||||||||||||
| (in thousands) | Volume | Yield/Rate(2) | Volume | Yield/Rate(2) | |||||||||||||||||||||||||||||||
| Interest income | |||||||||||||||||||||||||||||||||||
| Investment securities | $ | 40,771 | $ | 6,007 | $ | 34,764 | $ | 39,925 | $ | 5,298 | $ | 34,627 | |||||||||||||||||||||||
| Interest bearing cash and cash equivalents | (65,591) | (38,029) | (27,562) | (17,570) | (20,997) | 3,427 | |||||||||||||||||||||||||||||
| Loans held for sale | (2,430) | (2,424) | (6) | (424) | (629) | 205 | |||||||||||||||||||||||||||||
| Loans held for investment, mortgage finance | 38,924 | 21,741 | 17,183 | 7,867 | 22,375 | (14,508) | |||||||||||||||||||||||||||||
| Loans held for investment | 32,534 | 89,353 | (56,819) | 69,830 | 46,986 | 22,844 | |||||||||||||||||||||||||||||
| Total interest income | 44,208 | 76,648 | (32,440) | 99,628 | 53,033 | 46,595 | |||||||||||||||||||||||||||||
| Interest expense | |||||||||||||||||||||||||||||||||||
| Transaction deposits | (10,121) | 7,171 | (17,292) | 22,654 | 16,911 | 5,743 | |||||||||||||||||||||||||||||
| Savings deposits | (30,414) | 89,877 | (120,291) | 92,020 | 53,780 | 38,240 | |||||||||||||||||||||||||||||
| Time deposits | 2,111 | 16,115 | (14,004) | 33,747 | 15,444 | 18,303 | |||||||||||||||||||||||||||||
| Short-term borrowings | (35,617) | (32,389) | (3,228) | (20,648) | (20,780) | 132 | |||||||||||||||||||||||||||||
| Long-term debt | (11,061) | (5,781) | (5,280) | (15,323) | (9,345) | (5,978) | |||||||||||||||||||||||||||||
| Total interest expense | (85,102) | 74,993 | (160,095) | 112,450 | 56,010 | 56,440 | |||||||||||||||||||||||||||||
| Net interest income | $ | 129,310 | $ | 1,655 | $ | 127,655 | $ | (12,822) | $ | (2,977) | $ | (9,845) | |||||||||||||||||||||||
(1)Yield/rate and volume variances are allocated to yield/rate.
(2)Taxable equivalent rates used where applicable.
Net Interest Income
Net interest income was $1.0 billion for the year ended December 31, 2025 compared to $901.3 million for 2024. The increase was primarily due to an increase in average earning assets and a decrease in funding costs, partially offset by a decrease in earning asset yields and an increase in average interest bearing liabilities.
Average earning assets for the year ended December 31, 2025 increased $1.2 billion compared to the same period in 2024, which included increases of $1.8 billion in average total loans and $189.5 million in average investment securities, partially offset by a $737.0 million decrease in average interest bearing cash and cash equivalents. Average interest bearing liabilities increased $1.7 billion for the year ended December 31, 2025 compared to the same period in 2024, primarily due to a $2.5 billion increase in average interest bearing deposits, partially offset by decreases of $605.4 million in average short-term borrowings and $101.7 million in average long-term debt. Average non-interest bearing deposits for the year ended December 31, 2025 decreased to $8.2 billion from $9.0 billion for the same period in 2024.
Net interest margin for the year ended December 31, 2025 was 3.35% compared to 3.03% for 2024. The increase was primarily due to a decrease in funding costs.
The yield on total loans held for investment, net, decreased to 6.32% for the year ended December 31, 2025 compared to 6.52% for the same period in 2024 and the yield on earning assets decreased to 5.76% for the year ended December 31, 2025 compared to 5.82% for the same period in 2024. The average cost of total deposits decreased to 2.60% for 2025 from 2.93% for the same period in 2024 and total funding costs, including all deposits, long-term debt and stockholders' equity, decreased to 2.37% for 2025 compared to 2.75% for the same period 2024.
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Non-interest Income
| Year Ended December 31, | |||||||||||||||||
| (in thousands) | 2025 | 2024 | 2023 | ||||||||||||||
| Service charges on deposit accounts | $ | 32,544 | $ | 25,546 | $ | 20,874 | |||||||||||
| Wealth management and trust fee income | 15,899 | 15,315 | 13,955 | ||||||||||||||
| Brokered loan fees | 9,233 | 8,961 | 8,918 | ||||||||||||||
| Investment banking and advisory fees | 104,587 | 104,965 | 63,670 | ||||||||||||||
| Trading income | 27,093 | 21,635 | 22,512 | ||||||||||||||
| Available-for-sale debt securities losses | (1,886) | (179,581) | 489 | ||||||||||||||
| Other | 39,672 | 34,205 | 31,001 | ||||||||||||||
| Total non-interest income | $ | 227,142 | $ | 31,046 | $ | 161,419 | |||||||||||
Non-interest income was $227.1 million for the year ended December 31, 2025, a $196.1 million increase as compared to the same period in 2024, primarily due to the inclusion of a $179.6 million loss on sale of available-for-sale debt securities recognized during the third quarter of 2024, as well as increases in service charges on deposit accounts, trading income and other non-interest income.
Non-interest Expense
| Year Ended December 31, | |||||||||||||||||
| (in thousands) | 2025 | 2024 | 2023 | ||||||||||||||
| Salaries and benefits | $ | 480,502 | $ | 466,578 | $ | 459,700 | |||||||||||
| Occupancy expense | 47,619 | 45,266 | 38,494 | ||||||||||||||
| Marketing | 17,449 | 22,349 | 25,854 | ||||||||||||||
| Legal and professional | 50,112 | 53,783 | 64,924 | ||||||||||||||
| Communications and technology | 98,853 | 93,085 | 81,262 | ||||||||||||||
| Federal Deposit Insurance Corporation (“FDIC”) insurance assessment | 17,911 | 23,351 | 36,775 | ||||||||||||||
| Other | 55,623 | 53,873 | 49,938 | ||||||||||||||
| Total non-interest expense | $ | 768,069 | $ | 758,285 | $ | 756,947 | |||||||||||
Non-interest expense was $768.1 million for the year ended December 31, 2025, an increase of $9.8 million as compared to the same period in 2024, primarily due to increases in salaries and benefits and communications and technology expense, partially offset by decreases in marketing expense and FDIC insurance assessment. FDIC insurance assessment for 2025 included a release of $2.2 million in special assessment accruals upon determination by the FDIC that the extended collection period was no longer necessary, while FDIC insurance assessment for 2024 included an additional $2.8 million FDIC special assessment accrual.
Analysis of Financial Condition
Loans Held for Investment
The following table summarizes the Company’s loans held for investment by portfolio segment. See Note 1 - Operations and Summary of Significant Accounting Policies in the accompanying notes to the consolidated financial statements included elsewhere in this report for details of these portfolio segments.
| (in thousands) | December 31, 2025 | December 31, 2024 | |||||||||
| Commercial | $ | 12,252,805 | $ | 11,145,591 | |||||||
| Mortgage finance | 6,064,019 | 5,215,574 | |||||||||
| Commercial real estate | 5,395,753 | 5,616,282 | |||||||||
Consumer | 434,425 | 565,376 | |||||||||
Gross loans held for investment | 24,147,002 | 22,542,823 | |||||||||
Unearned income (net of direct origination costs) | (106,800) | (92,757) | |||||||||
| Total loans held for investment | $ | 24,040,202 | $ | 22,450,066 | |||||||
Total loans held for investment were $24.0 billion at December 31, 2025, an increase of $1.6 billion from December 31, 2024, as increases in commercial and mortgage finance loans were partially offset by decreases in commercial real estate and consumer loans. Mortgage finance loans include legal ownership interests in mortgage loans that the Company purchases from unaffiliated mortgage originators, either directly or through a special purpose entity structure, that are typically sold within 10 to 20 days and represent 25% and 23% of gross loans held for investment at December 31, 2025 and December 31, 2024, respectively. Volumes fluctuate based on the level of market demand for the product and the number of days between purchase
35
and sale of the loans, which can be affected by changes in overall market interest rates, and tend to peak at the end of each month.
The Company originates a substantial majority of all loans held for investment. The Company also participates in shared national credits, both as a participant and as an agent. As of December 31, 2025, the Company had $6.2 billion in shared national credits, $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 December 31, 2025, approximately $55.8 million of the Company’s shared national credits were on non-accrual.
Portfolio Concentrations
Although more than 50% of the Company’s total loan exposure is outside of Texas and more than 50% of deposits are sourced outside of Texas, Texas concentration remains significant. As of December 31, 2025, a majority of the loans held for investment, excluding mortgage finance and other national lines of business, were to businesses with headquarters or operations in Texas. This geographic concentration subjects the Company’s loan portfolio to the general economic conditions within Texas. The risks created by this concentration have been considered by management in determining the appropriateness of the allowance for credit losses.
The table below summarizes the industry concentrations of loans held for investment on a gross basis at December 31, 2025:
| (dollars in thousands) | Amount | Percent of Total | |||||||||
| Commercial: | |||||||||||
| Financials (excluding banks) | $ | 3,764,023 | 15.5 | % | |||||||
| Oil & gas and pipelines | 1,841,479 | 7.5 | % | ||||||||
| Technology, telecom and media | 1,393,835 | 5.8 | % | ||||||||
| Healthcare and pharmaceuticals | 842,902 | 3.5 | % | ||||||||
| Real estate related services (not secured by real estate) | 737,390 | 3.1 | % | ||||||||
| Commercial services | 595,923 | 2.5 | % | ||||||||
| Machinery, equipment and parts manufacturing | 455,561 | 1.9 | % | ||||||||
| Retail | 403,580 | 1.7 | % | ||||||||
| Government and education | 375,036 | 1.6 | % | ||||||||
| Entertainment and recreation | 257,256 | 1.1 | % | ||||||||
| Utilities | 231,023 | 1.0 | % | ||||||||
| Transportation services | 206,192 | 0.9 | % | ||||||||
| Food and beverage manufacturing and wholesale | 198,066 | 0.8 | % | ||||||||
| Materials and commodities | 192,376 | 0.8 | % | ||||||||
| Consumer services | 170,039 | 0.7 | % | ||||||||
| Diversified or miscellaneous | 588,124 | 2.4 | % | ||||||||
| Total commercial | 12,252,805 | 50.8 | % | ||||||||
| Mortgage finance | 6,064,019 | 25.1 | % | ||||||||
| Commercial real estate | 5,395,753 | 22.3 | % | ||||||||
| Consumer | 434,425 | 1.8 | % | ||||||||
| Total | $ | 24,147,002 | 100.0 | % | |||||||
The Company’s largest concentration of commercial loans held for investment in any single industry is in financials excluding banks. Loans extended to borrowers in the financials excluding banks category are comprised largely of loans to companies who loan money to businesses and consumers for various purposes including, but not limited to, insurance, consumer goods and real estate. This category also includes loans to companies involved in investment management and securities and commodities trading. The majority of the loans in this category plus the mortgage finance loan category make up the majority of the Company’s loans to non-depository financial institutions, as defined in the regulatory guidance for the Company’s consolidated financial report for bank holding companies.
36
The Company believes the loans it originates are appropriately collateralized under its credit standards. Approximately 97% of the Company’s loans held for investment are secured by collateral. The table below sets forth information regarding the distribution of loans held for investment on a gross basis among various types of collateral at December 31, 2025:
| (dollars in thousands) | Amount | Percent of Total | |||||||||
| Commercial: | |||||||||||
| Business assets | $ | 10,631,461 | 44.1 | % | |||||||
| Highly liquid assets | 380,494 | 1.6 | % | ||||||||
| Other assets | 203,311 | 0.8 | % | ||||||||
| Municipal tax- and revenue-secured | 188,962 | 0.8 | % | ||||||||
| Rolling stock | 59,233 | 0.2 | % | ||||||||
U.S. Government guaranty | 26 | — | % | ||||||||
| Unsecured | 789,318 | 3.3 | % | ||||||||
| Total commercial | 12,252,805 | 50.8 | % | ||||||||
| Mortgage finance | 6,064,019 | 25.1 | % | ||||||||
| Commercial real estate | 5,395,753 | 22.3 | % | ||||||||
| Consumer | 434,425 | 1.8 | % | ||||||||
| Total | $ | 24,147,002 | 100.0 | % | |||||||
As noted in the tables above, approximately 22% of loans held for investment as of December 31, 2025 are commercial real estate loans that are generally secured by real property. The commercial real estate portfolio is comprised primarily of non-owner occupied construction/development financing and limited term financing provided to professional real estate developers, owners/managers of commercial real estate projects and properties and residential builders/developers. Collateral properties include office buildings, warehouse/distribution buildings, shopping centers, hotels/motels, senior living, apartment buildings, residential and commercial tract developments and raw land or lots to be developed into single-family homes. The primary source of repayment on these loans is generally expected to come from the sale, permanent financing or lease of the real property collateral. As a result, the performance of these loans is generally impacted by fluctuations in collateral values, the ability of the borrower to obtain permanent financing and, in the case of loans to residential builder/developers, volatility in consumer demand.
The table below summarizes the commercial real estate loan portfolio on a gross basis by property type as of December 31, 2025:
| (dollars in thousands) | Amount | Percent of Total | |||||||||
| Apartment/condominium buildings | $ | 2,184,619 | 40.4 | % | |||||||
| Industrial buildings | 1,154,578 | 21.4 | % | ||||||||
| 1-4 Family dwellings (other than condominium) | 402,550 | 7.5 | % | ||||||||
| Senior housing buildings | 337,554 | 6.3 | % | ||||||||
| Office buildings | 259,507 | 4.8 | % | ||||||||
| Commercial buildings | 243,414 | 4.5 | % | ||||||||
| Shopping center/mall buildings | 222,878 | 4.1 | % | ||||||||
| Self-storage buildings | 108,387 | 2.0 | % | ||||||||
| Hotel/motel buildings | 103,403 | 1.9 | % | ||||||||
| Hospital/medical office | 84,731 | 1.6 | % | ||||||||
| Commercial lots | 68,252 | 1.3 | % | ||||||||
| Residential lots | 53,561 | 1.0 | % | ||||||||
| Other | 172,319 | 3.2 | % | ||||||||
| Total commercial real estate loans | $ | 5,395,753 | 100.0 | % | |||||||
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The table below summarizes the Company’s commercial real estate portfolio on a gross basis at December 31, 2025 as segregated by the geographic region in which the property is located. Approximately 52% of the commercial real estate collateral is located in Texas.
| (dollars in thousands) | Amount | Percent of Total | |||||||||
| Texas geographic region: | |||||||||||
| Dallas/Fort Worth | $ | 956,411 | 17.8 | % | |||||||
| Houston | 713,740 | 13.2 | % | ||||||||
| San Antonio | 567,056 | 10.5 | % | ||||||||
| Austin | 415,657 | 7.7 | % | ||||||||
| Other Texas cities | 173,649 | 3.2 | % | ||||||||
| Total Texas | 2,826,513 | 52.4 | % | ||||||||
| Other states | 2,569,240 | 47.6 | % | ||||||||
Total commercial real estate loans | $ | 5,395,753 | 100.0 | % | |||||||
The determination of collateral value is critically important when financing real estate. As a result, obtaining current and objectively prepared appraisals is a major part of the underwriting and monitoring processes. The Company engages a variety of professional firms to supply appraisals, market studies and feasibility reports, environmental assessments and project site inspections to complement its internal resources to underwrite and monitor these credit exposures. Generally, the credit policy requires a new appraisal every three years. However, in periods of economic uncertainty where real estate market conditions may change rapidly, more current appraisals are obtained when warranted by conditions such as a borrower’s deteriorating financial condition, their possible inability to perform on the loan or other indicators of increasing risk of reliance on collateral value as the sole source of repayment of the loan. Annual appraisals are generally obtained for loans graded substandard or worse where real estate is a material portion of the collateral value and/or the income from the real estate or sale of the real estate is the primary source of debt service.
Appraisals are, in substantially all cases, reviewed by a third party to determine the reasonableness of the appraised value. The third-party reviewer will challenge whether or not the data used is appropriate and relevant, form an opinion as to the appropriateness of the appraisal methods and techniques used, and determine if overall the analysis and conclusions of the appraiser can be relied upon. Additionally, the third-party reviewer provides a detailed report of that analysis. Further review may be conducted by credit officers, including the Bank’s managed asset committee as conditions warrant. These additional steps of review are undertaken to confirm that the underlying appraisal and the third-party analysis can be relied upon. If differences arise, management addresses those with the reviewer and determines an appropriate resolution. Both the appraisal process and the appraisal review process can be less reliable in establishing accurate collateral values during and following periods of economic weakness due to the lack of comparable sales and the limited availability of financing to support an active market of potential purchasers.
Interest Reserve Loans
As of December 31, 2025 and December 31, 2024, the Company had $588.4 million and $797.3 million, respectively, in loans held for investment that included interest reserve arrangements, representing approximately 11% and 14%, respectively, of outstanding commercial real estate loans. The use of interest reserves is common in construction loans and is carefully controlled by underwriting standards, which consider the feasibility of the project, the creditworthiness of the borrower and guarantors and the loan-to-value coverage of the collateral. The interest reserve allows the borrower to draw loan funds to pay interest charges on the outstanding balance of the loan when financial condition precedents are met. When drawn, the interest is capitalized and added to the loan balance, subject to conditions specified during the initial underwriting and at the time the credit is approved. The Company has ongoing controls for monitoring compliance with loan covenants, advancing funds and determining default conditions.
When the Company finances land on which improvements will be constructed, construction funds are generally not advanced until the borrower has received lease or purchase commitments which will meet cash flow coverage requirements and/or an analysis of market conditions and project feasibility indicates to management’s satisfaction that such lease or purchase commitments are forthcoming or other sources of repayment have been identified to repay the loan. It is the general policy to require a substantial equity investment by the borrower to complement the Bank's credit commitment. Any such required borrower investment is first contributed and invested in the project before any draws are allowed under the Bank's credit commitment. The Company requires current financial statements of the borrowing entity and guarantors, as well as conducts periodic inspections of the project and analyzes whether the project is on schedule or delayed. Updated appraisals are ordered when necessary to validate the collateral values to support advances, including interest reserves. Advances of interest reserves are discontinued if collateral values do not support the advances or if the borrower does not comply with other terms and conditions in the loan agreements. If at any time management believes that the collateral position is jeopardized, the Company
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retains the right to stop the use of interest reserves. As of December 31, 2025 and December 31, 2024, none of the loans with interest reserves were on non-accrual.
Large Credit Relationships
The Company originates and maintains large credit relationships with numerous customers in the ordinary course of business. The legal lending limit of the Bank is approximately $592.7 million. The Company, however, generally employs lower house limits which vary by assigned risk grade, product and collateral type. Such house limits, which generally range from $20 million to $60 million, may be exceeded with appropriate authorization for exceptionally strong borrowers and otherwise where business opportunity and assessed credit risk warrant a larger investment. The Company considers large credit relationships to be those with commitments equal to or in excess of $20.0 million. The following table provides additional information on large held for investment credit relationships outstanding at year-end:
| December 31, 2025 | December 31, 2024 | ||||||||||||||||||||||||||||||||||
| Period End Balances | Period End Balances | ||||||||||||||||||||||||||||||||||
| (dollars in thousands) | Number of Relationships | Committed | Outstanding | Number of Relationships | Committed | Outstanding | |||||||||||||||||||||||||||||
| $30.0 million and greater | 449 | $ | 24,032,107 | $ | 15,751,422 | 373 | $ | 20,195,542 | $ | 13,965,661 | |||||||||||||||||||||||||
| $20.0 million to $29.9 million | 234 | 5,831,795 | 3,747,527 | 225 | 5,516,052 | 3,792,528 | |||||||||||||||||||||||||||||
Loan Maturities and Interest Rate Sensitivity
The following table shows the contractual maturity distribution of loans held for investment on a gross basis as of December 31, 2025:
| (in thousands) | Within 1 Year | 1-5 Years | 5-15 Years | After 15 Years | Total | ||||||||||||||||||||||||
| Commercial | $ | 2,339,872 | $ | 9,444,271 | $ | 266,077 | $ | 202,585 | $ | 12,252,805 | |||||||||||||||||||
| Mortgage finance | 6,064,019 | — | — | — | 6,064,019 | ||||||||||||||||||||||||
| Commercial real estate | 2,469,996 | 2,654,123 | 199,994 | 71,640 | 5,395,753 | ||||||||||||||||||||||||
| Consumer | 22,340 | 7,621 | 3,689 | 400,775 | 434,425 | ||||||||||||||||||||||||
| Total loans held for investment | $ | 10,896,227 | $ | 12,106,015 | $ | 469,760 | $ | 675,000 | $ | 24,147,002 | |||||||||||||||||||
The following table shows the interest rate composition of loans held for investment on a gross basis with a maturity date over one year as of December 31, 2025:
| (in thousands) | Fixed Interest Rate | Floating Interest Rate | Total | ||||||||||||||
| Commercial | $ | 701,592 | $ | 9,211,341 | $ | 9,912,933 | |||||||||||
| Mortgage finance | — | — | — | ||||||||||||||
| Commercial real estate | 245,864 | 2,679,893 | 2,925,757 | ||||||||||||||
| Consumer | 16,800 | 395,285 | 412,085 | ||||||||||||||
| Total loans held for investment | $ | 964,256 | $ | 12,286,519 | $ | 13,250,775 | |||||||||||
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Non-performing Assets
Non-performing assets include non-accrual loans and leases, and repossessed assets. The table below summarizes non-accrual loans by portfolio segment and by type of property securing the credit.
| (dollars in thousands) | December 31, 2025 | December 31, 2024 | |||||||||
| Non-accrual loans held for investment | |||||||||||
| Commercial: | |||||||||||
| Business assets | $ | 92,725 | $ | 64,481 | |||||||
| Accounts receivable and inventory | 1,177 | 6,315 | |||||||||
Machinery and equipment | — | 2,729 | |||||||||
| Unsecured | 2,244 | 60 | |||||||||
| Highly liquid assets | — | 1,340 | |||||||||
| Other | — | 639 | |||||||||
| Total commercial | 96,146 | 75,564 | |||||||||
| Commercial real estate: | |||||||||||
Industrial buildings | 19,200 | 20,637 | |||||||||
Commercial building | 1,534 | — | |||||||||
Office buildings | — | 14,000 | |||||||||
| Total commercial real estate | 20,734 | 34,637 | |||||||||
| Consumer: | |||||||||||
| Single family residences | — | 964 | |||||||||
| Total consumer | — | 964 | |||||||||
| Total non-accrual loans held for investment | 116,880 | 111,165 | |||||||||
Non-accrual loans held for sale(1) | 4,361 | — | |||||||||
| Other real estate owned (“OREO”) | — | — | |||||||||
| Total non-performing assets | $ | 121,241 | $ | 111,165 | |||||||
| Non-accrual loans held for investment to total loans held for investment | 0.49 | % | 0.50 | % | |||||||
| Total non-performing assets to total assets | 0.38 | % | 0.36 | % | |||||||
| Allowance for credit losses on loans to non-accrual loans held for investment | 2.3x | 2.4x | |||||||||
| Loans held for investment past due 90 days and accruing | $ | 19,353 | $ | 4,265 | |||||||
| Loans held for investment past due 90 days to total loans held for investment | 0.08 | % | 0.02 | % | |||||||
| Loans held for sale past due 90 days and accruing | $ | — | $ | — | |||||||
(1) Non-accrual loans held for sale at December 31, 2025 include non-accrual loans previously reported in loans held for investment that were transferred at fair value to held for sale as of December 31, 2025.
Summary of Credit Loss Experience
The provision for credit losses, comprised of a provision for loans and off-balance sheet credit losses, is a charge to earnings to maintain the allowance for credit losses at a level consistent with management’s assessment of expected losses at each balance sheet date.
The Company recorded a provision for credit losses of $55.0 million for the year ended December 31, 2025, compared to a provision of $67.0 million for the year ended December 31, 2024. The provision for credit losses for the year ended December 31, 2025 reflects an increase in total loans held for investment and $47.2 million in net charge-offs recorded during the year ended December 31, 2025, partially offset by a decline in criticized loans. Criticized loans totaled $634.9 million at December 31, 2025, compared to $714.0 million at December 31, 2024.
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The table below presents key metrics related to the Company’s credit loss experience:
| December 31, 2025 | December 31, 2024 | |||||||||||||
| Allowance for credit losses on loans to total loans held for investment | 1.13 | % | 1.21 | % | ||||||||||
Allowance for credit losses on loans to average total loans held for investment | 1.17 | % | 1.27 | % | ||||||||||
| Total allowance for credit losses to total loans held for investment | 1.38 | % | 1.45 | % | ||||||||||
Total provision for credit losses to average total loans held for investment | 0.24 | % | 0.31 | % | ||||||||||
The table below details net charge-offs/(recoveries) as a percentage of average total loans by portfolio segment:
| Year Ended December 31, | ||||||||||||||||||||||||||
| 2025 | 2024 | |||||||||||||||||||||||||
| (dollars in thousands) | Net Charge-offs | Net Charge-offs to Average Loans | Net Charge-offs | Net Charge-offs to Average Loans(1) | ||||||||||||||||||||||
| Commercial | $ | 46,207 | 0.39 | % | $ | 32,612 | 0.31 | % | ||||||||||||||||||
| Mortgage finance | — | — | % | — | — | % | ||||||||||||||||||||
| Commercial real estate | 1,042 | 0.02 | % | 8,246 | 0.15 | % | ||||||||||||||||||||
| Consumer | (20) | — | % | 15 | — | % | ||||||||||||||||||||
| Total | $ | 47,229 | 0.20 | % | $ | 40,873 | 0.19 | % | ||||||||||||||||||
The allowance for credit losses on loans totaled $270.6 million at December 31, 2025 and $271.7 million at December 31, 2024. The following table presents a summary of the Company’s allowance for credit losses on loans by portfolio segment for the past two years:
| December 31, | ||||||||||||||||||||||||||
| 2025 | 2024 | |||||||||||||||||||||||||
| (dollars in thousands) | Allowance for Credit Losses on Loans | % of Loans in each Category to Total Loans | Allowance for Credit Losses on Loans | % of Loans in each Category to Total Loans | ||||||||||||||||||||||
| Commercial | $ | 202,029 | 51 | % | $ | 198,423 | 49 | % | ||||||||||||||||||
| Mortgage finance | 6,221 | 25 | % | 2,755 | 23 | % | ||||||||||||||||||||
| Commercial real estate | 60,559 | 22 | % | 68,825 | 25 | % | ||||||||||||||||||||
| Consumer | 1,748 | 2 | % | 1,706 | 3 | % | ||||||||||||||||||||
| Total | $ | 270,557 | 100 | % | $ | 271,709 | 100 | % | ||||||||||||||||||
See Note 1 - Operations and Summary of Significant Accounting Policies 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 details of the allowance for credit losses on loans.
Deposits
The Company primarily competes for deposits by offering a full suite of deposit products and services to its customers. While this includes offering competitive interest rates and fees, the primary means of competing for deposits is convenience and service to customers, tailored to the strategy of maintaining a branch-lite network. The Company offers banking centers, courier services and online and mobile banking. Bask Bank, the Bank’s digital-only online banking division, serves customers on a 24 hours-a-day, 7 days-a-week basis solely through online banking.
Average total deposits for the year ended December 31, 2025 increased $1.7 billion compared to 2024. Average non-interest bearing deposits for the year ended December 31, 2025 decreased $792.8 million compared to 2024 and average interest bearing deposits increased $2.5 billion compared to 2024. The average cost of total deposits decreased to 2.60% in 2025 from 2.93% in 2024.
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The following table discloses average deposits and weighted-average cost of deposits by type:
| Year Ended December 31, | |||||||||||||||||||||||
| 2025 | 2024 | ||||||||||||||||||||||
| (dollars in thousands) | Average Balance | Average Rate Paid | Average Balance | Average Rate Paid | |||||||||||||||||||
| Non-interest bearing | $ | 8,220,254 | — | % | $ | 9,013,038 | — | % | |||||||||||||||
| Interest bearing transaction | 2,275,219 | 2.42 | % | 2,049,720 | 3.18 | % | |||||||||||||||||
| Savings | 14,051,757 | 3.86 | % | 12,143,539 | 4.71 | % | |||||||||||||||||
| Time deposits | 2,263,568 | 4.46 | % | 1,946,341 | 5.08 | % | |||||||||||||||||
| Total | $ | 26,810,798 | 2.60 | % | $ | 25,152,638 | 2.93 | % | |||||||||||||||
The following table shows scheduled maturities of time deposits greater than $250,000:
| (in thousands) | December 31, 2025 | December 31, 2024 | |||||||||
| Months to maturity: | |||||||||||
| Three or less | $ | 198,937 | $ | 181,982 | |||||||
| Over three through six | 123,202 | 84,889 | |||||||||
| Over six through twelve | 261,436 | 186,469 | |||||||||
| Over twelve | 16,497 | 42,148 | |||||||||
| Total | $ | 600,072 | $ | 495,488 | |||||||
Liquidity and Capital Resources
Liquidity
In general terms, liquidity is a measurement of the Company’s ability to meet its cash needs. The Company’s objectives in managing its liquidity are to maintain the ability to meet loan commitments, repurchase investment securities and repay deposits and other liabilities in accordance with their terms, without an adverse impact on current or future earnings. The Company’s liquidity strategy is guided by policies, formulated and monitored by senior management and the Asset and Liability Management Committee (“ALCO”), which take into account the demonstrated marketability of the Company’s assets, the sources and stability of its funding and the level of unfunded commitments. The Company regularly evaluates all of its various funding sources with an emphasis on accessibility, stability, reliability and cost-effectiveness. The Company’s principal source of funding is customer deposits, supplemented by short-term borrowings, primarily from federal funds purchased and FHLB borrowings, brokered deposits and long-term debt. The Company also relies on the availability of the mortgage secondary market provided by Ginnie Mae and government sponsored entities to support the liquidity of mortgage finance loans.
The following table summarizes the Company’s interest bearing cash and cash equivalents:
| (dollars in thousands) | December 31, 2025 | December 31, 2024 | ||||||||||||
| Interest bearing cash and cash equivalents | $ | 1,897,803 | $ | 3,012,307 | ||||||||||
| Interest bearing cash and cash equivalents as a percent of: | ||||||||||||||
| Total loans held for investment | 7.9 | % | 13.4 | % | ||||||||||
| Total earning assets | 6.2 | % | 10.2 | % | ||||||||||
| Total deposits | 7.2 | % | 11.9 | % | ||||||||||
The Company aims to obtain as much of its funding as possible from customer deposits, which are generated through digital acquisition or as a result of development of long-term customer relationships, with a significant focus on treasury management products. In addition, the Company also has access to deposits through brokered channels. The following table summarizes period-end total deposits:
| December 31, 2025 | December 31, 2024 | ||||||||||||||||||||||
| (dollars in thousands) | Balance | % of Total | Balance | % of Total | |||||||||||||||||||
| Customer deposits | $ | 25,719,595 | 97.2 | % | $ | 24,704,091 | 97.9 | % | |||||||||||||||
| Brokered deposits | 729,172 | 2.8 | % | 534,508 | 2.1 | % | |||||||||||||||||
| Total deposits | $ | 26,448,767 | 100.0 | % | $ | 25,238,599 | 100.0 | % | |||||||||||||||
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Estimated uninsured deposits, including accrued interest, were 42% and 41% of total deposits at both December 31, 2025 and December 31, 2024, respectively. The uninsured amounts are estimated based on the methodologies and assumptions used for the Bank’s regulatory reporting requirements.
The Company has short-term borrowing sources available to supplement deposits and meet its funding needs. Such borrowings are generally used to fund mortgage finance loans, due to their liquidity, short duration and interest spreads available. These borrowing sources include federal funds purchased from downstream correspondent bank relationships (which consist of banks that are smaller than the Bank) and from upstream correspondent bank relationships (which consist of banks that are larger than the Bank) and advances from the FHLB and the Federal Reserve. The following table summarizes short-term borrowings, all of which mature within one year:
(in thousands) | December 31, 2025 | December 31, 2024 | ||||||||||||
| Federal funds purchased | $ | 30,000 | $ | — | ||||||||||
| FHLB borrowings | 300,000 | 885,000 | ||||||||||||
Total short-term borrowings | $ | 330,000 | $ | 885,000 | ||||||||||
The following table summarizes the Company’s short-term borrowing capacities net of balances outstanding:
| (in thousands) | December 31, 2025 | December 31, 2024 | |||||||||
| FHLB borrowing capacity relating to loans and pledged securities | $ | 2,570,596 | $ | 4,664,703 | |||||||
| FHLB borrowing capacity relating to unencumbered securities | 4,594,553 | 4,189,993 | |||||||||
| Total FHLB borrowing capacity(1) | $ | 7,165,149 | $ | 8,854,696 | |||||||
| Unused federal funds lines available from commercial banks | $ | 1,520,000 | $ | 1,370,000 | |||||||
| Unused Federal Reserve borrowings capacity | $ | 9,174,238 | $ | 5,436,652 | |||||||
Unused revolving line of credit(2) | $ | 75,000 | $ | 75,000 | |||||||
(1)FHLB borrowings are collateralized by a blanket floating lien on certain real estate secured loans and certain pledged securities.
(2)Unsecured revolving, non-amortizing line of credit with maturity date of February 8, 2027. Proceeds may be used for general corporate purposes, including funding regulatory capital infusions into the Bank. The loan agreement contains customary financial covenants and restrictions. No borrowings were made against this line of credit during the year ended December 31, 2025 or 2024.
The Company has long-term debt outstanding of $620.6 million as of December 31, 2025, comprised of trust preferred securities and subordinated notes with maturity dates ranging from January 2026 to December 2036. See Note 8 - 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 10 - Regulatory Ratios and Capital in the accompanying notes to the consolidated financial statements included elsewhere in this report for additional information regarding dividend restrictions and “Liquidity Risks” included in Part I, Item 1A. Risk Factors.
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 $3.6 billion for the year ended December 31, 2025 compared to $3.3 billion for the same period in 2024. The Company has not paid any cash dividends on common stock since operations commenced.
On January 22, 2025, the Company’s board of directors authorized a share repurchase program under which the Company may repurchase up to $200.0 million in shares of its outstanding common stock, excluding the effect of excise tax expense incurred on net stock repurchases. Effective December 12, 2025, the Company’s board of directors authorized a new share repurchase program under which the Company may repurchase up to $200.0 million in shares of its outstanding common stock, excluding the effect of excise tax expense incurred on the net stock repurchases. The share repurchase program will expire on December 31, 2026, but may be suspended or discontinued at any time. The remaining repurchase authorization under the January 22, 2025 share repurchase program was terminated upon authorization of this new program. During the year ended December 31, 2025, the Company repurchased 2,246,265 shares of its common stock for an aggregate purchase price, including excise tax expense, of $185.8 million, at a weighted average price of $82.01 per share.
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Any repurchases under the Company’s 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.
For additional information on the Company’s capital and stockholders’ equity, see Note 10 - 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 estimate.
Allowance for Credit Losses
Management considers the policies related to the allowance for credit losses as the most critical to the financial statement presentation. The total allowance for credit losses includes activity related to allowances calculated in accordance with Accounting Standards Codification 326, Credit Losses. The allowance for credit losses is established through a provision for credit losses charged to current earnings. The amount maintained in the allowance reflects management’s continuing evaluation of the credit losses expected to be recognized over the life of the loans in the Company’s portfolio. The allowance for credit losses on loans is a valuation account that is deducted from the loans' amortized cost basis to present the net amount expected to be collected on the loans. The allowance for credit losses on off-balance sheet financial instruments is recorded in other liabilities on the consolidated balance sheets. For purposes of determining the allowance for credit losses, the loan portfolio is segregated into pools first by portfolio segment and then by past due status or credit grade. Each pool is assigned a loss estimate, reflecting historical loss rates that incorporate probability of default and severity of losses over the estimated remaining life of the loans. Loans that do not share risk characteristics are evaluated on an individual basis and are not included in the collective (pool) evaluation. Management estimates the allowance balance using relevant available information from internal and external sources relating to past events, current conditions and reasonable and supportable forecasts. Modifications to loss estimates are made to incorporate a reasonable and supportable forecast of future losses at the pool level, as well as any necessary qualitative adjustments using a Portfolio Level Qualitative Factor (“PLQF”) and/or a Portfolio Segment Level Qualitative Factor (“SLQF”). A similar process is employed to calculate a reserve assigned to off-balance sheet financial instruments, specifically unfunded loan commitments and letters of credit. Modified loss estimates are assigned based on the balance of the commitments estimated to be outstanding at the time of default. The PLQF and SLQF are utilized to address factors that are not present in historical loss rates and are otherwise unaccounted for in the quantitative process. A reserve is recorded upon origination or purchase of a loan. See “Summary of Credit Loss Experience” above and Note 4 - Loans and Allowance for Credit Losses on Loans in the accompanying notes to the consolidated financial statements included elsewhere in this report for further discussion of the risk factors considered by management in establishing the allowance for credit losses.
Management considers a range of macroeconomic scenarios in connection with the allowance estimation process. Within the various economic scenarios considered as of December 31, 2025, the quantitative estimate of the allowance for credit loss would increase by approximately $108.7 million under sole consideration of the most severe downside scenario. The quoted sensitivity calculation reflects the sensitivity of the modeled allowance estimate to macroeconomic forecast data, but is absent of qualitative overlays and other qualitative adjustments that are part of the quarterly reserving process and does not necessarily reflect the nature and extent of future changes in the allowance for reasons including increases or decreases in qualitative adjustments, changes in the risk profile and size of the portfolio, changes in the severity of the macroeconomic scenario and the range of scenarios under management consideration.
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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 desks that engage in securities, derivatives and foreign exchange transactions to support the capital raising, investing and hedging activities of customers. The Company may manage or reduce market risk through the use of hedging, short sale or other similar transactions intended to reduce market risk to be within tolerance levels designated by the Company’s market risk management strategy. The Company uses Value-at-Risk (“VaR”) as a means to measure, monitor, and limit aggregate market risk on the trading portfolio. VaR is a statistical risk measure estimating potential loss at the 95th percentile based on a one-year history of market risk factors associated with the trading portfolio. VaR provides a consistent cross-asset measure for risk profiles and allows for diversification benefit based on historical correlations across market moves. As of December 31, 2025, the Company’s exposure through its trading desk does not pose a significant market risk to the Company. All statistical models involve a degree of uncertainty and VaR is calculated at a statistical confidence interval of the 95th percentile based on one-year daily historic market moves. Larger economic losses are possible, particularly during stressed macroeconomic and market conditions.
The responsibility for managing market risk rests with the ALCO, which operates under policy guidelines established by the Company’s board of directors. Oversight of the Company’s compliance with the guidelines is the ongoing responsibility of the ALCO, with exceptions reported to the Executive Risk Committee and the board of directors, if necessary, on a quarterly basis.
Interest Rate Risk Management
The Company’s interest rate sensitivity as of December 31, 2025 is illustrated in the following table. The table reflects rate-sensitive positions as of December 31, 2025 and is not necessarily indicative of positions on other dates. The table does not take into account the effect of the Company’s derivatives designated as cash flow hedges. The balances of interest rate sensitive assets and liabilities are presented in the periods in which they next reprice to market rates or mature and are aggregated to show the interest rate sensitivity gap. The mismatch between repricings or maturities within a time period is commonly referred to as the “gap” for that period. A positive gap (asset sensitive), where interest rate sensitive assets exceed interest rate sensitive liabilities, generally will result in the net interest margin increasing in a rising rate environment and decreasing in a falling rate environment. A negative gap (liability sensitive) will generally have the opposite results on the net interest margin. Certain variable rate loans have embedded floors which limit the decline in yield on those loans at times when market interest rates are extraordinarily low. The degree of asset sensitivity, spreads on loans and net interest margin may be reduced until rates increase by an amount sufficient to eliminate the effects of floors. The adverse effect of floors as market rates increase may also be offset by the positive gap, the extent to which rates on deposits and other funding sources lag increasing market rates for loans and changes in composition of funding.
| (in thousands) | 0-3 months | 4-12 months | 1-3 years | 3+ years | Total | ||||||||||||||||||||||||
| Assets | |||||||||||||||||||||||||||||
| Interest bearing cash and cash equivalents | $ | 1,897,803 | $ | — | $ | — | $ | — | $ | 1,897,803 | |||||||||||||||||||
| Investment securities(1) | 56,719 | 748 | 20,901 | 4,644,731 | 4,723,099 | ||||||||||||||||||||||||
| Variable loans | 22,439,164 | 255,576 | 116,443 | 231,026 | 23,042,209 | ||||||||||||||||||||||||
| Fixed loans | 42,637 | 102,260 | 264,148 | 700,109 | 1,109,154 | ||||||||||||||||||||||||
| Total loans(2) | 22,481,801 | 357,836 | 380,591 | 931,135 | 24,151,363 | ||||||||||||||||||||||||
| Total interest sensitive assets | $ | 24,436,323 | $ | 358,584 | $ | 401,492 | $ | 5,575,866 | $ | 30,772,265 | |||||||||||||||||||
| Liabilities | |||||||||||||||||||||||||||||
| Interest bearing customer deposits | $ | 17,372,121 | $ | — | $ | — | $ | — | $ | 17,372,121 | |||||||||||||||||||
| CDs | 783,200 | 1,272,452 | 58,357 | 3,540 | 2,117,549 | ||||||||||||||||||||||||
| Total interest bearing deposits | 18,155,321 | 1,272,452 | 58,357 | 3,540 | 19,489,670 | ||||||||||||||||||||||||
| Short-term borrowings | 330,000 | — | — | — | 330,000 | ||||||||||||||||||||||||
| Long-term debt | 247,915 | — | — | 372,660 | 620,575 | ||||||||||||||||||||||||
| Total borrowings | 577,915 | — | — | 372,660 | 950,575 | ||||||||||||||||||||||||
| Total interest sensitive liabilities | $ | 18,733,236 | $ | 1,272,452 | $ | 58,357 | $ | 376,200 | $ | 20,440,245 | |||||||||||||||||||
| GAP | $ | 5,703,087 | $ | (913,868) | $ | 343,135 | $ | 5,199,666 | $ | — | |||||||||||||||||||
| Cumulative GAP | $ | 5,703,087 | $ | 4,789,219 | $ | 5,132,354 | $ | 10,332,020 | $ | 10,332,020 | |||||||||||||||||||
| Non-interest bearing deposits | 6,959,097 | ||||||||||||||||||||||||||||
| Stockholders’ equity | 3,631,382 | ||||||||||||||||||||||||||||
| Total | $ | 10,590,479 | |||||||||||||||||||||||||||
(1)Available-for-sale debt securities, equity securities and trading securities based on fair market value.
(2)Total loans include gross loans held for investment and loans held for sale.
45
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 different interest rate scenarios. These are a static rate scenario and “shock test” scenarios, as described below.
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 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 December 31, 2025 and December 31, 2024 assume immediate parallel, sustained 100 and 200 basis point increases in interest rates as well as 100 and 200 basis point decreases in interest rates. The Company will continue to evaluate these scenarios as interest rates change.
The Company’s interest rate risk exposure model incorporates 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 prepayment 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 and 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 and indicated interest rate sensitivity as follows:
| Annualized Hypothetical Change in Net Interest Income | ||||||||||||||
| December 31, 2025 | December 31, 2024 | |||||||||||||
| + 200 basis points | 6.8 | % | 6.8 | % | ||||||||||
| + 100 basis points | 3.6 | % | 3.4 | % | ||||||||||
| - 100 basis points | (6.7) | % | (6.8) | % | ||||||||||
| - 200 basis points | (12.9) | % | (13.7) | % | ||||||||||
The simulations used to manage interest rate 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 14 - Derivative Financial Instruments in the accompanying notes to the consolidated financial statements included elsewhere in this report.
46
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index to Consolidated Financial Statements
| Page Reference | |||||
Report of Ernst & Young LLP, Independent Registered Public Accounting Firm ( | 48 | ||||
Consolidated Balance Sheets — December 31, 2025 and December 31, 2024 | 50 | ||||
Consolidated Statements of Income and Other Comprehensive Income — Years ended December 31, 2025, 2024 and 2023 | 51 | ||||
Consolidated Statements of Stockholders’ Equity — Years ended December 31, 2025, 2024 and 2023 | 52 | ||||
Consolidated Statements of Cash Flows — Years ended December 31, 2025, 2024 and 2023 | 53 | ||||
Notes to Consolidated Financial Statements | 54 | ||||
47
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of Texas Capital Bancshares, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Texas Capital Bancshares, Inc. (the Company) as of December 31, 2025 and 2024, the related consolidated statements of income and other comprehensive income, stockholders' equity and cash flows for each of the three years in the period ended December 31, 2025, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2025, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 10, 2026 expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the account or disclosures to which it relates.
48
| Allowance for Credit Losses - Loans | |||||
| Description of the Matter | The Company’s loans held for investment portfolio totaled $24.0 billion as of December 31, 2025, and the associated allowance for credit losses (ACL) was $332.8 million. The ACL represents management’s best estimate of expected credit losses over the contractual life of loans and for off-balance sheet commitments. The ACL is estimated using relevant available information relating to past events, current conditions, and reasonable and supportable forecasts, as well as qualitative adjustments using a Portfolio Level Qualitative Factor and/or Portfolio Segment Level Qualitative Factor (collectively the “qualitative factors”). The qualitative factors are used to bring the ACL to the level management believes is appropriate based on factors that are otherwise unaccounted for in the quantitative process. The ACL also includes reserves for loans evaluated on an individual basis, such as certain loans graded substandard or worse. Management applies judgment in the determination and usage of the qualitative factors, and in the use of a single or a blend of forecast scenarios used to calculate the reasonable and supportable forecast. Auditing management’s estimate of the ACL is complex due to the models utilized and involves a high degree of subjectivity due to the judgment required in evaluating management’s determination and usage of the qualitative factors, and in the use of a single or blend of forecast scenarios used to calculate the reasonable and supportable forecast. | ||||
| How We Addressed the Matter in Our Audit | Our considerations and procedures performed included evaluation of the process utilized by management to challenge the model results and determine the best estimate of the ACL as of the balance sheet date. We obtained an understanding of the Company’s process for establishing the ACL, including determination and usage of the qualitative factors and determination of a single or blend of multiple forecast scenarios used to calculate the reasonable and supportable forecast. We evaluated the design and tested the operating effectiveness of the controls associated with the ACL process, including controls around 1) the reliability and accuracy of data used in the model; 2) management’s review and approval of the selected qualitative factors; 3) the single or blend of multiple forecast scenarios used to calculate the reasonable and supportable forecast; 4) the governance of the credit loss methodology including model validation; and 5) management’s review and approval of the ACL. We performed specific substantive tests of the models utilized, qualitative factors and the single or blend of forecast scenarios used to calculate the reasonable and supportable forecast. We involved EY specialists to assist in testing management models including evaluating model methodology and key modeling assumptions, as well as the appropriateness of management’s qualitative and reasonable and supportable forecast framework. We evaluated if the qualitative factors were applied based on a comprehensive framework and compared the adjustments utilized by management to both internal portfolio metrics and external macroeconomic data (as applicable) to support the adjustments and evaluate trends in such adjustments. We searched for and evaluated information that corroborates or contradicts management’s reasonable and supportable forecast as well as identification and measurement of qualitative factors. In addition, we evaluated the Company’s estimate of the overall ACL, giving consideration to the Company’s borrowers, loan portfolio, and macroeconomic trends, independently obtained and compared such information to comparable financial institutions and considered whether new or contrary information existed. | ||||
/s/ Ernst & Young LLP
We have served as the Company's auditor since 1999.
Dallas, TX
February 10, 2026
49
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
TEXAS CAPITAL BANCSHARES, INC.
CONSOLIDATED BALANCE SHEETS - AUDITED
| (in thousands except share data) | December 31, 2025 | December 31, 2024 | |||||||||
| Assets | |||||||||||
| Cash and due from banks | $ | $ | |||||||||
| Interest bearing cash and cash equivalents | |||||||||||
| Available-for-sale debt securities | |||||||||||
| Held-to-maturity debt securities | |||||||||||
| Equity securities | |||||||||||
| Trading securities | |||||||||||
| Investment securities | |||||||||||
| Loans held for sale | |||||||||||
| Loans held for investment, mortgage finance | |||||||||||
| Loans held for investment | |||||||||||
| Less: Allowance for credit losses on loans | |||||||||||
| Loans held for investment, net | |||||||||||
| Premises and equipment, net | |||||||||||
| Accrued interest receivable and other assets | |||||||||||
| Goodwill and intangibles, net | |||||||||||
| Total assets | $ | $ | |||||||||
| Liabilities and Stockholders’ Equity | |||||||||||
| Liabilities: | |||||||||||
| Non-interest bearing deposits | $ | $ | |||||||||
| Interest bearing deposits | |||||||||||
| Total deposits | |||||||||||
| Accrued interest payable | |||||||||||
| Other liabilities | |||||||||||
| Short-term borrowings | |||||||||||
| Long-term debt | |||||||||||
| Total liabilities | |||||||||||
| Stockholders’ equity: | |||||||||||
Preferred stock, $ | |||||||||||
Authorized shares - | |||||||||||
Issued shares - | |||||||||||
Common stock, $ | |||||||||||
Authorized shares - | |||||||||||
Issued shares - | |||||||||||
| Additional paid-in capital | |||||||||||
| Retained earnings | |||||||||||
Treasury stock - | ( | ( | |||||||||
| Accumulated other comprehensive loss, net of taxes | ( | ( | |||||||||
| Total stockholders’ equity | |||||||||||
| Total liabilities and stockholders’ equity | $ | $ | |||||||||
See accompanying notes to consolidated financial statements.
50
TEXAS CAPITAL BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF INCOME AND OTHER
COMPREHENSIVE INCOME - AUDITED
| Year Ended December 31, | |||||||||||||||||
| (in thousands except per share data) | 2025 | 2024 | 2023 | ||||||||||||||
| Interest income | |||||||||||||||||
| Interest and fees on loans | $ | $ | $ | ||||||||||||||
| Investment securities | |||||||||||||||||
| Interest bearing cash and cash equivalents | |||||||||||||||||
| Total interest income | |||||||||||||||||
| Interest expense | |||||||||||||||||
| Deposits | |||||||||||||||||
| Short-term borrowings | |||||||||||||||||
| Long-term debt | |||||||||||||||||
| Total interest expense | |||||||||||||||||
| Net interest income | |||||||||||||||||
| Provision for credit losses | |||||||||||||||||
| Net interest income after provision for credit losses | |||||||||||||||||
| Non-interest income | |||||||||||||||||
| Service charges on deposit accounts | |||||||||||||||||
| Wealth management and trust fee income | |||||||||||||||||
| Brokered loan fees | |||||||||||||||||
| Investment banking and advisory fees | |||||||||||||||||
| Trading income | |||||||||||||||||
Available-for-sale debt securities gains/(losses) | ( | ( | |||||||||||||||
| Other | |||||||||||||||||
| Total non-interest income | |||||||||||||||||
| Non-interest expense | |||||||||||||||||
| Salaries and benefits | |||||||||||||||||
| Occupancy expense | |||||||||||||||||
| Marketing | |||||||||||||||||
| Legal and professional | |||||||||||||||||
| Communications and technology | |||||||||||||||||
| Federal Deposit Insurance Corporation insurance assessment | |||||||||||||||||
| Other | |||||||||||||||||
| Total non-interest expense | |||||||||||||||||
| Income before income taxes | |||||||||||||||||
| Income tax expense | |||||||||||||||||
| Net income | |||||||||||||||||
| Preferred stock dividends | |||||||||||||||||
| Net income available to common stockholders | $ | $ | $ | ||||||||||||||
Other comprehensive income | |||||||||||||||||
| Change in unrealized gain/(loss) | $ | $ | ( | $ | |||||||||||||
Amounts reclassified into net income | |||||||||||||||||
Other comprehensive income | |||||||||||||||||
Income tax expense | |||||||||||||||||
Other comprehensive income, net of tax | |||||||||||||||||
| Comprehensive income | $ | $ | $ | ||||||||||||||
Basic earnings per common share | $ | $ | $ | ||||||||||||||
Diluted earnings per common share | $ | $ | $ | ||||||||||||||
See accompanying notes to consolidated financial statements.
51
TEXAS CAPITAL BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
| Preferred Stock | Common Stock | Additional | Treasury Stock | Accumulated Other | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Paid-in | Retained | Comprehensive | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (in thousands except share data) | Shares | Amount | Shares | Amount | Capital | Earnings | Shares | Amount | Income/(Loss) | Total | |||||||||||||||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2022 | $ | $ | $ | $ | ( | $ | ( | $ | ( | $ | |||||||||||||||||||||||||||||||||||||||||||||||||
| Comprehensive income/(loss): | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Change in other comprehensive income/(loss), net of taxes | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||
Total comprehensive income | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation expense recognized in earnings | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||
Preferred stock dividends | — | — | — | — | — | ( | — | — | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of stock related to stock-based awards | — | — | ( | — | — | — | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Repurchase of common stock | — | — | — | — | — | — | ( | ( | — | (105,024) | |||||||||||||||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2023 | $ | $ | $ | $ | ( | $ | ( | $ | ( | $ | |||||||||||||||||||||||||||||||||||||||||||||||||
| Comprehensive income/(loss): | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Change in other comprehensive income/(loss), net of taxes | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||
Total comprehensive income | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation expense recognized in earnings | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||
Preferred stock dividends | — | — | — | — | — | ( | — | — | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of stock related to stock-based awards | — | — | ( | — | — | — | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Repurchase of common stock | — | — | — | — | — | — | ( | ( | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2024 | $ | $ | $ | $ | ( | $ | ( | $ | ( | $ | |||||||||||||||||||||||||||||||||||||||||||||||||
Comprehensive income/(loss): | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Change in other comprehensive income/(loss), net of taxes | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||
Total comprehensive income | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation expense recognized in earnings | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||
Preferred stock dividends | — | — | — | — | — | ( | — | — | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of stock related to stock-based awards | — | — | ( | — | — | — | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Repurchase of common stock | — | — | — | — | — | — | ( | ( | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2025 | $ | $ | $ | $ | ( | $ | ( | $ | ( | $ | |||||||||||||||||||||||||||||||||||||||||||||||||
See accompanying notes to consolidated financial statements.
52
TEXAS CAPITAL BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
| Year Ended December 31, | |||||||||||||||||
| (in thousands) | 2025 | 2024 | 2023 | ||||||||||||||
| Operating activities | |||||||||||||||||
| Net income | $ | $ | $ | ||||||||||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||||||||
| Provision for credit losses | |||||||||||||||||
| Deferred tax expense/(benefit) | ( | ( | |||||||||||||||
| Depreciation and amortization | |||||||||||||||||
| Net loss on available-for-sale debt securities | ( | ||||||||||||||||
| Net gain on equity securities | ( | ( | ( | ||||||||||||||
| Sales/(purchases) of trading securities, net | ( | ||||||||||||||||
| Stock-based compensation expense | |||||||||||||||||
| Purchases and originations of loans held for sale | ( | ||||||||||||||||
| Proceeds from sales and repayments of loans held for sale | |||||||||||||||||
| Changes in operating assets and liabilities: | |||||||||||||||||
| Accrued interest receivable and other assets | ( | ( | ( | ||||||||||||||
| Accrued interest payable and other liabilities | ( | ||||||||||||||||
| Net cash provided by operating activities | |||||||||||||||||
| Investing activities | |||||||||||||||||
| Purchases of available-for-sale debt securities | ( | ( | ( | ||||||||||||||
| Proceeds from sales of available-for-sale debt securities | |||||||||||||||||
| Proceeds from maturities, redemptions and pay-downs of available-for-sale debt securities | |||||||||||||||||
| Proceeds from maturities, redemptions and pay-downs of held-to-maturity debt securities | |||||||||||||||||
| Sales/(purchases) of equity securities, net | ( | ( | |||||||||||||||
| Originations of loans held for investment, mortgage finance | ( | ( | ( | ||||||||||||||
| Proceeds from pay-offs of loans held for investment, mortgage finance | |||||||||||||||||
| Net increase in loans held for investment, excluding mortgage finance loans | ( | ( | ( | ||||||||||||||
| Purchase of premises and equipment, net | ( | ( | ( | ||||||||||||||
| Net cash used in investing activities | ( | ( | ( | ||||||||||||||
| Financing activities | |||||||||||||||||
| Net increase/(decrease) in deposits | ( | ||||||||||||||||
| Issuance of stock related to stock-based awards | ( | ( | ( | ||||||||||||||
| Preferred stock dividends paid | ( | ( | ( | ||||||||||||||
| Repurchase of common stock | ( | ( | ( | ||||||||||||||
| Net increase/(decrease) in short-term borrowings | ( | ( | |||||||||||||||
| Redemption of long-term debt | ( | ( | ( | ||||||||||||||
Net cash provided by/(used in) financing activities | ( | ||||||||||||||||
Net decrease in cash and cash equivalents | ( | ( | ( | ||||||||||||||
| Cash and cash equivalents at beginning of period | |||||||||||||||||
| Cash and cash equivalents at end of period | $ | $ | $ | ||||||||||||||
Supplemental disclosures of cash flow information | |||||||||||||||||
| Cash paid during the period for interest | $ | $ | $ | ||||||||||||||
| Cash paid during the period for income taxes: | $ | $ | $ | ||||||||||||||
| Transfers of loans from held for investment to held for sale | $ | $ | $ | ||||||||||||||
See accompanying notes to consolidated financial statements.
53
(1) Operations and Summary of Significant Accounting Policies
Organization and Nature of Business
Texas Capital Bancshares, Inc. (“TCBI” or the “Company”) is a registered bank holding company and a full-service financial services firm that delivers customized solutions to businesses, entrepreneurs and individual customers. TCBI is headquartered in Dallas, with primary banking offices in Austin, Dallas, Fort Worth, Houston and San Antonio, and has built a network of clients across the country.
The Company’s business activities are conducted primarily through its wholly-owned bank subsidiary Texas Capital Bank (the “Bank”) and its wholly-owned non-bank subsidiary, TCBI Securities Inc., doing business as Texas Capital Securities. The Bank is a Texas state-chartered bank. Texas Capital Securities is a registered broker-dealer with the U.S. Securities and Exchange Commission (“SEC”) and a member of the Financial Industry Regulatory Authority and Municipal Securities Rulemaking Board.
The Company was incorporated as a Delaware corporation in 1996 and commenced banking operations in 1998.
Effective September 19, 2025, the Bank became a member of the Federal Reserve System. As a result, the Board of Governors of the Federal Reserve System assumed the role as the Bank’s primary federal regulator, succeeding the Federal Deposit Insurance Corporation. The Texas Department of Banking continues to serve as the Bank’s primary state regulator.
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.
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.
See the Allowance for Credit Losses accounting policy below for additional details of these changes.
Basic and Diluted Earnings Per Common Share
Basic earnings per common share is based on net income available to common stockholders divided by the weighted-average number of common shares outstanding during the period excluding non-vested stock-settled awards. Diluted earnings per common share include the dilutive effect of non-vested stock-settled awards granted using the treasury stock method.
Cash and Cash Equivalents
Cash equivalents include amounts due from banks, interest bearing deposits in other banks, federal funds sold and highly liquid investments with original maturities of three months or less from the date of purchase.
Investment Securities
Investment securities include debt securities and equity securities.
Debt Securities
Debt securities are classified as trading, available-for-sale or held-to-maturity. Debt securities not classified as held-to-maturity or trading are classified as available-for-sale. Management classifies securities at the time of purchase and re-assesses such designation at each balance sheet date.
The amortized cost of debt securities is adjusted for amortization of premiums and accretion of discounts to maturity, or in the case of mortgage-backed securities, over the estimated life of the security. Such amortization and accretion are included in interest income from investment securities. Gains or losses realized upon the sale of debt securities are recorded in other non-interest income on the consolidated statements of income and other comprehensive income. The cost of securities sold is based on the specific identification method.
The Company has made a policy election to exclude accrued interest from the amortized cost basis of debt securities and report accrued interest separately in accrued interest and other assets on the consolidated balance sheets. Available-for-sale and held-to-maturity debt securities are placed on non-accrual status when management no longer expects to receive all contractual amounts due, which is generally at 90 days past due. Accrued interest receivable is reversed against interest income when a
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security is placed on non-accrual status. Accordingly, the Company does not recognize an allowance for credit loss against accrued interest receivable.
Trading Account
Debt securities acquired for resale in anticipation of short-term market movements are classified as trading and recorded at fair value, with realized and unrealized gains and losses recognized in income.
Held-to-Maturity
Debt securities are classified as held-to-maturity when the Company has the positive intent and ability to hold the securities to maturity. Held-to-maturity securities are stated at amortized cost, net of any allowance for credit losses.
Management may transfer debt securities classified as available-for-sale to held-to-maturity when upon reassessment it is determined that the Company has both the positive intent and ability to hold these securities to maturity. The debt securities are transferred at fair value resulting in a premium or discount recorded on transfer date. Unrealized gains or losses at the date of transfer continue to be reported as a separate component of accumulated other comprehensive income/loss, net (“AOCI”). The premium or discount and the unrealized gain or loss, net of tax, in AOCI will be amortized to interest income over the remaining life of the securities using the interest method.
Available-for-Sale
Available-for-sale debt securities are recorded at fair value, with unrealized gains and losses, net of tax, reported as a separate component of AOCI. For available-for-sale debt securities in an unrealized loss position, the Company first assesses whether it intends to sell, or it is more-likely-than-not that it will be required to sell, the securities before recovery of the amortized cost basis. If either of these criteria is met, the securities’ amortized cost basis is written down to fair value as a current period expense recorded on the consolidated statements of income and other comprehensive income. If either of the above criteria is not met, management evaluates whether the decline in fair value is the result of credit losses or other factors. In making this assessment, management may consider various factors including the extent to which fair value is less than amortized cost, performance of any underlying collateral and adverse conditions specifically related to the security, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected is compared to the amortized cost basis of the security and any excess is recorded as an allowance for credit losses, limited to the amount by which the fair value is less than the amortized cost basis. Any impairment not recorded through an allowance for credit losses is recognized in AOCI, net of tax, as a non-credit related impairment.
Included in debt securities available-for-sale are credit risk transfer (“CRT”) securities, which represent unsecured obligations issued by government sponsored entities (“GSEs”) such as Freddie Mac and are designed to transfer mortgage credit risk from the GSE to private investors. CRT securities are structured to be subject to the performance of a reference pool of mortgage loans in which the Company shares in 50% of the first losses with the GSE. If the reference pool incurs losses, the amount the Company will recover on the notes is reduced by its share of the amount of such losses, which could potentially be up to 100% of the amount outstanding. Unrealized losses recognized in AOCI for the CRT securities are primarily related to the difference between the current market rate for similar securities and the stated interest rate and are not considered to be related to credit loss events. The CRT securities are generally interest-only for an initial period of time and may be restricted from being transferred until a future date.
Equity Securities
Equity securities with readily determinable fair values are stated at fair value with realized and unrealized gains and losses reported in income. Equity securities without readily determinable fair values are recorded at cost less any impairment.
Loans
Loans Held for Sale
Loans held for sale are carried at the lower of cost or fair value, unless, pursuant to the election of the fair value option in accordance with Accounting Standards Codification (“ASC”) 825, Financial Instruments, the Company elects to carry loans held for sale at fair value. As of December 31, 2025 and December 31, 2024, the Company has no loans held for sale accounted for under the fair value option.
Loans Held for Investment
Loans held for investment (including financing leases) are stated at the amount of unpaid principal reduced by unearned income, net of direct loan origination costs. Interest on loans is recognized using the simple interest method on the daily balances of the principal amounts outstanding. Loan origination fees, net of direct loan origination costs, and commitment fees are deferred and amortized as an adjustment to yield over the life of the loan, or over the commitment period, as applicable.
A loan is considered past due when a contractually due payment has not been received by the contractual due date. The Company places a loan on non-accrual when there is a clear indication that the borrower’s cash flow may not be sufficient to
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meet payments as they become due, which is generally when a loan is 90 days past due. When a loan is placed on non-accrual status, all previously accrued and unpaid interest is reversed as a reduction of current period interest income. Interest income is subsequently recognized on a cash basis as long as the remaining book balance of the asset is deemed to be collectible. If collectability is questionable, then cash payments are applied to principal. A loan is placed back on accrual status when both principal and interest are current and it is probable that all amounts due will be collected (both principal and interest) according to the terms of the loan agreement.
Loans held for investment includes legal ownership interests in mortgage loans that the Company purchases from unaffiliated mortgage originators, either directly or through a special purpose entity (“SPE”) structure, who are seeking additional liquidity to facilitate their ability to originate loans. In the case of an SPE structure, the unaffiliated mortgage originator is responsible for formation of the SPE and ongoing servicing of the underlying mortgage loans, and thus is the primary beneficiary of the SPE. The mortgage originator (or SPE) has no obligation to offer and the Company has no obligation to purchase these interests. The originator closes mortgage loans consistent with underwriting standards established by approved investors, and, at the time of the sale to the investor, the Company’s ownership interest and that of the originator (or SPE) are delivered to the investor selected by the originator. The Company typically purchases up to a 99% ownership interest in each mortgage with the originator (or SPE) owning the remaining percentage. These mortgage ownership interests are generally held for a period of less than 30 days and more typically 10-20 days. Because of conditions in agreements with originators (or SPEs) designed to reduce transaction risks, under ASC 860, Transfers and Servicing of Financial Assets (“ASC 860”), the ownership interests do not qualify as participating interests. Under ASC 860, the ownership interests are deemed to be loans to the originators (or SPEs) and payments received from investors are deemed to be payments made by or on behalf of the originators (or SPEs) to repay the loan. Because the Company has an actual, legal ownership interest in the underlying residential mortgage loan, these interests are reported as extensions of credit to the originators (or SPEs) that are secured by the mortgage loans as collateral. Due to market conditions or events of default by the investor or the originators (or SPEs), the Company could be required to purchase the remaining interests in the mortgage loans and hold them beyond the expected 10-20 days. Mortgage loans acquired under these conditions would require mark-to-market adjustments to income and could require further allocations of the allowance for credit losses or be subject to charge-off in the event the loans become impaired.
Purchased loans are evaluated upon acquisition in order to determine if the loan, or pool of loans, has experienced more-than-insignificant deterioration in credit quality since origination or issuance (“PCD loans”). PCD loans are recorded at fair value at the acquisition date along with an allowance for credit losses determined using the same methodology as originated loans. The sum of the loan’s purchase price and allowance for credit losses becomes its initial amortized cost basis. The difference between the initial amortized cost basis and the par value of the loan is a non-credit discount or premium, which is amortized into interest income over the life of the loan. Subsequent changes to the allowance for credit losses are recorded through provision for credit losses.
Allowance for Credit Losses
The Company’s allowance for credit losses is determined using a current expected credit loss (“CECL”) model. The measurement of expected credit losses under the CECL methodology is applicable to financial assets measured at amortized cost, including loan receivables and held-to-maturity debt securities. It also applies to off-balance sheet credit exposures not accounted for as insurance (loan commitments, standby letters of credit, financial guarantees, and other similar instruments) and net investments in leases recognized by a lessor in accordance with Accounting Standards Update 2016-02 "Leases (Topic 842)".
The following is a discussion of the allowance for credit losses on loans held for investment and off-balance sheet credit exposures. See “Investment Securities - Debt Securities” above for discussion of the allowance for credit losses on available-for-sale and held-to maturity debt securities.
The CECL methodology recognizes lifetime expected credit losses immediately when a financial asset is originated or purchased. The allowance for credit losses on loans is a valuation account that is deducted from the amortized cost basis of loans to present the net amount expected to be collected on the loans. Loans, or portions thereof, are charged off against the allowance when they are deemed uncollectible. Expected recoveries do not exceed the aggregate of amounts previously charged-off and expected to be charged-off. The allowance for credit losses on off-balance sheet financial instruments is recorded in other liabilities on the consolidated balance sheets.
Management estimates the allowance balance using relevant available information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. Historical credit loss experience provides the basis for the estimation of expected credit losses. Adjustments to historical loss information are made for differences in current loan-specific risk characteristics such as differences in underwriting standards, portfolio mix, credit quality, or term, as well as for changes in macroeconomic conditions, such as changes in unemployment rates, gross domestic product, property values, or other relevant factors.
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The allowance for credit losses is comprised of reserves measured on a collective (pool) basis when similar risk characteristics exist. Loans that do not share risk characteristics are assigned a reserve based on an individual evaluation and are not included in the collective (pool) evaluation. For purposes of determining the collective (pool) allowance for credit losses, the loan portfolio is segregated into pools first by portfolio segment and then by past due status or credit grade. Each pool is assigned a loss estimate, reflecting historical loss rates that incorporate probability of default and severity of losses over the estimated remaining life of the loans. These loss estimates are then modified to incorporate a reasonable and supportable forecast of future losses at the pool level, as well as any necessary qualitative adjustments using a Portfolio Level Qualitative Factor (“PLQF”) and/or a Portfolio Segment Level Qualitative Factor (“SLQF”). A similar process is employed to calculate a reserve assigned to off-balance financial instruments, specifically unfunded loan commitments and letters of credit. Modified loss estimates are assigned based on the balance of the commitments estimated to be outstanding at the time of default. The PLQF and SLQF are utilized to address factors that are not present in historical loss rates and are otherwise unaccounted for in the quantitative process. The PLQF is used to apply a qualitative adjustment across the entire portfolio of loans, while the SLQF is designed to apply a qualitative adjustment across a single portfolio segment. Even though portions of the allowance may be allocated to specific loans, the entire allowance is available for any credit that, in management’s judgment, should be charged off.
The Company generally uses a two-year forecast period, based on a single forecast scenario or a blend of multiple forecast scenarios, using variables management believes are most relevant to each portfolio segment. For periods beyond which management is able to develop reasonable and supportable forecasts, the Company reverts to the average historical loss rate, reflecting historical default probabilities and loss severities, using a reversion speed that approximates 1 to 2 years. The forecast period and scenario(s) used are reviewed on a quarterly basis and may be adjusted based on management's view of the current economic conditions and level of predictability the forecast can provide.
Portfolio segments are used to pool loans with similar risk characteristics and align with the Company’s methodology for measuring expected credit losses. A summary of the primary portfolio segments is as follows:
Commercial. The commercial loan portfolio is comprised of lines of credit for working capital, term loans, reserve-based loans to energy exploration and production companies, and leases to finance equipment and other business assets across a variety of industries. These loans are used for general corporate purposes including financing working capital, internal growth, and acquisitions and are generally secured by accounts receivable, inventory, oil and gas reserves, equipment and other assets of clients’ businesses.
Mortgage Finance. Mortgage finance loans include legal ownership interests in mortgage loans that the Company purchases from unaffiliated mortgage originators, either directly or through a SPE structure, that are generally held for a period of less than 30 days and more typically 10-20 days before they are sold to an approved investor. Volumes fluctuate based on the level of market demand for the product and the number of days between purchase and sale of the loans, which can be affected by changes in overall market interest rates and housing demand and tend to peak at the end of each month. Mortgage finance loans are consistently underwritten based on standards established by the approved investors. Market conditions or events of default by an investor or originator could require that the Company repurchases the remaining interests in the mortgage loans and hold them beyond the expected 10-20 days.
Commercial Real Estate (“CRE”). The CRE portfolio is comprised of construction/development financing and limited term financing provided to professional real estate developers, owners/managers of commercial real estate projects and properties, and residential builders/developers. Collateral properties include office buildings, warehouse/distribution buildings, shopping centers, hotels/motels, senior living, apartment buildings, residential and commercial tract developments, and raw land or lots to be developed into single-family homes. The primary source of repayment on these loans is expected to come from the sale, permanent financing or lease of the real property collateral. The performance of these loans is impacted by fluctuations in collateral values, the ability of the borrower to obtain permanent financing, and, in the case of loans to residential builder/developers, volatility in consumer demand.
Consumer. This category of loans is comprised of loans made to consumers for personal expenditures, first and second lien mortgages made for the purpose of purchasing or constructing 1-4 family residential dwellings and home equity revolving lines of credit.
The Company has several pass credit grades that are assigned to loans based on varying levels of risk, ranging from credits that are secured by cash or marketable securities, to watch credits which have all the characteristics of an acceptable credit risk but warrant more than the normal level of monitoring. Within the criticized/classified credit grades are special mention, substandard and doubtful. Special mention loans are those that are currently protected by the sound worth and paying capacity of the borrower, but that are potentially weak and constitute an additional credit risk. These loans have the potential to deteriorate to a substandard grade due to the existence of financial or administrative deficiencies. Substandard loans have a well-defined weakness or weaknesses that jeopardizes the liquidation of the debt. They are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected. Some substandard loans are inadequately protected by the sound worth and paying capacity of the borrower and of the collateral pledged and may be considered impaired. Substandard loans can be accruing or can be on non-accrual depending on the circumstances of the individual loans. Loans classified as
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doubtful have all the weaknesses inherent in substandard loans with the added characteristics that the weaknesses make collection in full highly questionable and improbable. The possibility of loss is extremely high. All doubtful loans are on non-accrual.
The methodology used in the estimation of the allowance, which is performed at least quarterly, is designed to be dynamic and responsive to changes in portfolio credit quality and forecasted economic conditions. Changes are reflected in the pool-basis allowance and in reserves assigned on an individual basis as the collectability of classified loans is evaluated with new information. As the Company’s portfolio has matured, historical loss ratios have been closely monitored. The review of the appropriateness of the allowance is performed by executive management and presented to the Audit Committee and Risk Committee of the board of directors for their review. The committees report to the board of directors as part of the board of directors’ quarterly review of the Company’s consolidated financial statements.
When management determines that foreclosure is probable, and for certain collateral-dependent loans where foreclosure is not considered probable, expected credit losses are based on the estimated fair value of the collateral adjusted for selling costs, when appropriate. A loan is considered collateral-dependent when the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral.
Expected credit losses are estimated over the contractual term of the loans, adjusted for expected prepayments when appropriate. The contractual term excludes expected extensions, renewals and modifications unless either of the following applies: management has a reasonable expectation that a loan will be restructured or the extension or renewal options are included in the borrower contract and are not unconditionally cancellable.
The Company does not measure an allowance for credit losses on accrued interest receivable balances because these balances are written off in a timely manner as a reduction to interest income when loans are placed on non-accrual status as discussed above.
Other Real Estate Owned
Other real estate owned (“OREO”), which is included in other assets on the consolidated balance sheet, consists of real estate that has been foreclosed. When foreclosure occurs, the acquired asset is recorded at fair value less selling costs, generally based on appraised value, which may result in partial charge-off of the loan through a charge to the allowance for credit losses, if necessary. Subsequent write-downs required for declines in value are recorded through a valuation allowance, or taken directly to the asset, and are recorded in other non-interest expense on the consolidated statements of income and other comprehensive income. Gains or losses on sale of OREO are recorded in other non-interest income on the consolidated statements of income and other comprehensive income.
Goodwill and Other Intangible Assets, Net
Intangible assets are acquired assets that lack physical substance but can be distinguished from goodwill because of contractual or other legal rights or because the asset is capable of being sold or exchanged either on its own or in combination with a related contract, asset or liability. The Company had $1.5 No amortization expense related to intangible assets was recorded during the years ended December 31, 2025, 2024 or 2023. Goodwill and intangible assets are tested for impairment at least annually or whenever changes in circumstances indicate the carrying amount of the assets may not be recoverable from future undiscounted cash flows. If impaired, the assets are recorded at fair value. In 2025 and 2024, the annual test of goodwill impairment was performed, and in both periods, no impairment was indicated.
Premises and Equipment, Net
Premises and equipment are stated at cost less accumulated depreciation and amortization. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. Furniture and equipment are generally depreciated over to five years , while leasehold improvements are generally depreciated over the term of their respective lease. Gains or losses on disposals of premises and equipment are included in other non-interest income on the consolidated statements of income and other comprehensive income.
Software
Costs incurred in connection with development or purchase of internal use software and cloud computing arrangements, including in-substance software licenses, are capitalized. Amortization is computed on a straight-line basis over the estimated useful life of the asset, which generally ranges from to five years . Capitalized software is included in other assets on the consolidated balance sheets.
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Financial Instruments with Off-Balance Sheet Risk
The Company has undertaken certain guarantee obligations in the ordinary course of business which include liabilities with off-balance sheet risk.
The Company is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and standby letters of credit that involve varying degrees of credit risk in excess of the amount recognized on the consolidated balance sheets. The Company’s exposure to credit loss in the event of non-performance by the other party to these financial instruments is represented by the contractual amount of the instruments. The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments. The amount of collateral obtained, if deemed necessary, is based on management’s credit evaluation of the borrower.
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments may expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Company evaluates each customer’s creditworthiness on a case-by-case basis. Commitments to extend credit generally do not include mortgage finance loan arrangements with mortgage loan originators (or SPEs), which are established as uncommitted “guidance” purchase and sale facilities under which the mortgage originator has no obligation to offer and the Company has no obligation to purchase interests in the mortgage loans subject to the arrangements.
Standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. Those guarantees are primarily issued to support public and private borrowing arrangements. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers.
Leases
Right of use (“ROU”) assets represent the Company’s right to use an underlying asset during the lease term and lease liabilities represent its obligation to make lease payments arising from the lease. Lease agreements may contain extension options which typically provide for an extension of a lease term at the then fair market rental rates. As these extension options are not generally considered reasonably certain of exercise, they are not included in the lease term. Operating leases relate primarily to real estate used for corporate offices and bank branches and finance leases relate primarily to equipment. The Company does not separate lease and non-lease components for real estate leases.
For those leases with a term greater than one year, ROU assets and lease liabilities are recognized at lease commencement based on the present value of the remaining lease payments using a discount rate that represents the incremental borrowing rate on the effective date of the lease, which is based on the Company’s collateralized borrowing capabilities over a similar term as the related lease payments. ROU assets are further adjusted for lease incentives.
Operating leases in which the Company is the lessee are recorded as operating lease ROU assets and operating lease liabilities, and are included in other assets and other liabilities, respectively, on the consolidated balance sheets. Operating lease expense, which is comprised of amortization of the ROU asset and the implicit interest accreted on the operating lease liability, is recognized on a straight-line basis over the lease term and recorded in occupancy expense on the consolidated statements of income and other comprehensive income.
Finance leases in which the Company is the lessee are recorded as finance lease ROU assets and finance lease liabilities and are included in premises and equipment, net, and other liabilities, respectively, on the consolidated balance sheets. Finance lease expense is comprised of amortization of the ROU asset, which is recognized on a straight-line basis over the lease term and recorded in occupancy expense on the consolidated statements of income and other comprehensive income, and the implicit interest accreted on the operating lease liability, which is recognized using the effective interest method over the lease term and recorded in occupancy expense on the consolidated statements of income and other comprehensive income.
Variable costs, such as maintenance expenses, parking and property and sales taxes, are expensed as they are incurred, and are recorded in occupancy expense on the consolidated statements of income and other comprehensive income.
Revenue Recognition
ASC 606, Revenue from Contracts with Customers (“ASC 606”), establishes principles for reporting information about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity's contracts to provide goods or services to customers. The core principle requires an entity to recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration that it expects to be entitled to receive in exchange for those goods or services recognized as performance obligations are satisfied.
The majority of the Company’s revenue-generating transactions are not subject to ASC 606, including revenue generated from financial instruments, such as loans, letters of credit, derivatives and investment securities, as these activities are subject to
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other GAAP discussed elsewhere within the Company’s disclosures. Descriptions of revenue-generating activities that are within the scope of ASC 606, which are presented in the income statements as components of non-interest income are as follows:
•Service charges on deposit accounts - these represent general service fees for monthly account maintenance and activity- or transaction-based fees and consist of transaction-based revenue, time-based revenue (service period), item-based revenue or some other individual attribute-based revenue. Revenue is recognized when the performance obligation is completed, which is generally monthly for account maintenance services or when a transaction has been completed (such as a stop payment). Payments for these activities are generally received at the time the performance obligations are satisfied.
•Wealth management and trust fee income - this represents monthly fees due from wealth management customers as consideration for managing the customers’ assets. Wealth management and trust services include custody of assets, investment management, escrow services, fees for trust services and similar fiduciary activities. These fees are typically paid on a quarterly basis and recognized ratably throughout the quarter as the performance obligation is satisfied each month.
•Brokered loan fees - these represent fees for the administration and funding of purchased mortgage loan interests as well as facility renewal and application fees received from mortgage originators (or SPEs) related to mortgage finance loans. Revenue is recognized when the related mortgage loan interest is disposed (i.e., through sale or payoff) or upon receipt of the facility renewal or application.
•Investment banking and advisory fees - this includes fees for merger, acquisition, divestiture and restructuring advisory services, fees for securities underwriting activities and loan and security syndication fees. Advisory fees are generally earned as performance obligations of the advisory service are satisfied. Underwriting fees are generally recognized upon execution of the client’s issuance of debt or equity instruments. Loan syndication fees are generally recognized upon closing of a loan syndication transaction.
•Trading income - this includes fees for derivative transactions which are generally recognized when the derivative transaction occurs. Also included in trading income are realized and unrealized gains and losses recognized on the Company’s trading assets and liabilities. Realized gains and losses are generally recognized when a sale occurs and unrealized gains and losses are generally recognized monthly as the trading assets and liabilities are marked to fair value.
•Other non-interest income includes items such as letter of credit fees, bank owned life insurance income, dividends on FHLB and FRB stock and other general operating income, none of which are subject to the requirements of ASC 606. Also included in other-non-interest income are interchange fees earned when commercial credit card clients process transactions through card networks. The Company’s performance obligations are generally complete when the transactions generating the fees are processed.
Stock-based Compensation
The Company accounts for all stock-based compensation transactions in accordance with ASC 718, Compensation — Stock Compensation (“ASC 718”), which requires that stock compensation transactions be recognized as compensation expense over the requisite service period, with forfeitures recognized as they occur, on the consolidated statements of income and other comprehensive income based on their fair values on the measurement date, which is generally the date of the grant. As compensation expense is recognized, a deferred tax asset is recorded that represents an estimate of the future tax deduction from exercise or release of restrictions. At the time awards are exercised, cancelled, expire or restrictions are released, the Company recognizes an adjustment to income tax expense for the difference between the previously estimated tax deduction and the actual tax deduction realized.
Income Taxes
On January 1, 2025, the Company adopted, on a retrospective basis, Accounting Standards Update 2023-09 “Income Taxes (Topic 740) - Improvements to Income Tax Disclosures.
The Company and its subsidiary file a consolidated federal income tax return. The Company utilizes the liability method in accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based upon the difference between the values of the assets and liabilities as reflected in the financial statements and their related tax basis using enacted tax rates in effect for the year in which the differences are expected to be recovered or settled. As changes in tax law or rates are enacted, deferred tax assets and liabilities are adjusted through the provision for income taxes. A valuation allowance is provided against deferred tax assets unless it is more likely than not that such deferred tax assets will be realized. Deferred tax assets, net, are included in other assets on the consolidated balance sheets.
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The tax effect of unrealized gains and losses on available-for-sale debt securities and derivative instruments designated as hedges is recorded to other comprehensive income and is not a component of income tax expense/(benefit).
Unrecognized tax benefits for the uncertain portion of recorded tax benefits and related interest may result from the application of complex tax laws, rules, regulations and interpretations. Unrecognized tax benefits, as well as estimated penalties and interest, are assessed quarterly and may be adjusted through current income tax expense in future periods based on changing facts and circumstances, completion of examinations by taxing authorities or expiration of a statute of limitations.
Fair Values of Financial Instruments
ASC 820, Fair Value Measurements and Disclosures (“ASC 820”), defines fair value, establishes a framework for measuring fair value under GAAP and enhances disclosures about fair value measurements. The standard describes three levels of inputs that may be used to measure fair value as provided below.
Level 1 Quoted prices in active markets for identical assets or liabilities.
Level 2 Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3 Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair values requires significant management judgment or estimation.
Also required are disclosures of fair value information about financial instruments, whether or not recognized on the balance sheet, for which it is practical to estimate that value. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. The disclosure of fair value information about financial instruments does not and is not intended to represent the fair value of the Company.
The following are descriptions of the methods and significant assumptions used by the Company in estimating its fair value disclosures for financial instruments:
Cash and Cash Equivalents, Variable Rate Loans, Variable Rate Short-term Borrowings and Variable Rate Long-term Debt
The fair value of these financial instruments approximates carrying value.
Investment Securities
The fair value of the Company’s U.S. Treasury, U.S. government agency, residential mortgage-backed and commercial mortgage-backed securities are based on prices obtained from independent pricing services. The Company’s U.S. Treasury securities are valued based on quoted market prices for identical securities in an active market and are classified as Level 1 assets in the fair value hierarchy, while the Company’s U.S. government agency, residential mortgage-backed and commercial mortgage-backed securities are valued based on quoted market prices for the same or similar securities and are characterized as Level 2 assets in the fair value hierarchy. Management obtains documentation from the primary independent pricing service regarding the processes and controls applicable to pricing investment securities, and on a quarterly basis independently verifies the prices that were received from the service provider using two additional independent pricing sources. CRT securities are valued using a discounted cash flow model, which utilizes Level 3 inputs, and are classified as Level 3 assets in the fair value hierarchy.
Within the investment securities portfolio, the Company holds equity securities. Some of these equity securities are valued using quoted market prices for identical equity securities in an active market and are classified as Level 1 assets in the fair value hierarchy and others are traded in less active markets and are classified as Level 2 assets in the fair value hierarchy.
The fair value of the Company’s trading securities is derived from quoted prices for the same or similar securities. Management verifies the prices using two additional independent pricing sources. These assets are classified as Level 2 assets in the fair value hierarchy.
Loans Held for Sale
The fair value for loans held for sale is derived from quoted market prices for similar loans, in which case they are characterized as Level 2 assets in the fair value hierarchy, or is derived from third party pricing models, in which case they are characterized as Level 3 assets in the fair value hierarchy.
Securities Sold Not Yet Purchased
The fair value for securities sold but not yet purchased is derived from quoted prices in active markets and are classified as Level 1 liabilities in the fair value hierarchy.
61
Derivative Assets and Liabilities
The estimated fair value of derivative assets and liabilities is obtained from independent pricing services based on quoted market prices for similar derivative contracts and these financial instruments are characterized as Level 2 assets and liabilities in the fair value hierarchy. On a quarterly basis, management independently verifies the fair value using an additional independent pricing source.
Derivative Financial Instruments
All contracts that satisfy the definition of a derivative are recorded at fair value in other assets and other liabilities on the consolidated balance sheets, and the related cash flows are recorded in the operating activities section of the consolidated statement of cash flows. The Company records the derivatives on a net basis when a right of offset exists with a single counterparty that is subject to a legally enforceable master netting agreement.
Non-Hedging Derivatives
The Company enters into interest rate derivative instruments with customers while at the same time entering into offsetting interest rate derivative instruments with another financial institution. These transactions allow the customer to effectively manage their exposure to a variable rate loan. Because the Company acts as an intermediary for its customers, changes in the fair value of the underlying derivative instruments substantially offset each other and do not have a material impact on the Company’s results of operations.
The Company offers forward contract derivative instruments, such as to-be-announced U.S. agency residential mortgage-back securities, to its mortgage banking customers to allow the customers to mitigate exposure to market risks associated with the purchase or origination of mortgage loans. To mitigate the Company’s exposure to these forward contracts, the Company will enter into offsetting forward contracts, most typically with a financial institution. Any changes in fair value to the forward contract derivative instruments are recorded in trading income on the consolidated statements of income and other comprehensive income.
The Company also offers foreign currency derivative instruments in which the Company enters into a contract with a customer to buy or sell a foreign currency at a future date for a specified price while at the same time entering into an offsetting contract with a financial institution to buy or sell the same currency at the same future date for a specified price. The transaction allows the customer to manage their exposure to foreign currency exchange rate fluctuations. Because the Company acts as an intermediary for its customers, changes in the fair value of the underlying derivative instruments substantially offset each other and do not have a material impact on the Company’s results of operations.
Derivatives Designated as Hedges
Segment Reporting
The Company adopted Accounting Standards Update 2023-07 “Segment Reporting (Topic 280) - Improvement to Reportable Segment Disclosures” on January 1, 2024. The Company has determined that all of its banking divisions and subsidiaries meet the aggregation criteria of ASC 280, Segment Reporting, as its current operating model is structured whereby banking divisions and subsidiaries serve a similar base of primarily commercial clients utilizing a company-wide offering of similar products and services managed through similar processes and platforms that are collectively reviewed by the Company’s Chief Executive Officer, who has been identified as the chief operating decision maker (“CODM”).
The CODM regularly assesses performance of the aggregated single operating and reporting segment and decides how to allocate resources based on net income calculated on the same basis as is net income reported in the Company’s consolidated statements of income and other comprehensive income. The CODM is also regularly provided with expense information at a level consistent with that disclosed in the Company’s consolidated statements of income and other comprehensive income.
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(2) Earnings Per Share
The following table presents the computation of basic and diluted earnings per share:
| Year Ended December 31, | |||||||||||||||||
| (in thousands except share and per share data) | 2025 | 2024 | 2023 | ||||||||||||||
| Numerator: | |||||||||||||||||
Net income | $ | $ | $ | ||||||||||||||
| Preferred stock dividends | |||||||||||||||||
Net income available to common stockholders | $ | $ | $ | ||||||||||||||
| Denominator: | |||||||||||||||||
| Basic earnings per common share—weighted average common shares | |||||||||||||||||
| Effect of dilutive outstanding stock-settled awards | |||||||||||||||||
| Dilutive earnings per common share—weighted average diluted common shares | |||||||||||||||||
Basic earnings per common share | $ | $ | $ | ||||||||||||||
Diluted earnings per common share | $ | $ | $ | ||||||||||||||
| Anti-dilutive outstanding stock-settled awards | |||||||||||||||||
(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 | |||||||||||||||||||
| December 31, 2025 | |||||||||||||||||||||||
| Available-for-sale debt securities: | |||||||||||||||||||||||
| Residential mortgage-backed securities | $ | $ | $ | ( | $ | ||||||||||||||||||
Commercial mortgage-backed securities | |||||||||||||||||||||||
| CRT securities | ( | ||||||||||||||||||||||
| Total available-for-sale debt securities | ( | ||||||||||||||||||||||
| Held-to-maturity debt securities: | |||||||||||||||||||||||
| Residential mortgage-backed securities | ( | ||||||||||||||||||||||
| Total held-to-maturity debt securities | ( | ||||||||||||||||||||||
| Equity securities | |||||||||||||||||||||||
| Trading securities | |||||||||||||||||||||||
| Total investment securities(2) | $ | ||||||||||||||||||||||
| December 31, 2024 | |||||||||||||||||||||||
| Available-for-sale debt securities: | |||||||||||||||||||||||
| U.S. Treasury securities | $ | $ | $ | ( | $ | ||||||||||||||||||
| Residential mortgage-backed securities | ( | ||||||||||||||||||||||
Commercial mortgage-backed securities | ( | ||||||||||||||||||||||
| CRT securities | ( | ||||||||||||||||||||||
| Total available-for-sale debt securities | ( | ||||||||||||||||||||||
| Held-to-maturity securities: | |||||||||||||||||||||||
| Residential mortgage-backed securities | ( | ||||||||||||||||||||||
| Total held-to-maturity securities | ( | ||||||||||||||||||||||
| Equity securities | |||||||||||||||||||||||
| Total investment securities(2) | $ | ||||||||||||||||||||||
(1) Excludes accrued interest receivable of $16.1 million and $13.8 million at December 31, 2025 and December 31, 2024, respectively, related to available-for-sale debt securities and $1.2 million and $1.3 million at December 31, 2025 and December 31, 2024, 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, equity securities and trading securities at estimated fair value and held-to-maturity debt securities at amortized cost.
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Debt Securities
In the second quarter of 2025, the Company sold available-for-sale debt securities with an amortized cost basis of $287.5 million, realizing a loss of $1.9 million, and repositioned the proceeds into purchases of available-for-sale residential mortgage-backed securities. In the third quarter of 2024, the Company sold available-for-sale debt securities with an amortized cost basis of $1.2 billion, realizing a loss of $179.6 million.
The amortized cost and estimated fair value as of December 31, 2025, excluding accrued interest receivable, of available-for-sale and held-to-maturity debt securities are presented below by contractual maturity. Actual maturities may differ from contractual maturities of mortgage-backed securities because borrowers may have the right to call or prepay obligations with or without prepayment penalties.
| Available-for-sale | Held-to-maturity | ||||||||||||||||||||||
| (in thousands) | Amortized Cost | Fair Value | Amortized Cost | Fair Value | |||||||||||||||||||
| Due within one year | $ | $ | $ | $ | |||||||||||||||||||
| Due after one year through five years | |||||||||||||||||||||||
| Due after five years through ten years | |||||||||||||||||||||||
| Due after ten years | |||||||||||||||||||||||
| Total | $ | $ | $ | $ | |||||||||||||||||||
The table below presents the weighted average yields for the Company’s available-for-sale debt securities as of December 31, 2025. Weighted average yields are calculated based on amortized cost on a tax-exempt basis assuming a 21% federal tax rate, where applicable.
| Residential mortgage-backed securities | Commercial mortgage-backed securities | CRT securities | |||||||||||||||
| Due within one year | % | % | % | ||||||||||||||
| Due after one year through five years | |||||||||||||||||
| Due after five years through ten years | |||||||||||||||||
| Due after ten years | |||||||||||||||||
| Total | % | % | % | ||||||||||||||
The following table discloses the Company’s available-for-sale debt securities that have been in a continuous unrealized loss position for less than 12 months and those that have been in a continuous unrealized loss position for 12 or more months:
| Less Than 12 Months | 12 Months or Longer | Total | |||||||||||||||||||||||||||||||||
| (in thousands) | Fair Value | Unrealized Loss | Fair Value | Unrealized Loss | Fair Value | Unrealized Loss | |||||||||||||||||||||||||||||
| December 31, 2025 | |||||||||||||||||||||||||||||||||||
| Residential mortgage-backed securities | $ | $ | ( | $ | $ | ( | $ | $ | ( | ||||||||||||||||||||||||||
Commercial mortgage-backed securities | |||||||||||||||||||||||||||||||||||
| CRT securities | ( | ( | |||||||||||||||||||||||||||||||||
| Total | $ | $ | ( | $ | $ | ( | $ | $ | ( | ||||||||||||||||||||||||||
| December 31, 2024 | |||||||||||||||||||||||||||||||||||
| U.S. Treasury securities | $ | $ | $ | $ | ( | $ | $ | ( | |||||||||||||||||||||||||||
| Residential mortgage-backed securities | ( | ( | ( | ||||||||||||||||||||||||||||||||
Commercial mortgage-backed securities | ( | ( | |||||||||||||||||||||||||||||||||
| CRT securities | ( | ( | |||||||||||||||||||||||||||||||||
| Total | $ | $ | ( | $ | $ | ( | $ | $ | ( | ||||||||||||||||||||||||||
At December 31, 2025, the Company had 32 available-for-sale debt securities in an unrealized loss position, comprised of 30 residential mortgage-backed securities and two Credit Risk Transfer (“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 December 31, 2025 and December 31, 2024, no
At December 31, 2025 and December 31, 2024, debt securities with carrying values of approximately $937,000 and $940,000 , respectively, were pledged to secure certain customer deposits.
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Equity Securities
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:
| Year Ended December 31, | |||||||||||
| (in thousands) | 2025 | 2024 | |||||||||
| Net gains/(losses) recognized during the period | $ | $ | |||||||||
| Less: Realized net gains/(losses) recognized on securities sold | |||||||||||
| Unrealized net gains/(losses) recognized on securities still held | $ | ( | $ | ||||||||
(4) Loans and Allowance for Credit Losses on Loans
Loans are summarized by portfolio segment as follows:
| (in thousands) | December 31, 2025 | December 31, 2024 | |||||||||
| Loans held for investment(1): | |||||||||||
| Commercial | $ | $ | |||||||||
| Mortgage finance | |||||||||||
| Commercial real estate | |||||||||||
| Consumer | |||||||||||
| Gross loans held for investment | |||||||||||
| Unearned income (net of direct origination costs) | ( | ( | |||||||||
| Total loans held for investment | |||||||||||
| Allowance for credit losses on loans | ( | ( | |||||||||
| Total loans held for investment, net | $ | $ | |||||||||
| Loans held for sale: | |||||||||||
| Mortgage loans, at fair value | $ | $ | |||||||||
| Non-mortgage loans, at lower of cost or fair value | |||||||||||
| Total loans held for sale | $ | $ | |||||||||
(1) Excludes accrued interest receivable of $107.3 million and $107.3 million at December 31, 2025 and December 31, 2024, respectively, that is recorded in accrued interest receivable and other assets on the consolidated balance sheets.
65
The following tables summarize gross loans held for investment by year of origination and internally assigned credit grades:
| (in thousands) | 2025 | 2024 | 2023 | 2022 | 2021 | 2020 and prior | Revolving lines of credit | Revolving lines of credit converted to term loans | Total | ||||||||||||||||||||
| December 31, 2025 | |||||||||||||||||||||||||||||
| Commercial | |||||||||||||||||||||||||||||
| (1-7) Pass | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||
| (8) Special mention | |||||||||||||||||||||||||||||
| (9) Substandard - accruing | |||||||||||||||||||||||||||||
| (9+) Non-accrual | |||||||||||||||||||||||||||||
| Total commercial | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||
| Mortgage finance | |||||||||||||||||||||||||||||
| (1-7) Pass | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||
| (8) Special mention | |||||||||||||||||||||||||||||
| (9) Substandard - accruing | |||||||||||||||||||||||||||||
| (9+) Non-accrual | |||||||||||||||||||||||||||||
| Total mortgage finance | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||
| Commercial real estate | |||||||||||||||||||||||||||||
| (1-7) Pass | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||
| (8) Special mention | |||||||||||||||||||||||||||||
| (9) Substandard - accruing | |||||||||||||||||||||||||||||
| (9+) Non-accrual | |||||||||||||||||||||||||||||
| Total commercial real estate | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||
| Consumer | |||||||||||||||||||||||||||||
| (1-7) Pass | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||
| (8) Special mention | |||||||||||||||||||||||||||||
| (9) Substandard - accruing | |||||||||||||||||||||||||||||
| (9+) Non-accrual | |||||||||||||||||||||||||||||
| Total consumer | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||
| Gross charge-offs | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||
| (in thousands) | 2024 | 2023 | 2022 | 2021 | 2020 | 2019 and prior | Revolving lines of credit | Revolving lines of credit converted to term loans | Total | ||||||||||||||||||||
| December 31, 2024 | |||||||||||||||||||||||||||||
| Commercial | |||||||||||||||||||||||||||||
| (1-7) Pass | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||
| (8) Special mention | |||||||||||||||||||||||||||||
| (9) Substandard - accruing | |||||||||||||||||||||||||||||
| (9+) Non-accrual | |||||||||||||||||||||||||||||
| Total commercial | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||
| Mortgage finance | |||||||||||||||||||||||||||||
| (1-7) Pass | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||
| (8) Special mention | |||||||||||||||||||||||||||||
| (9) Substandard - accruing | |||||||||||||||||||||||||||||
| (9+) Non-accrual | |||||||||||||||||||||||||||||
| Total mortgage finance | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||
| Commercial real estate | |||||||||||||||||||||||||||||
| (1-7) Pass | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||
| (8) Special mention | |||||||||||||||||||||||||||||
| (9) Substandard - accruing | |||||||||||||||||||||||||||||
| (9+) Non-accrual | |||||||||||||||||||||||||||||
| Total commercial real estate | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||
| Consumer | |||||||||||||||||||||||||||||
| (1-7) Pass | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||
| (8) Special mention | |||||||||||||||||||||||||||||
| (9) Substandard - accruing | |||||||||||||||||||||||||||||
| (9+) Non-accrual | |||||||||||||||||||||||||||||
| Total Consumer | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||
| Gross charge-offs | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||
66
The following table details activity in the allowance for credit losses on loans. Allocation of a portion of the allowance to one category does not preclude its availability to absorb losses in other categories.
| (in thousands) | Commercial | Mortgage Finance | Commercial Real Estate | Consumer | Total | ||||||||||||
Year Ended December 31, 2025 | |||||||||||||||||
| Beginning balance | $ | $ | $ | $ | $ | ||||||||||||
| Provision for credit losses on loans | ( | ||||||||||||||||
| Charge-offs | |||||||||||||||||
| Recoveries | |||||||||||||||||
| Net charge-offs (recoveries) | ( | ||||||||||||||||
| Ending balance | $ | $ | $ | $ | $ | ||||||||||||
Year Ended December 31, 2024 | |||||||||||||||||
| Beginning balance | $ | $ | $ | $ | $ | ||||||||||||
| Allowance established for acquired PCD loans | |||||||||||||||||
| Provision for credit losses on loans | ( | ( | |||||||||||||||
| Charge-offs | |||||||||||||||||
| Recoveries | |||||||||||||||||
| Net charge-offs (recoveries) | |||||||||||||||||
| Ending balance | $ | $ | $ | $ | $ | ||||||||||||
The Company recorded a $46.1 million provision for credit losses on loans for the year ended December 31, 2025, compared to $60.0 million for the same period of 2024. The $46.1 million provision for credit losses on loans resulted primarily from an increase in total loans held for investment and $47.2 million in net charge-offs recorded during the year ended December 31, 2025, partially offset by a decline in criticized loans. Criticized loans totaled $634.9 million at December 31, 2025, compared to $714.0 million at December 31, 2024.
A loan is considered collateral-dependent when the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral. At December 31, 2025, the Company had $10.9 million in collateral-dependent commercial loans, collateralized by business assets, and $20.7 million in collateral-dependent commercial real estate loans, collateralized by real estate.
The table below provides an age analysis of gross loans held for investment:
| (in thousands) | 30-59 Days Past Due | 60-89 Days Past Due | 90 Days or More Past Due | Total Past Due | Non-accrual(1) | Current | Total | Non-accrual With No Allowance | |||||||||||||||||||||||||||||||||||||||
| December 31, 2025 | |||||||||||||||||||||||||||||||||||||||||||||||
| Commercial | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||
| Mortgage finance | |||||||||||||||||||||||||||||||||||||||||||||||
| Commercial real estate | |||||||||||||||||||||||||||||||||||||||||||||||
| Consumer | |||||||||||||||||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||
(1)As of December 31, 2025, $470,000 of non-accrual loans were earning interest income on a cash basis compared to $360,000 as of December 31, 2024. Additionally, $661,000 of interest income was recognized on non-accrual loans for the year ended December 31, 2025 compared to $287,000 for the same period in 2024. Accrued interest of $2.4 million and $1.4 million was reversed during the year ended December 31, 2025 and December 31, 2024, respectively.
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Modifications to Borrowers Experiencing Financial Difficulty
The table below details gross loans held for investment made to borrowers experiencing financial difficulty that were modified during the year ended December 31, 2025 and December 31, 2024, by type of modification granted and the financial effect of those modifications:
| Financial Statement Impact | |||||||||||||||||||||||||||||
| ($ in thousands) | Payment Deferral | Term Extension | Payment Deferral and Term Extension | Total | Percentage of Loans Held for Investment | Interest Rate Reduction | Term Extension (in months) | Payment Deferrals | |||||||||||||||||||||
| Year Ended December 31, 2025 | |||||||||||||||||||||||||||||
| Commercial | $ | $ | $ | $ | % | $ | |||||||||||||||||||||||
| Commercial real estate | % | ||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | % | ||||||||||||||||||||||||
| Year Ended December 31, 2024 | |||||||||||||||||||||||||||||
| Commercial | $ | $ | $ | $ | % | $ | |||||||||||||||||||||||
| Commercial real estate | % | $ | |||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | % | ||||||||||||||||||||||||
The table below details gross loans held for investment that experienced a default during the periods presented subsequent to being granted a modification in the prior twelve months. Default is defined as movement to nonperforming status, foreclosure or charge-off, whichever occurs first.
(in thousands) | Payment Deferral | Term Extension | Payment Deferral and Term Extension | Total | ||||||||||||||||||||||
| Year Ended December 31, 2025 | ||||||||||||||||||||||||||
| Commercial | $ | $ | $ | $ | ||||||||||||||||||||||
| Commercial real estate | ||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||||||||||||
| Year Ended December 31, 2024 | ||||||||||||||||||||||||||
| Commercial | $ | $ | $ | $ | ||||||||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||||||||||||
The table below provides an age analysis of gross loans held for investment as of December 31, 2025 and December 31, 2024 made to borrowers experiencing financial difficulty that were modified in the prior twelve months:
| (in thousands) | 30-89 Days Past Due | 90+ Days Past Due | Non-Accrual | Current | Total | |||||||||||||||||||||||||||
| December 31, 2025 | ||||||||||||||||||||||||||||||||
| Commercial | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
Commercial real estate | ||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| December 31, 2024 | ||||||||||||||||||||||||||||||||
| Commercial | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
Commercial real estate | ||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
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(5) Leases
The following table presents ROU assets and lease liabilities:
| Year Ended December 31, | |||||||||||
| (in thousands) | 2025 | 2024 | |||||||||
| ROU assets: | |||||||||||
| $ | $ | ||||||||||
| Total | $ | $ | |||||||||
| Lease liabilities | |||||||||||
| $ | $ | ||||||||||
| Total | $ | $ | |||||||||
As of December 31, 2025, operating leases had remaining lease terms of approximately 1 year to 14 years, while finance leases had remaining terms of less than 3 years.
The table below summarizes the Company’s net lease cost:
| Year Ended December 31, | |||||||||||
| (in thousands) | 2025 | 2024 | |||||||||
| Finance lease cost: | |||||||||||
| Amortization of ROU assets | $ | $ | |||||||||
| Interest on lease liabilities | |||||||||||
| Operating lease cost | |||||||||||
| Short-term lease cost | |||||||||||
| Variable lease cost | |||||||||||
| Net lease cost | $ | $ | |||||||||
| Cash paid for amounts included in the measurement of lease liabilities: | |||||||||||
| Operating cash flows from finance leases | $ | $ | |||||||||
| Operating cash flows from operating leases | |||||||||||
| Financing cash flows from finance leases | |||||||||||
| ROU assets obtained in exchange for new finance leases | |||||||||||
| ROU assets obtained in exchange for new operating leases | |||||||||||
The table below summarizes other information related to operating and finance leases:
| Year Ended December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Weighted-average remaining lease term - finance leases, in years | |||||||||||
| Weighted-average remaining lease term - operating leases, in years | |||||||||||
| Weighted-average discount rate - finance leases | % | % | |||||||||
| Weighted-average discount rate - operating leases | % | % | |||||||||
69
The table below summarizes the maturity of remaining lease liabilities as of December 31, 2025:
| (in thousands) | Finance Leases | Operating Leases | Total | ||||||||||||||
| 2026 | $ | $ | $ | ||||||||||||||
| 2027 | |||||||||||||||||
| 2028 | |||||||||||||||||
| 2029 | |||||||||||||||||
| 2030 | |||||||||||||||||
| 2030 and thereafter | |||||||||||||||||
| Total lease payments | |||||||||||||||||
| Less: Interest | ( | ( | ( | ||||||||||||||
| Present value of lease liabilities | $ | $ | $ | ||||||||||||||
As of December 31, 2025, the Company had $21.9 million of future payments for banking center and corporate office leases that have not yet commenced. These leases are expected to commence during 2026 and 2027, with lease terms of approximately 10 to 11 years.
(6) Premises & Equipment
Premises and equipment are summarized as follows:
| December 31, | |||||||||||
| (in thousands) | 2025 | 2024 | |||||||||
| Premises | $ | $ | |||||||||
| Furniture and equipment | |||||||||||
| Total cost | |||||||||||
| Accumulated depreciation | ( | ( | |||||||||
| Total premises and equipment, net | $ | $ | |||||||||
Depreciation and amortization expense for the above premises and equipment was approximately $13.5 million, $11.8 million and $10.4 million in 2025, 2024 and 2023, respectively.
(7) Deposits
Deposits are summarized as follows:
| December 31, | |||||||||||
| (in thousands) | 2025 | 2024 | |||||||||
| Non-interest bearing deposits | $ | $ | |||||||||
| Interest bearing deposits: | |||||||||||
| Transaction | |||||||||||
| Savings | |||||||||||
| Time | |||||||||||
| Total interest bearing deposits | |||||||||||
| Total deposits | $ | $ | |||||||||
The scheduled maturities of interest bearing time deposits were as follows at December 31, 2025:
| (in thousands) | |||||
| 2026 | $ | ||||
| 2027 | |||||
| 2028 | |||||
| 2029 | |||||
| 2030 | |||||
| 2031 and after | |||||
| Total | $ | ||||
At December 31, 2025 and 2024, interest bearing time deposits greater than $250,000 were approximately $600.1 million and $495.5 million, respectively.
70
(8) Short-Term Borrowings and Long-Term Debt
The table below presents a summary of the Company’s short-term borrowings, all of which mature within one year:
| (dollars in thousands) | Federal Funds Purchased | Customer Repurchase Agreements | FHLB Borrowings | |||||||||||||||||
| December 31, 2025 | ||||||||||||||||||||
| Amount outstanding at year-end | $ | $ | $ | |||||||||||||||||
| Interest rate at year-end | % | % | % | |||||||||||||||||
| Average balance outstanding during the year | $ | $ | $ | |||||||||||||||||
| Weighted-average interest rate during the year | % | % | % | |||||||||||||||||
| Maximum month-end outstanding during the year | $ | $ | $ | |||||||||||||||||
| December 31, 2024 | ||||||||||||||||||||
| Amount outstanding at year-end | $ | $ | $ | |||||||||||||||||
| Interest rate at year-end | % | % | % | |||||||||||||||||
| Average balance outstanding during the year | $ | $ | $ | |||||||||||||||||
| Weighted-average interest rate during the year | % | % | % | |||||||||||||||||
| Maximum month-end outstanding during the year | $ | $ | $ | |||||||||||||||||
The following table summarizes the Company’s short-term borrowing capacities net of balances outstanding:
| (in thousands) | December 31, 2025 | December 31, 2024 | |||||||||
| FHLB borrowing capacity relating to loans and pledged securities | $ | $ | |||||||||
| FHLB borrowing capacity relating to unencumbered securities | |||||||||||
| Total FHLB borrowing capacity(1) | $ | $ | |||||||||
| Unused federal funds lines available from commercial banks | $ | $ | |||||||||
| Unused Federal Reserve borrowings capacity | $ | $ | |||||||||
| Unused revolving line of credit(2) | $ | $ | |||||||||
(1)FHLB borrowings are collateralized by a blanket floating lien on certain real estate secured loans and certain pledged securities.
(2)Unsecured revolving, non-amortizing line of credit with maturity date of February 8, 2027. Proceeds may be used for general corporate purposes, including funding regulatory capital infusions into the Bank. The loan agreement contains customary financial covenants and restrictions. No
The table below presents a summary of long-term debt:
| (in thousands) | December 31, 2025 | December 31, 2024 | ||||||||||||
Bank-issued | $ | $ | ||||||||||||
Company-issued | ||||||||||||||
| Trust preferred floating rate subordinated debentures due 2032 to 2036 | ||||||||||||||
| Total long-term debt | $ | $ | ||||||||||||
During the second quarter of 2025, the Company partially paid down $40.5 million of the bank-issued 5.25 % fixed rate subordinated notes due 2026. The notes matured and were repaid in full in January 2026.
The Company-issued 4.00 % fixed rate subordinated notes due 2031 are redeemable, in whole or in part, on May 6, 2026 and any interest payment date thereafter at a redemption price equal to 100 % of the principal amount of the notes being redeemed, plus accrued interest thereon. Furthermore, the interest rate on these notes will reset on May 6, 2026 to a rate per annum equal to the five-year U.S. treasury rate plus 3.15 % for the five-year period from the reset date to maturity.
The following table summarizes the significant terms of the Company’s trust preferred subordinated debentures:
| (dollars in thousands) | Texas Capital Statutory Trust I | Texas Capital Statutory Trust II | Texas Capital Statutory Trust III | Texas Capital Statutory Trust IV | Texas Capital Statutory Trust V | ||||||||||||||||||||||||
| Date issued | November 19, 2002 | April 10, 2003 | October 6, 2005 | April 28, 2006 | September 29, 2006 | ||||||||||||||||||||||||
| Trust preferred securities issued | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Floating or fixed rate securities | Floating | Floating | Floating | Floating | Floating | ||||||||||||||||||||||||
| Interest rate on subordinated debentures | 3 month SOFR + | 3 month SOFR + | 3 month SOFR + | 3 month SOFR + | 3 month SOFR + | ||||||||||||||||||||||||
| Maturity date | November 2032 | April 2033 | December 2035 | June 2036 | December 2036 | ||||||||||||||||||||||||
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(9) 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.
| (in thousands) | Commercial | Mortgage Finance | Commercial Real Estate | Consumer | Total | ||||||||||||||||||||||||
| Year Ended December 31, 2025 | |||||||||||||||||||||||||||||
| Beginning balance | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Provision for off-balance sheet credit losses | ( | ( | |||||||||||||||||||||||||||
| Ending balance | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Year Ended December 31, 2024 | |||||||||||||||||||||||||||||
| Beginning balance | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Provision for off-balance sheet credit losses | ( | ( | |||||||||||||||||||||||||||
| Ending balance | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| (in thousands) | December 31, 2025 | December 31, 2024 | |||||||||||||||||||||||||||
| Commitments to extend credit - period end balance | $ | $ | |||||||||||||||||||||||||||
| Standby letters of credit - period end balance | |||||||||||||||||||||||||||||
(10) 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 Capital Rules adopted by U.S. federal banking agencies, among other things, (i) establish the capital measure called “Common Equity Tier 1” (“CET1”), (ii) specify that Tier 1 capital consists of CET1 and “Additional Tier 1 Capital” instruments meeting stated requirements, (iii) require that most deductions/adjustments to regulatory capital measures be made to CET1 and not to other components of capital and (iv) define the scope of the deductions/adjustments to the capital measures.
Additionally, the Basel III Capital Rules require that the Company maintain a 2.5 % capital conservation buffer comprised of CET1, with respect to each of CET1, Tier 1 and total capital to risk-weighted asset ratios. A financial institution with a conservation buffer of less than the required amount is subject to limitations on capital distributions, including dividend payments and stock repurchases, and certain discretionary bonus payments to executive officers. No dividends were declared or paid on the Company’s common stock during the year ended December 31, 2025 or during 2024. On January 22, 2025, the Company’s board of directors authorized a new share repurchase program under which the Company may repurchase up to $200.0 million in shares of its outstanding common stock, excluding the effect of excise tax expense incurred on net stock repurchases. Effective December 12, 2025, the Company’s board of directors authorized a new share repurchase program under which the Company may repurchase up to $200 million in shares of its outstanding common stock, excluding the effect of excise tax expense incurred on the net stock repurchases. The share repurchase program will expire on December 31, 2026, but may be suspended or discontinued at any time. The remaining repurchase authorization under the January 22, 2025 share repurchase program was terminated upon authorization of this new program. During the year ended December 31, 2025, the Company repurchased 2,246,265 shares of its common stock for an aggregate price, including excise tax expense, of $185.8 million, at a weighted average price of $82.01 per share.
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 2025, the amount of the notes that qualify as Tier 2 capital has been reduced by 100%.
72
The table below summarizes the Company’s and the Bank’s actual and required capital ratios under the Basel III Capital Rules and other standards. As shown in the table below, the Company’s and Bank’s capital ratios exceeded the regulatory definition of well capitalized as of December 31, 2025 and December 31, 2024.
| December 31, 2025 | December 31, 2024 | ||||||||||||||||||||||||||||
| (dollars in thousands) | Minimum Capital Required(2) | Capital Required to be Well Capitalized | Capital Amount | Ratio | Capital Amount | Ratio | |||||||||||||||||||||||
| The Company | |||||||||||||||||||||||||||||
| CET1 capital (to risk-weighted assets) | % | N/A | $ | % | $ | % | |||||||||||||||||||||||
| Tier 1 capital (to risk-weighted assets) | % | % | % | % | |||||||||||||||||||||||||
| Total capital (to risk-weighted assets) | % | % | % | % | |||||||||||||||||||||||||
| Tier 1 capital (to average assets)(1) | % | N/A | % | % | |||||||||||||||||||||||||
| The Bank | |||||||||||||||||||||||||||||
| CET1 capital (to risk-weighted assets) | % | % | $ | % | $ | % | |||||||||||||||||||||||
| Tier 1 capital (to risk-weighted assets) | % | % | % | % | |||||||||||||||||||||||||
| Total capital (to risk-weighted assets) | % | % | % | % | |||||||||||||||||||||||||
| Tier 1 capital (to average assets)(1) | % | % | % | % | |||||||||||||||||||||||||
(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.
(11) Stock-Based Compensation
The Company has a qualified retirement plan with a salary deferral feature designed to qualify under Section 401 of the Internal Revenue Code (the “401(k) Plan”). The 401(k) Plan permits employees to defer a portion of their compensation. Matching contributions may be made in amounts and at times determined by the Company. These contributions were approximately $12.9 million, $13.8 million and $15.2 million for the years ended December 31, 2025, 2024 and 2023, respectively. Employees are eligible to participate in the 401(k) Plan when they meet certain requirements concerning minimum age and period of credited service. All contributions to the 401(k) Plan are invested in accordance with participant elections among certain investment options.
The Company also offers a non-qualified deferred compensation plan for executives and key members of management in order to assist in attracting and retaining these individuals. Participants in the plan may elect to defer up to 75 % of their annual salary and/or short-term incentive payout into deferral accounts that mirror the gains or losses of investments selected by the participants. The plan allows the Company to make discretionary contributions on behalf of a participant as well as matching contributions. The Company did not
The Company has an Employee Stock Purchase Plan (“ESPP”). Employees are eligible for the ESPP when they meet certain requirements concerning period of credited service and minimum hours worked. Eligible employees may contribute between 1 % and 10 % of eligible compensation up to the Section 423 of the Internal Revenue Code limit of $25,000. In 2006, stockholders approved the ESPP, which allocated 400,000 shares for purchase. As of December 31, 2025, 2024 and 2023, 246,976 , 231,505 and 210,558 shares, respectively, had been purchased on behalf of employees under the ESPP.
The Company has stock-based compensation plans under which equity-based compensation grants are made by the board of directors, or its designated committee. Grants are subject to vesting requirements and may be settled in shares of common stock or paid in cash. Under the plans, the Company may grant, among other things, non-qualified stock options, incentive stock options, restricted stock, restricted stock units (“RSUs”), stock appreciation rights, performance awards or any combination thereof to employees and non-employee directors. The Company has historically issued new shares to satisfy share unit conversions. A total of 2,500,000 shares are authorized for grant under the current plan. Total shares remaining available for grant under the current plan at December 31, 2025 were 1,050,055 .
73
A summary of the Company’s stock-settled RSU activity and related information is as follows. Grants of stock-settled RSUs include time-based vesting conditions that generally vest ratably over a period of three years . Also included are grants of stock-settled RSUs with both time-based and performance-based or market-based vesting conditions that generally vest at the end of a three-year period.
| December 31, 2025 | December 31, 2024 | December 31, 2023 | |||||||||||||||||||||||||||||||||
| RSUs | Weighted Average Grant Date Fair Value | RSUs | Weighted Average Grant Date Fair Value | RSUs | Weighted Average Grant Date Fair Value | ||||||||||||||||||||||||||||||
| Outstanding at beginning of year | $ | $ | $ | ||||||||||||||||||||||||||||||||
| Granted | |||||||||||||||||||||||||||||||||||
| Vested | ( | ( | ( | ||||||||||||||||||||||||||||||||
| Forfeited | ( | ( | ( | ||||||||||||||||||||||||||||||||
| Outstanding at year-end | $ | $ | $ | ||||||||||||||||||||||||||||||||
| Compensation expense | $ | $ | $ | ||||||||||||||||||||||||||||||||
| Unrecognized compensation expense | $ | $ | $ | ||||||||||||||||||||||||||||||||
| Weighted average years over which unrecognized compensation expense is expected to be recognized | |||||||||||||||||||||||||||||||||||
| Fair value of shares vested during the year | $ | $ | $ | ||||||||||||||||||||||||||||||||
Intrinsic value of shares vested during the year | $ | $ | $ | ||||||||||||||||||||||||||||||||
The grant date fair value of stock-settled RSUs and performance-based awards that do not contain market-based conditions is equal to the market price of common stock on the grant date. The value of performance awards that include a market-based condition is estimated on the date of grant using a Monte Carlo simulation model with the following weighted average assumptions:
| December 31, 2025 | December 31, 2024 | December 31, 2023 | |||||||||||||||
Risk-free interest rate | % | % | % | ||||||||||||||
Expected stock price volatility | % | % | % | ||||||||||||||
Simulation period | |||||||||||||||||
A summary of the Company’s cash-settled RSU activity and related information is as follows. Grants of cash-settled RSUs include time-based vesting conditions that generally vest ratably over a period of three years . Since these units have a cash payout feature, they are accounted for under the liability method with related expense based on the stock price at period end.
| December 31, 2025 | December 31, 2024 | December 31, 2023 | |||||||||||||||
RSUs outstanding at beginning of year | |||||||||||||||||
| Granted | |||||||||||||||||
| Vested | ( | ( | |||||||||||||||
| Forfeited | ( | ( | |||||||||||||||
RSUs outstanding at year-end | |||||||||||||||||
| Compensation expense | $ | $ | $ | ||||||||||||||
| Weighted average years over which unrecognized compensation expense is expected to be recognized | |||||||||||||||||
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(12) Income Taxes
Income tax expense/(benefit) consists of the following:
| Year ended December 31, | |||||||||||||||||
| (in thousands) | 2025 | 2024 | 2023 | ||||||||||||||
| Current: | |||||||||||||||||
| Federal | $ | $ | $ | ||||||||||||||
| State | |||||||||||||||||
| Total | |||||||||||||||||
| Deferred: | |||||||||||||||||
| Federal | ( | ( | |||||||||||||||
| State | ( | ( | |||||||||||||||
| Total | ( | ( | |||||||||||||||
| Total expense: | |||||||||||||||||
| Federal | |||||||||||||||||
| State | |||||||||||||||||
| Total | $ | $ | $ | ||||||||||||||
The reconciliation of income tax at the U.S. federal statutory tax rate to income tax expense and effective tax rate is as follows:
| Year ended December 31, | |||||||||||||||||||||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||||||||||||||||||||
| (dollars in thousands) | Amount | Rate | Amount | Rate | Amount | Rate | |||||||||||||||||||||||||||||
| $ | % | $ | % | $ | % | ||||||||||||||||||||||||||||||
State and local taxes, net of federal income tax effect(1) | % | % | % | ||||||||||||||||||||||||||||||||
| Tax credits | |||||||||||||||||||||||||||||||||||
| Research & development | ( | % | ( | ( | % | ( | % | ||||||||||||||||||||||||||||
| Other | ( | % | ( | % | % | ||||||||||||||||||||||||||||||
| Nontaxable or nondeductible items | |||||||||||||||||||||||||||||||||||
| Tax-exempt income | ( | ( | % | ( | ( | % | ( | % | |||||||||||||||||||||||||||
| Disallowed compensation | % | % | % | ||||||||||||||||||||||||||||||||
| Disallowed FDIC | % | % | % | ||||||||||||||||||||||||||||||||
| Other | ( | % | % | % | |||||||||||||||||||||||||||||||
| Uncertain tax positions recognized | ( | % | % | % | |||||||||||||||||||||||||||||||
| Effective tax rate | $ | % | $ | % | $ | % | |||||||||||||||||||||||||||||
(1)For the years presented, California, Illinois, New York and New York City make up the majority (greater than 50%) of the tax effect in this category.
Cash paid for income taxes consists of the following:
| Year ended December 31, | |||||||||||||||||||||||||||||||||||
| (dollars in thousands) | 2025 | 2024 | 2023 | ||||||||||||||||||||||||||||||||
| Federal | $ | % | $ | % | $ | % | |||||||||||||||||||||||||||||
| State | % | % | % | ||||||||||||||||||||||||||||||||
| Total | $ | % | $ | % | $ | % | |||||||||||||||||||||||||||||
At December 31, 2025, 2024 and 2023, the Company had unrecognized tax benefits of $3.4 million, $4.3 million and $1.0 million, respectively. If the income tax impacts from these tax positions are ultimately realized, such realization would not have a material impact on the income tax provision or effective tax rate.
The Company is no longer subject to U.S. federal income tax examinations for years before 2022 or state and local income tax examinations for years before 2021.
75
The table below summarizes significant components of deferred tax assets and liabilities utilizing the federal corporate income tax rate of 21% and state tax rate of 3% for 2025 and 2% for 2024. Management believes it is more likely than not that all of the deferred tax assets will be realized.
| December 31, | |||||||||||
| (in thousands) | 2025 | 2024 | |||||||||
| Deferred tax assets: | |||||||||||
| Allowance for credit losses | $ | $ | |||||||||
| Lease liabilities | |||||||||||
Loan origination fees, net | |||||||||||
| Stock compensation | |||||||||||
| Non-accrual interest | |||||||||||
Deferred compensation | |||||||||||
| Net unrealized losses in AOCI | |||||||||||
| Other | |||||||||||
| Total deferred tax assets | |||||||||||
| Deferred tax liabilities: | |||||||||||
Lease financing transactions | ( | ( | |||||||||
| Lease ROU assets | ( | ( | |||||||||
| Depreciation | ( | ( | |||||||||
| Other | ( | ( | |||||||||
| Total deferred tax liabilities | ( | ( | |||||||||
| Net deferred tax asset | $ | $ | |||||||||
(13) Fair Value Disclosures
The Company determines the fair market values of its assets and liabilities measured at fair value on a recurring and nonrecurring basis using the fair value hierarchy as prescribed in Accounting Standards Codification 820, Fair Value Measurements and Disclosures. See Note 1 - Operations and Summary of Significant Accounting Policies for information regarding the fair value hierarchy and a description of the methods and significant assumptions used by the Company in estimating its fair value disclosures for financial statements.
76
Assets and liabilities measured at fair value are as follows:
| Fair Value Measurements Using | |||||||||||||||||
| (in thousands) | Level 1 | Level 2 | Level 3 | ||||||||||||||
| December 31, 2025 | |||||||||||||||||
| Available-for-sale debt securities:(1) | |||||||||||||||||
| Residential mortgage-backed securities | $ | $ | $ | ||||||||||||||
Commercial mortgage-backed securities | |||||||||||||||||
| CRT securities | |||||||||||||||||
Equity securities(1) | |||||||||||||||||
| Trading securities(1) | |||||||||||||||||
Loans held for investment(2) | |||||||||||||||||
Derivative assets(3) | |||||||||||||||||
Securities sold not yet purchased(4) | |||||||||||||||||
Derivative liabilities(3) | |||||||||||||||||
Non-qualified deferred compensation plan liabilities(5) | |||||||||||||||||
| December 31, 2024 | |||||||||||||||||
| Available-for-sale debt securities:(1) | |||||||||||||||||
| U.S. Treasury securities | $ | $ | $ | ||||||||||||||
| Residential mortgage-backed securities | |||||||||||||||||
Commercial mortgage-backed securities | |||||||||||||||||
| CRT securities | |||||||||||||||||
Equity securities(1) | |||||||||||||||||
Loans held for investment(2) | |||||||||||||||||
Derivative assets(3) | |||||||||||||||||
Securities sold not yet purchased(4) | |||||||||||||||||
Derivative liabilities(3) | |||||||||||||||||
Non-qualified deferred compensation plan liabilities(5) | |||||||||||||||||
(1)Available-for-sale debt securities, equity securities and trading securities are measured at fair value on a recurring basis, generally monthly.
(2)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.
(3)Derivative assets and liabilities are measured at fair value on a recurring basis, generally quarterly.
(4)Securities sold not yet purchased are measured at fair value on a recurring basis, generally monthly.
(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.
Level 3 Valuations
The following table presents a reconciliation of the level 3 fair value category measured at fair value on a recurring basis:
| Net Gains/(Losses) | |||||||||||||||||||||||||||||||||||
| (in thousands) | Balance at Beginning of Period | Purchases / Additions | Sales / Reductions | Realized | Unrealized | Balance at End of Period | |||||||||||||||||||||||||||||
Year Ended December 31, December 31, 2025 | |||||||||||||||||||||||||||||||||||
| Available-for-sale debt securities:(1) | |||||||||||||||||||||||||||||||||||
| CRT securities | $ | $ | $ | ( | $ | $ | $ | ||||||||||||||||||||||||||||
Year Ended December 31, December 31, 2024 | |||||||||||||||||||||||||||||||||||
| Available-for-sale debt securities:(1) | |||||||||||||||||||||||||||||||||||
| CRT securities | $ | $ | $ | ( | $ | $ | $ | ||||||||||||||||||||||||||||
(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).
CRT securities
The fair value of CRT securities is based on a discounted cash flow model, which utilizes Level 3 inputs, the most significant of which were a discount rate and weighted-average life. At December 31, 2025, the discount rates utilized ranged from 4.66 % to 5.81 % and the weighted-average life ranged from 3.88 years to 5.65 years. On a combined amortized cost weighted-average basis a discount rate of 5.16 % and a weighted-average life of 4.65 years were utilized to determine the fair value of these
77
securities at December 31, 2025. At December 31, 2024, the combined weighted-average discount rate and weighted-average life utilized were 5.63 % and 5.35 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 $20.8 million fair value of loans held for investment at December 31, 2025 reported above includes impaired loans with a carrying value of $30.1 million that were reduced by specific allowance allocations totaling $9.3 million based on collateral valuations utilizing Level 3 inputs. The $35.3 million fair value of loans held for investment at December 31, 2024 reported above includes impaired loans with a carrying value of $63.6 million that were reduced by specific allowance allocations totaling $28.3 million based on collateral valuations utilizing Level 3 inputs.
Fair Value of Financial Instruments
A summary of the carrying amounts and estimated fair values of financial instruments is as follows:
| Carrying Amount | Estimated Fair Value | ||||||||||||||||||||||||||||
| (in thousands) | Total | Level 1 | Level 2 | Level 3 | |||||||||||||||||||||||||
| December 31, 2025 | |||||||||||||||||||||||||||||
| Financial assets: | |||||||||||||||||||||||||||||
| Cash and cash equivalents | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Available-for-sale debt securities | |||||||||||||||||||||||||||||
| Held-to-maturity debt securities | |||||||||||||||||||||||||||||
| Equity securities | |||||||||||||||||||||||||||||
| Trading securities | |||||||||||||||||||||||||||||
| Loans held for sale | |||||||||||||||||||||||||||||
| Loans held for investment, net | |||||||||||||||||||||||||||||
| Derivative assets | |||||||||||||||||||||||||||||
| Financial liabilities: | |||||||||||||||||||||||||||||
| Total deposits | |||||||||||||||||||||||||||||
| Short-term borrowings | |||||||||||||||||||||||||||||
| Long-term debt | |||||||||||||||||||||||||||||
| Securities sold not yet purchased | |||||||||||||||||||||||||||||
| Derivative liabilities | |||||||||||||||||||||||||||||
| December 31, 2024 | |||||||||||||||||||||||||||||
| Financial assets: | |||||||||||||||||||||||||||||
| Cash and cash equivalents | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Available-for-sale debt securities | |||||||||||||||||||||||||||||
| Held-to-maturity debt securities | |||||||||||||||||||||||||||||
| Equity securities | |||||||||||||||||||||||||||||
| Loans held for investment, net | |||||||||||||||||||||||||||||
| Derivative assets | |||||||||||||||||||||||||||||
| Financial liabilities: | |||||||||||||||||||||||||||||
| Total deposits | |||||||||||||||||||||||||||||
| Short-term borrowings | |||||||||||||||||||||||||||||
| Long-term debt | |||||||||||||||||||||||||||||
| Securities sold not yet purchased | |||||||||||||||||||||||||||||
| Derivative liabilities | |||||||||||||||||||||||||||||
78
(14) Derivative Financial Instruments
The notional amounts and estimated fair values of derivative positions outstanding are presented in the following table.
| December 31, 2025 | December 31, 2024 | ||||||||||||||||||||||||||||
| Estimated Fair Value | Estimated Fair Value | ||||||||||||||||||||||||||||
| (in thousands) | Notional Amount | Notional Amount | |||||||||||||||||||||||||||
| Derivatives designated as hedges | |||||||||||||||||||||||||||||
| Cash flow hedges: | |||||||||||||||||||||||||||||
| Interest rate contracts: | |||||||||||||||||||||||||||||
| Swaps hedging loans | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| Non-hedging derivatives | |||||||||||||||||||||||||||||
| Customer-initiated and other derivatives: | |||||||||||||||||||||||||||||
| Foreign currency forward contracts | |||||||||||||||||||||||||||||
| Interest rate contracts: | |||||||||||||||||||||||||||||
| Swaps | |||||||||||||||||||||||||||||
| Caps and floors written | |||||||||||||||||||||||||||||
| Caps and floors purchased | |||||||||||||||||||||||||||||
| Forward contracts | |||||||||||||||||||||||||||||
| Gross derivatives | |||||||||||||||||||||||||||||
| Netting adjustment - offsetting derivative assets/liabilities | ( | ( | ( | ( | |||||||||||||||||||||||||
| Netting adjustment - cash collateral received/posted | ( | ( | ( | ( | |||||||||||||||||||||||||
| Net derivatives included on the consolidated balance sheets | $ | $ | $ | $ | |||||||||||||||||||||||||
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 $40.9 million at December 31, 2025 and approximately $23.2 million at December 31, 2024. Collateral levels are monitored and adjusted on a regular basis for changes in the value of derivative instruments. At December 31, 2025, the Company had $29.5 million in cash collateral pledged to counterparties included in interest bearing cash and cash equivalents on the consolidated balance sheet and $7.6 million in cash collateral received from counterparties included in interest bearing deposits on the consolidated balance sheet. The comparative amounts at December 31, 2024, were $71.3 million in cash collateral pledged to counterparties and $31.0 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 23 risk participation agreements where it acts as a participant bank with a notional amount of $338.1 million at December 31, 2025, compared to 17 risk participation agreements with a notional amount of $228.6 million at December 31, 2024. The maximum estimated exposure to these agreements, assuming 100% default by all obligors, was approximately $510,000 at December 31, 2025 and $4.1 million at December 31, 2024. The fair value of these exposures was insignificant to the consolidated financial statements at both December 31, 2025 and December 31, 2024. 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 47 risk participation agreements where the Company acts as the lead bank having a notional amount of $603.1 million at December 31, 2025, compared to 25 agreements having a notional amount of $349.5 million at December 31, 2024.
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 year ended December 31, 2025, the Company recorded $581,000 in unrealized gains to adjust its cash flow hedges to fair value, which was recorded net of tax to AOCI, and reclassified $23.2 million from AOCI as a decrease to interest income on loans. Based on current market conditions, the Company estimates that during the next 12 months, an additional $1.2 million will be reclassified from AOCI as a decrease to interest income. As of December 31, 2025, the maximum length of time over which forecasted transactions are hedged is 2.25 years.
79
(15) Accumulated Other Comprehensive Income
The following table provides the change in AOCI by component:
| (in thousands) | Cash Flow Hedges | Available-for-Sale Securities | Held-to-Maturity Securities | Total | |||||||||||||||||||
| Year Ended December 31, 2025 | |||||||||||||||||||||||
| Beginning balance | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
| Change in unrealized gain/(loss) | |||||||||||||||||||||||
| Amounts reclassified into net income | |||||||||||||||||||||||
Total other comprehensive income | |||||||||||||||||||||||
Income tax expense | |||||||||||||||||||||||
Total other comprehensive income, net of tax | |||||||||||||||||||||||
| Ending balance | $ | $ | ( | $ | ( | $ | ( | ||||||||||||||||
| Year Ended December 31, 2024 | |||||||||||||||||||||||
| Beginning balance | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
| Change in unrealized gain/(loss) | ( | ( | ( | ||||||||||||||||||||
| Amounts reclassified into net income | |||||||||||||||||||||||
Total other comprehensive income | |||||||||||||||||||||||
Income tax expense | |||||||||||||||||||||||
Total other comprehensive income, net of tax | |||||||||||||||||||||||
| Ending balance | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
(16) Related Party Transactions
During 2025 and 2024, the Company had transactions with its directors, executive officers and their affiliates. These transactions were made in the ordinary course of business and include extensions of credit and deposit transactions, all made on substantially the same terms as the then prevailing market and credit terms extended to other customers.
(17) Parent Company Only
Summarized financial information for Texas Capital Bancshares, Inc. are as follows:
Balance Sheet
| December 31, | |||||||||||
| (in thousands) | 2025 | 2024 | |||||||||
| Assets | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
| Investment securities | |||||||||||
| Investment in subsidiaries | |||||||||||
| Other assets | |||||||||||
| Total assets | $ | $ | |||||||||
| Liabilities and Stockholders’ Equity | |||||||||||
| Liabilities: | |||||||||||
| Other liabilities | $ | $ | |||||||||
| Long-term debt | |||||||||||
| Total liabilities | |||||||||||
| Stockholders’ Equity: | |||||||||||
| Preferred stock | |||||||||||
| Common stock | |||||||||||
| Additional paid-in capital | |||||||||||
| Retained earnings | |||||||||||
| Treasury stock | ( | ( | |||||||||
Accumulated other comprehensive loss | ( | ( | |||||||||
| Total stockholders’ equity | |||||||||||
| Total liabilities and stockholders’ equity | $ | $ | |||||||||
80
Statement of Income
| Year ended December 31, | |||||||||||||||||
| (in thousands) | 2025 | 2024 | 2023 | ||||||||||||||
| Interest on notes receivable | $ | $ | $ | ||||||||||||||
| Dividend income | |||||||||||||||||
| Other income | ( | ( | |||||||||||||||
| Total income | |||||||||||||||||
| Interest expense | |||||||||||||||||
Salaries and benefits | |||||||||||||||||
| Legal and professional | |||||||||||||||||
| Other non-interest expense | |||||||||||||||||
| Total expense | |||||||||||||||||
| Loss before income taxes and equity in undistributed income of subsidiary | ( | ( | ( | ||||||||||||||
| Income tax benefit | ( | ( | ( | ||||||||||||||
| Loss before equity in undistributed income of subsidiary | ( | ( | ( | ||||||||||||||
| Equity in undistributed income of subsidiary | |||||||||||||||||
| Net income | |||||||||||||||||
| Preferred stock dividends | |||||||||||||||||
| Net income available to common stockholders | $ | $ | $ | ||||||||||||||
Statements of Cash Flows
| Year ended December 31, | |||||||||||||||||
| (in thousands) | 2025 | 2024 | 2023 | ||||||||||||||
| Operating Activities | |||||||||||||||||
| Net income | $ | $ | $ | ||||||||||||||
| Adjustments to reconcile net income to net cash provided by/(used in) operating activities: | |||||||||||||||||
| Equity in undistributed income of subsidiary | ( | ( | ( | ||||||||||||||
Depreciation and amortization | |||||||||||||||||
Net (gain)/loss recognized on equity securities | ( | ( | |||||||||||||||
| Changes in operating assets and liabilities: | |||||||||||||||||
| Accrued interest receivable and other assets | ( | ||||||||||||||||
| Accrued interest payable and other liabilities | ( | ||||||||||||||||
Net cash provided by/(used in) operating activities | ( | ||||||||||||||||
| Investing Activities | |||||||||||||||||
| Sales/(purchases) of equity securities, net | ( | ( | |||||||||||||||
Repayments of investments in/(advances to) subsidiaries | ( | ( | |||||||||||||||
Sale or repayment of investments in and advances to subs | |||||||||||||||||
| Net cash provided by/(used in) investing activities | ( | ||||||||||||||||
| Financing Activities | |||||||||||||||||
| Issuance of stock related to stock-based awards | ( | ( | ( | ||||||||||||||
| Preferred stock dividends paid | ( | ( | ( | ||||||||||||||
| Repurchase of common stock | ( | ( | ( | ||||||||||||||
Net cash used in financing activities | ( | ( | ( | ||||||||||||||
| Net increase/(decrease) in cash and cash equivalents | ( | ||||||||||||||||
| Cash and cash equivalents at beginning of year | |||||||||||||||||
| Cash and cash equivalents at end of year | $ | $ | $ | ||||||||||||||
(18) New Accounting Standards
Accounting Standards Update 2024-03 “Income Statement Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses” (“ASU 2024-03”) improves financial reporting by requiring that public business entities disclose additional information about specific expense categories (certain costs and expenses) in the notes to the financial statements. ASU 2024-03 is effective January 1, 2026 and is not expected to have a significant impact on the Company’s financial statements.
81
Accounting Standards Update 2025-01 “Income Statement Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date” (“ASU 2025-01”) clarifies the effective date of Accounting Standards Update 2024-03 “Income Statement Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses” (“ASU 2024-03”) to stipulate that ASU 2024-03 is effective for public business entities for annual reporting periods beginning after December 15, 2026 and interim reporting periods beginning after December 15, 2027, with early adoption permitted. ASU 2025-01 will be effective for the Company beginning January 1, 2027 for the Company’s annual financial statements on Form 10-K and January 1, 2028 for the Company’s quarterly financial statements on Form 10-Q and is not expected to have a significant impact on the Company’s financial statements.
Accounting Standards Update 2025-03 “Business Combinations (Topic 805) and Consolidation (Topic 810): Determining the Accounting Acquirer in the Acquisition of a Variable Interest Entity” (“ASU 2025-03”) amends the guidance to improve the requirements for identifying the accounting acquirer in a business combination in which the legal acquiree is a variable interest entity (“VIE”). The amendments require entities to consider the general accounting acquirer factors in Topic 805 when the transaction is primarily effected by the exchange of equity interests. ASU 2025-03 will be effective for the Company beginning January 1, 2027 and is not expected to have a significant impact on the Company’s financial statements.
Accounting Standards Update 2025-04 “Compensation - Stock Compensation (Topic 718) and Revenue from Contracts with Customers (Topic 606): Clarifications to Share-Based Consideration Payable to a Customer” (“ASU 2025-04”) clarifies the guidance on the accounting for share-based payment awards that are granted by an entity as consideration payable to its customer, with the intent to reduce diversity in practice and improve existing guidance by revising the definition of a “performance condition” and eliminating a forfeiture policy election for service conditions associated with share-based consideration payable to a customer. ASU 2025-04 also clarifies the guidance in Topic 606 on the variable consideration constraint does not apply to share-based consideration payable to a customer “regardless of whether an award’s grant date has occurred”. ASU 2025-04 will be effective for the Company beginning January 1, 2027 and is not expected to have a significant impact on the Company’s financial statements.
Accounting Standards Update 2025-05 “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets” (“ASU 2025-05”) provides certain entities with an additional practical expedient and an accounting policy election for estimating expected credit losses on current accounts receivable and current contract assets arising from revenue transactions accounted for under Topic 606, Revenue from Contracts with Customers. ASU 2025-05 will be effective for the Company beginning January 1, 2026, with early adoption permitted, and is not expected to have a significant impact on the Company’s financial statements.
Accounting Standards Update 2025-06 “Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): (“ASU 2025-06”) removes all references to prescriptive and sequential software development stages and clarifies that the threshold for when an entity is required to start capitalizing software costs is when (1) management has authorized and committed to funding the software project and (2) it is probable that the project will be completed and the software will be used to perform the function intended. ASU 2025-06 will be effective for the Company beginning January 1, 2028, with early adoption permitted, and is not expected to have a significant impact on the Company’s financial statements.
Accounting Standards Update 2025-07 “Derivatives and Hedging (Topic 815) and Revenue from Contracts with Customers (Topic 606): Derivatives Scope Refinements and Scope Clarification for Share-Based Noncash Consideration from a Customer in a Revenue Contract” (“ASU 2025-07”) refines the scope of Topic 815 to clarify which contracts are subject to derivative accounting. ASU 2025-07 also clarifies the guidance on share-based payments from a customer in a revenue contract under Topic 606. ASU 2025-07 will be effective for the Company beginning January 1, 2027, with early adoption permitted, and is not expected to have a significant impact on the Company’s financial statements.
Accounting Standards Update 2025-08 “Financial Instruments - Credit Losses (Topic 326): Purchased Loans” (“ASC 2025-08”) amends the guidance on the accounting for certain purchased loans. The new guidance makes significant changes to the accounting for certain acquired seasoned loans subject to the current expected credit loss model. The amendments in ASU 2025-08 apply prospectively and will be effective for the Company beginning January 1, 2027, with early adoption permitted, and is not expected to have a significant impact on the Company’s financial statements.
Accounting Standards Update 2025-09 “Derivatives and Hedging (Topic 815): Hedge Accounting Improvements” (“ASC 2025-09”) clarifies the application of previous guidance and addresses emerging issues identified by stakeholders, including those related to reference rate reform. ASC 2025-09 will be effective for the Company beginning January 1, 2027, with early adoption permitted, and is not expected to have a significant impact on the Company’s financial statements.
Accounting Standards Update 2025-10 “Government Grants (Topic 832): Accounting for Government Grants Received by Business Entities” (“ASC 2025-10”) adds guidance on the recognition, measurement and presentation of government grants. ASC 2025-10 will be effective for the Company beginning January 1, 2029 and is not expected to have a significant impact on the Company’s financial statements.
82
Accounting Standards Update 2025-11 “Interim Reporting (Topic 270): Narrow-Scope Improvements” (“ASC 2025-11”) is intended to provide clarity about the current interim reporting requirements, provides a list of the interim disclosures required by all other Codification topics and establishes a disclosure principle that requires entities to disclose events since the end of the last annual reporting period that have a material impact on the entity. ASC 2025-11 will be effective for the Company beginning January 1, 2028, with early adoption permitted, and is not expected to have a significant impact on the Company’s financial statements.
Accounting Standards Update 2025-12 “Codification Improvements” (“ASC 2025-12”) includes updates for a broad range of Topics arising from technical corrections, unintended application of the Codification, clarifications and other minor improvements. The amendments in ASC 2025-12 will be effective for the Company beginning January 1, 2029 and is not expected to have a significant impact on the Company’s financial statements.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES
None.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Management, with the supervision and participation of the Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the design and operation of the disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, disclosure controls and procedures were effective in recording, processing, summarizing and reporting, on a timely basis, information required to be disclosed in the reports that the Company files or submits under the Exchange Act and were effective in ensuring that information required to be disclosed in the reports filed or submitted under the Exchange Act is accumulated and communicated to the Company's management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
There were no changes in the internal control over financial reporting (as defined in Rules 13a-15(e) and 15d-15(f) under the Exchange Act) during the period covered by this report that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
Management’s Report on Internal Control over Financial Reporting
The management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting. The internal control over financial reporting is a process designed under the supervision of the Chief Executive Officer and Chief Financial Officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the financial statements for external purposes in accordance with generally accepted accounting principles.
As of December 31, 2025, management assessed the effectiveness of the Company’s internal control over financial reporting based on the criteria for effective internal control over financial reporting established in “Internal Control—Integrated Framework (2013),” issued by the Committee of Sponsoring Organizations (COSO) of the Treadway Commission. Based on the assessment, management determined that the Company maintained effective internal control over financial reporting as of December 31, 2025.
Ernst & Young LLP, the independent registered public accounting firm that audited the consolidated financial statements of the Company included in this Annual Report on Form 10-K, has issued an audit report on the effectiveness of the Company’s internal control over financial reporting as of December 31, 2025. The report, which expresses an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting as of December 31, 2025, is included in this Item under the heading “Report of Independent Registered Public Accounting Firm.”
83
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of Texas Capital Bancshares, Inc.
Opinion on Internal Control Over Financial Reporting
We have audited Texas Capital Bancshares, Inc.’s internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Texas Capital Bancshares, Inc. (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2025, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2025 and 2024, the related consolidated statements of income and other comprehensive income, stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2025, and the related notes and our report dated February 10, 2026 expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Ernst & Young LLP
Dallas, TX
February 10, 2026
84
ITEM 9B. OTHER INFORMATION
None.
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
None.
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The information regarding Directors under the subheadings “Proposal One – Election of Directors,” “Qualifications Required of All Directors” and “Director Nominees” under the principal heading “Governance”; the information regarding Executive Officers under the subheading “Executive Officers” under the principal heading “Executive Compensation”; the information regarding the Code of Business Conduct under the principal heading “Governance”; the information under the subheading “Delinquent Section 16(a) Reports” under the principal heading “Stock Ownership Information”; the information regarding the Audit Committee under the subheading “Committees of the Board” under the principal heading “Governance”; and the information regarding the Insider Trading Policy under the subheading “Compensation and Other Policies - Insider Trading and Anti-Hedging / Anti-Pledging Policy” under the principal heading “Executive Compensation” in the Company’s 2026 Proxy Statement is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information under the subheading “Director Compensation” under the principal heading “Governance” and the information under the subheadings “Compensation Discussion and Analysis,” “Compensation Committee Report,” “Compensation Tables,” “Compensation Committee Interlocks and Insider Participation,” “2026 CEO Pay Ratio” and “2026 Pay Versus Performance” under the principal heading “Executive Compensation” in the Company’s 2026 Proxy Statement is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The information under the subheading “Equity Compensation Plan Information” under the principal heading “Executive Compensation” and the information under the principal heading “Stock Ownership Information” in the Company’s 2026 Proxy Statement is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The information under the subheading “Director Nominees” under the principal heading “Governance” and the information under the subheading “Indebtedness of Management and Related Party Transactions” under the principal heading “Executive Compensation” in the Company’s 2026 Proxy Statement is incorporated herein by reference.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
The information regarding Audit Fees, Audit-Related Fees, Tax Fees, All Other Fees and Audit Committee Pre-Approval of Audit and Pre-Approval of Audit and Permissible Non-Audit Services of Independent Auditors under the subheading “Proposal Two – Ratification of Appointment of Ernst & Young LLP as the Company’s Independent Registered Public Accounting Firm” and under the principal heading “Audit Matters” in the Company’s 2026 Proxy Statement is incorporated herein by reference.
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
(a) Documents filed as part of this report
(1) All financial statements
The Company’s consolidated financial statements and related report of its independent registered public accounting firm required in response to this Item are incorporated by reference from Item 8 of this Report.
(2) All financial statements required by Item 8
None are applicable because the required information has been incorporated in the Company’s consolidated financial statements and notes thereto which are incorporated in this Report by reference.
(3) Exhibits
85
| 3.1 | Certificate of Incorporation, which is incorporated by reference to Exhibit 3.1 to the Company’s Registration Statement on Form 10 dated August 24, 2000 | ||||
| 3.2 | Certificate of Amendment of Certificate of Incorporation, which is incorporated by reference to Exhibit 3.2 to the Company’s Registration Statement on Form 10 dated August 24, 2000 | ||||
| 3.3 | Certificate of Amendment of Certificate of Incorporation, which is incorporated by reference to Exhibit 3.3 to the Company’s Registration Statement on Form 10 dated August 24, 2000 | ||||
| 3.4 | Certificate of Amendment of Certificate of Incorporation, which is incorporated by reference to Exhibit 3.4 to the Company’s Registration Statement on Form 10 dated August 24, 2000 | ||||
| 3.5 | Certificate of Amendment of Certificate of Incorporation, which is incorporated by reference to Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q dated October 30, 2008 | ||||
| 3.6 | Amended and Restated Bylaws of Texas Capital Bancshares, Inc. which is incorporated by reference to Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q dated October 22, 2020 | ||||
| 3.7 | Certificate of Designation of 5.75% Non-Cumulative Perpetual Preferred Stock, Series B, which is incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K dated March 3, 2021 | ||||
| 4.1 | Description of Capital Stock registered pursuant to Section 12 of the Securities Exchange Act of 1934 and is incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K dated April 19, 2022 | ||||
| 4.2 | Certificate of Trust of Texas Capital Bancshares Statutory Trust I, dated November 12, 2002 which is incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K dated December 4, 2002 | ||||
| 4.3 | Amended and Restated Declaration of Trust by and among State Street Bank and Trust Company of Connecticut, National Association, Texas Capital Bancshares, Inc. and Joseph M. Grant, Raleigh Hortenstine III and Gregory B. Hultgren, dated November 19, 2002 which is incorporated by reference to Exhibit 3.3 to the Company’s Current Report on Form 8- K dated December 4, 2002 | ||||
| 4.4 | Indenture dated November 19, 2002 which is incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K dated December 4, 2002 | ||||
| 4.5 | Guarantee Agreement between Texas Capital Bancshares, Inc. and State Street Bank and Trust of Connecticut, National Association dated November 19, 2002, which is incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K dated December 4, 2002 | ||||
| 4.6 | Certificate of Trust of Texas Capital Statutory Trust II, which is incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K dated June 11, 2003 | ||||
| 4.7 | Amended and Restated Declaration of Trust by and among Wilmington Trust Company, Texas Capital Bancshares, Inc., and Joseph M. Grant and Gregory B. Hultgren, dated April 10, 2003, which is incorporated by reference to Exhibit 3.3 to the Company’s Current Report on Form 8-K dated June 11, 2003 | ||||
| 4.8 | Indenture between Texas Capital Bancshares, Inc. and Wilmington Trust Company, dated April 10, 2003, which is incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K dated June 11, 2003 | ||||
| 4.9 | Guarantee Agreement between Texas Capital Bancshares, Inc. and Wilmington Trust Company, dated April 10, 2003, which is incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K dated June 11, 2003 | ||||
| 4.10 | Amended and Restated Declaration of Trust for Texas Capital Statutory Trust III by and among Wilmington Trust Company, as Institutional Trustee and Delaware Trustee, Texas Capital Bancshares, Inc. as Sponsor, and the Administrators named therein, dated as of October 6, 2005, which is incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated October 13, 2005 | ||||
| 4.11 | Indenture between Texas Capital Bancshares, Inc., as Issuer, and Wilmington Trust Company, as Trustee, for Fixed/Floating Rate Junior Subordinated Deferrable Interest Debentures, dated as of October 6, 2005, which is incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K dated October 13, 2005 | ||||
| 4.12 | Guarantee Agreement between Texas Capital Bancshares, Inc. and Wilmington Trust Company, dated as of October 6, 2005, which is incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K dated October 13, 2005 | ||||
| 4.13 | Amended and Restated Declaration of Trust for Texas Capital Statutory Trust IV by and among Wilmington Trust Company, as Institutional Trustee and Delaware Trustee, Texas Capital Bancshares, Inc. as Sponsor, and the Administrators named therein, dated as of April 28, 2006, which is incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated May 3, 2006 | ||||
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| 4.14 | Indenture between Texas Capital Bancshares, Inc., as Issuer, and Wilmington Trust Company, as Trustee, for Floating Rate Junior Subordinated Deferrable Interest Debentures dated as of April 28, 2006, which is incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K dated May 3, 2006 | ||||
| 4.15 | Guarantee Agreement between Texas Capital Bancshares, Inc. and Wilmington Trust Company, dated as of April 28, 2006, which is incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K dated May 3, 2006 | ||||
| 4.16 | Amended and Restated Trust Agreement for Texas Capital Statutory Trust V by and among Wilmington Trust Company, as Property Trustee and Delaware Trustee, Texas Capital Bancshares, Inc., as Depositor, and the Administrative Trustees named therein, dated as of September 29, 2006, which is incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated October 5, 2006 | ||||
| 4.17 | Junior Subordinated Indenture between Texas Capital Bancshares, Inc. and Wilmington Trust Company, as Trustee, for Floating Rate Junior Subordinated Note dated as of September 29, 2006, which is incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K dated October 5, 2006 | ||||
| 4.18 | Guarantee Agreement between Texas Capital Bancshares, Inc. and Wilmington Trust Company, dated as of September 29, 2006, which is incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K dated October 5, 2006 | ||||
| 4.19 | Form of Global 5.25% Subordinated Note due 2026, which is incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K dated January 31, 2014. | ||||
| 4.20 | First Supplemental Indenture, dated May 6, 2021, between the Company and the Trustee, which is incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K dated May 6, 2021. | ||||
| 4.21 | Deposit Agreement, dated March 3, 2021, among the Company, Computershare, Inc. and Computershare Trust Company, N.A., acting jointly as depositary, and the holders from time to time of the depositary receipts described therein, which is incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K, dated March 3, 2021 | ||||
| 10.1 | Amended and Restated Employment Agreement, dated as of July 29, 2024, between Texas Capital Bancshares, Inc. and Robert C. Holmes, which is incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q dated October 17, 2024+ | ||||
| 10.2 | Form of Indemnity Agreement for directors and officers of Texas Capital Bancshares, Inc., which is incorporated by reference to Exhibit 10.14 to the Company’s Annual Report on Form 10-K dated February 21, 2014+ | ||||
| 10.3 | Texas Capital Bancshares, Inc. Amended and Restated 2006 Employee Stock Purchase Plan, which is incorporated by reference to Exhibit 10.10 to the Company’s Annual Report on Form 10-K dated February 9, 2021+ | ||||
| 10.4 | Third Amended and Restated Texas Capital Bancshares, Inc. Nonqualified Deferred Compensation Plan, which is incorporated by reference to Exhibit 10.13 to the Company’s Annual Report on form 10-K dated February 9, 2021+ | ||||
| 10.5 | Texas Capital Bancshares, Inc. 2022 Long-Term Incentive Plan, which is incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated April 20, 2022+ | ||||
| 10.6 | Texas Capital Bancshares, Inc. 2022 Long-Term Incentive Plan, as amended and restated, which is incorporated by reference to the Company’s Registration Statement on Form S-8 dated April 17, 2025+ | ||||
| 10.7 | Form of 2022 Time-Based Award Agreement pursuant to the Texas Capital Bancshares, Inc. 2015 Lon-Term Incentive Plan, which is incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q dated April 21, 2022+ | ||||
| 10.8 | Form of 2022 Performance-Based Award Agreement pursuant to the Texas Capital Bancshares, Inc. 2015 Lon-Term Incentive Plan, which is incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q dated April 21, 2022+ | ||||
| 10.9 | Form of 2023 Time-Based Award Agreement pursuant to the Texas Capital Bancshares, Inc. 2022 Long-Term Incentive Plan, which is incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q dated April 20, 2023+ | ||||
| 10.10 | Form of 2023 Performance-Based Award Agreement pursuant to the Texas Capital Bancshares, Inc. 2022 Long-Term Incentive Plan, which is incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q dated April 20, 2023+ | ||||
| 10.11 | Form of 2024 Time-Based Award Agreement pursuant to the Texas Capital Bancshares, Inc. 2022 Long-Term Incentive Plan, which is incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q dated April 18, 2024+ | ||||
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| 10.12 | Form of 2024 Performance-Based Award Agreement pursuant to the Texas Capital Bancshares, Inc. 2022 Long-Term Incentive Plan, which is incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q dated April 18, 2024+ | ||||
| 10.13 | Form of 2025 Time-Based Award Agreement pursuant to the Texas Capital Bancshares, Inc. 2022 Long-Term Incentive Plan, which is incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q dated April 17, 2025+ | ||||
| 10.14 | Form of 2025 Performance-Based Award Agreement pursuant to the Texas Capital Bancshares, Inc. 2022 Long-Term Incentive Plan, which is incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q dated April 17, 2025+ | ||||
| 10.15 | Key Executive Severance Policy, which is incorporated by reference to Exhibit 10.14 to the Company’s Annual Report on Form 10-K dated February 9, 2022+ | ||||
| 10.16 | Key Executive Change-in-Control Severance Policy, which is incorporated by reference to Exhibit 10.15 to the Company’s Annual Report on Form 10-K dated February 9, 2022+ | ||||
| 19.1 | |||||
| 21 | Subsidiaries of the Registrant* | ||||
| 23.1 | Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm* | ||||
| 31.1 | Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Exchange Act* | ||||
| 31.2 | Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the Exchange Act* | ||||
| 32.1 | Section 1350 Certification of Chief Executive Officer** | ||||
| 32.2 | Section 1350 Certification of Chief Financial Officer** | ||||
97.1 | Policy Relating to Recovery of Erroneously Awarded Compensation, which is incorporated by reference to Exhibit 97.1 to the Company’s Annual Report on Form 10-K dated February 13, 2024 | ||||
| 101.INS | XBRL Instance Document* | ||||
| 101.SCH | XBRL Taxonomy Extension Schema Document* | ||||
| 101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document* | ||||
| 101.DEF | XBRL Taxonomy Extension Definition Linkbase Document* | ||||
| 101.LAB | XBRL Taxonomy Extension Label Linkbase Document* | ||||
| 101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document* | ||||
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document and contained in Exhibit 101) | ||||
* Filed herewith
** Furnished herewith
+ Management contract or compensatory plan arrangement
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
| Date: | February 10, 2026 | TEXAS CAPITAL BANCSHARES, INC. | |||||||||||||||
| By: | /S/ ROB C. HOLMES | ||||||||||||||||
| Rob C. Holmes Chairman, President and Chief Executive Officer | |||||||||||||||||
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| Date: | February 10, 2026 | /S/ ROBERT W. STALLINGS | |||||||||
| Robert W. Stallings Lead Independent Director | |||||||||||
| Date: | February 10, 2026 | /S/ J. MATTHEW SCURLOCK | |||||||||
| J. Matthew Scurlock Chief Financial Officer (principal financial officer) | |||||||||||
| Date: | February 10, 2026 | /S/ ELLEN E. DETRICH | |||||||||
| Ellen E. Detrich Controller and Chief Accounting Officer (principal accounting officer) | |||||||||||
| Date: | February 10, 2026 | /S/ PAOLA M. ARBOUR | |||||||||
| Paola M. Arbour Director | |||||||||||
| Date: | February 10, 2026 | /S/ JONATHAN E. BALIFF | |||||||||
| Jonathan E. Baliff Director | |||||||||||
| Date: | February 10, 2026 | /S/ RANJANA B. CLARK | |||||||||
Ranjana B. Clark Director | |||||||||||
| Date: | February 10, 2026 | /S/ DAVID S. HUNTLEY | |||||||||
| David S. Huntley Director | |||||||||||
| Date: | February 10, 2026 | /S/ CHARLES S. HYLE | |||||||||
| Charles S. Hyle Director | |||||||||||
| Date: | February 10, 2026 | /S/ THOMAS E. LONG | |||||||||
| Thomas E. Long Director | |||||||||||
| Date: | February 10, 2026 | /S/ MARK W. MIDKIFF | |||||||||
Mark W. Midkiff Director | |||||||||||
| Date: | February 10, 2026 | /S/ ELYSIA HOLT RAGUSA | |||||||||
| Elysia Holt Ragusa Director | |||||||||||
| Date: | February 10, 2026 | /S/ STEVEN P. ROSENBERG | |||||||||
| Steven P. Rosenberg Director | |||||||||||
| Date: | February 10, 2026 | /S/ DALE W. TREMBLAY | |||||||||
| Dale W. Tremblay Director | |||||||||||
| Date: | February 10, 2026 | /S/ LAURA L. WHITLEY | |||||||||
| Laura L. Whitley Director | |||||||||||
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FAQ
What is Texas Capital Bancshares, Inc. (TCBI) and how is it structured?
Texas Capital Bancshares, Inc. is a Dallas-based bank holding company with Texas Capital Bank and Texas Capital Securities as wholly owned subsidiaries. It offers commercial banking, treasury, private banking and investment banking services, primarily in major Texas markets but also through national specialty lines.
How many employees does TCBI have and where are they primarily located?
TCBI reports 1,785 employees as of December 31, 2025, nearly all full time. Because operations are heavily Texas-based, a majority of staff work in Texas markets such as Dallas, Austin, Fort Worth, Houston and San Antonio, supporting commercial and consumer financial services.
Is Texas Capital Bank considered well capitalized under regulatory standards?
Yes. As of December 31, 2025, Texas Capital Bank’s CET1, Tier 1, total risk-based and leverage ratios were all above the levels required to be classified as “well capitalized,” supporting ongoing operations, growth plans and its financial holding company status under Federal Reserve rules.
What is the market value and share count for TCBI common stock?
As of June 30, 2025, TCBI’s common stock held by non‑affiliates had an aggregate market value of about $3.57 billion. The company reports 44,176,837 common shares outstanding on February 9, 2026, trading on the Nasdaq Global Select Market under the symbol TCBI.
What are the main strategic risks highlighted for TCBI?
Key strategic risks include intense competition from banks and non‑bank financial firms, the need to execute its growth strategy, dependence on technology and new products, potential acquisition integration challenges, and pressure from real-time payments adoption, which may affect liquidity needs and fee economics.
Which credit risks are particularly important for TCBI investors?
TCBI highlights concentration in commercial lending, significant exposure to Texas real estate, dependence on commercial business customers, and broader exposure to the Texas economy, including sectors linked to energy. Effective management of underwriting standards and portfolio concentrations is critical to controlling credit losses.
What regulatory and compliance areas are most significant for TCBI?
TCBI operates under extensive oversight, including the Federal Reserve, FDIC, Texas Department of Banking, CFPB, SEC, FINRA and MSRB. Key themes include Basel III capital rules, liquidity oversight, consumer protection, cybersecurity disclosure, BSA/AML and OFAC compliance, CRA performance, and broker-dealer regulations.
Texas Capital