UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

~~FORM 10-Q~~



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

For the quarterly period ended ~~September~~June 30, ~~2017~~

2021



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

For the transition period from to

Commission file number 001-34657

TEXAS CAPITAL BANCSHARES, INC.

(Exact ~~Name~~name of ~~Registrant~~registrant as ~~Specified~~specified in ~~Its Charter)~~

its charter)



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

2000 McKinney Avenue ~~Suite 700, Dallas, Texas, U.S.A.~~

~~75201~~

Suite 700

Dallas

USA

75201

(Address of principal executive ~~officers)~~offices)

(Zip Code)

~~214/~~(214)932-6600

(Registrant’s telephone number,

including area code)

N/A

(Former ~~Name, Former Address~~name, former address and ~~Former Fiscal Year,~~former fiscal year, if ~~Changed Since Last Report)~~changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.01 per share

TCBI

Nasdaq Stock Market

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

TCBIO

Nasdaq Stock Market

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

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ 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 ~~and post~~ such files). Yes ý¨ No

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

Large Accelerated Filer

Accelerated Filer

¨☐

Non-Accelerated Filer

☐

~~(Do not check if a smaller reporting company)~~

Smaller Reporting Company

¨☐

Emerging Growth Company

☐

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

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

~~APPLICABLE ONLY TO CORPORATE ISSUERS:~~

On ~~October 18, 2017,~~July 21, 2021, the number of shares set forth below was outstanding with respect to each of the ~~issuer’s~~issuer's classes of common stock:

Common Stock, par value $0.01 per share ~~49,626,545~~50,597,797

Texas Capital Bancshares, Inc.

Form 10-Q

Quarter Ended ~~September~~June 30, ~~2017~~2021

Index

PART ~~I –~~ I—FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

TEXAS CAPITAL BANCSHARES, INC.

CONSOLIDATED BALANCE SHEETS

~~(In thousands except share data)~~

September 30,
2017 December 31,
2016
(Unaudited)
Assets
Cash and due from banks $ 143,616
$ 113,707
Interest-bearing deposits 2,332,537
2,700,645
Federal funds sold and securities purchased under resale agreements 25,000
25,000
Securities, available-for-sale 24,224
24,874
Loans held for sale, at fair value 955,983
968,929
Loans held for investment, mortgage finance 5,642,285
4,497,338
Loans held for investment (net of unearned income) 14,828,406
13,001,011
Less: Allowance for loan losses 182,929
168,126
Loans held for investment, net 20,287,762
17,330,223
Mortgage servicing rights, net 77,630
28,536
Premises and equipment, net 23,882
19,775
Accrued interest receivable and other assets 511,207
465,933
Goodwill and intangible assets, net 19,157
19,512
Total assets $ 24,400,998
$ 21,697,134
Liabilities and Stockholders’ Equity
Liabilities:
Deposits:
Non-interest-bearing $ 8,263,202
$ 7,994,201
Interest-bearing 10,818,055
9,022,630
Total deposits 19,081,257
17,016,831
Accrued interest payable 4,562
5,498
Other liabilities 178,599
161,223
Federal funds purchased and repurchase agreements 83,496
109,575
Other borrowings 2,500,000
2,000,000
Subordinated notes, net 281,315
281,044
Trust preferred subordinated debentures 113,406
113,406
Total liabilities 22,242,635
19,687,577
Stockholders’ equity:
Preferred stock, $.01 par value, $1,000 liquidation value:
Authorized shares – 10,000,000
Issued shares – 6,000,000 shares issued at September 30, 2017 and December 31, 2016 150,000
150,000
Common stock, $.01 par value:
Authorized shares – 100,000,000
Issued shares – 49,622,242 and 49,504,079 at September 30, 2017 and December 31, 2016, respectively 496
495
Additional paid-in capital 959,251
955,468
Retained earnings 1,048,195
903,187
Treasury stock (shares at cost: 417 at September 30, 2017 and December 31, 2016) (8 ) (8 )
Accumulated other comprehensive income, net of taxes 429
415
Total stockholders’ equity 2,158,363
2,009,557
Total liabilities and stockholders’ equity $ 24,400,998
$ 21,697,134
- UNAUDITED


(in thousands except share data)	June 30, 2021		December 31, 2020
	(Unaudited)
Assets
Cash and due from banks	$	202,549	$	173,573
Interest-bearing deposits in other banks	6,768,650		9,032,807

Investment securities	3,798,275		3,196,970
Loans held for sale ($63.7 million and $239.1 million at June 30, 2021 and December 31, 2020, respectively, at fair value)	63,747		283,165
Loans held for investment, mortgage finance	8,772,799		9,079,409
Loans held for investment (net of unearned income)	15,168,565		15,351,451
Less: Allowance for credit losses on loans	221,511		254,615
Loans held for investment, net	23,719,853		24,176,245
Mortgage servicing rights, net	1,316		105,424

Premises and equipment, net	21,969		24,546
Accrued interest receivable and other assets	634,719		715,699
Goodwill and intangible assets, net	17,464		17,667
Total assets	$	35,228,542	$	37,726,096

Liabilities and Stockholders’ Equity
Liabilities:
Deposits:
Non-interest-bearing	$	14,228,038	$	12,740,947
Interest-bearing	14,611,525		18,255,642

Total deposits	28,839,563		30,996,589
Accrued interest payable	8,116		11,150

Other liabilities	324,039		339,486
Federal funds purchased and repurchase agreements	14,481		111,751
Other borrowings	2,000,000		3,000,000
Long-term debt	927,386		395,896


Total liabilities	32,113,585		34,854,872

Stockholders’ equity:
Preferred stock, $0.01 par value, $1,000 liquidation value:
Authorized shares—10,000,000
Issued shares—300,000 and 6,000,000 at June 30, 2021 and December 31, 2020, respectively	300,000		150,000
Common stock, $0.01 par value:
Authorized shares—100,000,000
Issued shares— 50,592,618 and 50,470,867 at June 30, 2021 and December 31, 2020, respectively	506		504
Additional paid-in capital	992,469		991,898
Retained earnings	1,848,379		1,713,056
Treasury stock (shares at cost: 417 at June 30, 2021 and December 31, 2020)	(8)		(8)
Accumulated other comprehensive income/(loss), net of taxes	(26,389)		15,774
Total stockholders’ equity	3,114,957		2,871,224
Total liabilities and stockholders’ equity	$	35,228,542	$	37,726,096

See accompanying notes to consolidated financial statements.

TEXAS CAPITAL BANCSHARES, INC.

CONSOLIDATED STATEMENTS OF INCOME AND OTHER

COMPREHENSIVE ~~INCOME –~~INCOME/(LOSS) - UNAUDITED

~~(In thousands except per share data)~~


												Three months ended June 30,				Six months ended June 30,
	Three months ended September 30,					Nine months ended September 30,
	2017		2016			2017		2016
(in thousands except per share data)											(in thousands except per share data)	2021		2020		2021		2020
Interest income											Interest income
Interest and fees on loans	$	229,116	$	177,724		$	607,386	$	501,673		Interest and fees on loans	$	210,611	$	247,595	$	426,203	$	531,220
Securities	341		232			853		739
Investment securities											Investment securities	10,918		2,024		20,805		4,207
Federal funds sold and securities purchased under resale agreements	642		455			1,606		1,209			Federal funds sold and securities purchased under resale agreements	0		77		1		691
Deposits in other banks	7,544		4,081			19,935		11,116
Interest-bearing deposits in other banks											Interest-bearing deposits in other banks	2,961		2,314		5,893		21,900
Total interest income	237,643		182,492			629,780		514,737			Total interest income	224,490		252,010		452,902		558,018
Interest expense											Interest expense
Deposits	22,435		8,950			52,261		26,743			Deposits	16,271		32,294		36,275		94,468
Federal funds purchased	891		126			1,869		362			Federal funds purchased	51		176		126		845

Other borrowings	4,835		1,733			9,757		4,265			Other borrowings	451		4,569		2,968		14,151
Subordinated notes	4,191		4,191			12,573		12,573
Trust preferred subordinated debentures	930		753			2,641		2,203
Long-term debt											Long-term debt	10,723		5,043		16,466		10,307

Total interest expense	33,282		15,753			79,101		46,146			Total interest expense	27,496		42,082		55,835		119,771
Net interest income	204,361		166,739			550,679		468,591			Net interest income	196,994		209,928		397,067		438,247
Provision for credit losses	20,000		22,000			42,000		68,000			Provision for credit losses	(19,000)		100,000		(25,000)		196,000
Net interest income after provision for credit losses	184,361		144,739			508,679		400,591			Net interest income after provision for credit losses	215,994		109,928		422,067		242,247
Non-interest income											Non-interest income
Service charges on deposit accounts	3,211		2,880			9,323		7,401			Service charges on deposit accounts	4,634		2,459		9,350		5,752
Wealth management and trust fee income	1,627		1,113			4,386		3,024			Wealth management and trust fee income	3,143		2,348		5,998		4,815
Bank owned life insurance (BOLI) income	615		520			1,562		1,592

Brokered loan fees	6,152		7,581			17,639		18,090			Brokered loan fees	6,933		10,764		16,244		18,779
Servicing income	4,486		310			10,387		305			Servicing income	5,935		6,120		14,944		10,866
Swap fees	647		918			3,404		2,330			Swap fees	534		1,468		1,060		4,225
Net gain/(loss) on sale of loans held for sale											Net gain/(loss) on sale of loans held for sale	(3,070)		39,023		2,502		26,023
Other	2,265		3,394			8,181		9,203			Other	11,993		8,303		19,096		11,805
Total non-interest income	19,003		16,716			54,882		41,945			Total non-interest income	30,102		70,485		69,194		82,265
Non-interest expense											Non-interest expense
Salaries and employee benefits	67,882		56,722			194,039		162,904			Salaries and employee benefits	86,830		100,791		174,352		177,984
Net occupancy expense	6,436		5,634			19,062		17,284			Net occupancy expense	7,865		9,134		16,139		17,846
Marketing	7,242		4,292			18,349		12,686			Marketing	1,900		7,988		3,597		16,510
Legal and professional	6,395		5,333			20,975		16,883			Legal and professional	9,147		11,330		17,424		28,796
Communications and technology	6,002		6,620			24,414		19,228			Communications and technology	14,352		42,760		30,321		56,551
FDIC insurance assessment	6,203		6,355			16,800		17,867
Servicing related expenses	3,897		620			8,329		1,305
Federal Deposit Insurance Corporation (“FDIC”) insurance assessment											Federal Deposit Insurance Corporation (“FDIC”) insurance assessment	5,226		7,140		11,839		12,989
Servicing-related expenses											Servicing-related expenses	12,355		20,100		25,344		36,454

Merger-related expenses											Merger-related expenses	0		10,486		0		17,756
Other	10,773		9,223			30,770		27,717			Other	11,385		12,606		20,360		22,866
Total non-interest expense	114,830		94,799			332,738		275,874			Total non-interest expense	149,060		222,335		299,376		387,752
Income before income taxes	88,534		66,656			230,823		166,662
Income tax expense	29,850		23,931			78,502		59,929
Net income	58,684		42,725			152,321		106,733
Income/(loss) before income taxes											Income/(loss) before income taxes	97,036		(41,922)		191,885		(63,240)
Income tax expense/(benefit)											Income tax expense/(benefit)	23,555		(7,606)		46,466		(12,237)
Net income/(loss)											Net income/(loss)	73,481		(34,316)		145,419		(51,003)
Preferred stock dividends	2,438		2,438			7,313		7,313			Preferred stock dividends	6,317		2,437		10,096		4,875
Net income available to common stockholders	$	56,246	$	40,287		$	145,008	$	99,420
Other comprehensive income (loss)
Change in net unrealized gain on available-for-sale securities arising during period, before-tax	$	52	$	(63	)	$	22	$	(121	)
Income tax benefit related to net unrealized gain on available-for-sale securities	18		(23		)	8		(43		)
Other comprehensive loss, net of tax	34		(40		)	14		(78		)
Comprehensive income	$	58,718	$	42,685		$	152,335	$	106,655

Basic earnings per common share	$	1.13	$	0.88		$	2.93	$	2.16
Diluted earnings per common share	$	1.12	$	0.87		$	2.89	$	2.14
Net income/(loss) available to common stockholders											Net income/(loss) available to common stockholders	$	67,164	$	(36,753)	$	135,323	$	(55,878)
Other comprehensive loss											Other comprehensive loss
Change in unrealized gain/(loss) on available-for-sale debt securities, before tax											Change in unrealized gain/(loss) on available-for-sale debt securities, before tax	$	38,037	$	(5,435)	$	(53,370)	$	(10,727)
Income tax expense/(benefit)											Income tax expense/(benefit)	7,989		(1,142)		(11,207)		(2,253)
Other comprehensive income/(loss), net of tax											Other comprehensive income/(loss), net of tax	30,048		(4,293)		(42,163)		(8,474)
Comprehensive income/(loss)											Comprehensive income/(loss)	$	103,529	$	(38,609)	$	103,256	$	(59,477)
Basic earnings/(loss) per common share											Basic earnings/(loss) per common share	$	1.33	$	(0.73)	$	2.68	$	(1.11)
Diluted earnings/(loss) per common share											Diluted earnings/(loss) per common share	$	1.31	$	(0.73)	$	2.65	$	(1.11)

See accompanying notes to consolidated financial statements.

TEXAS CAPITAL BANCSHARES, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY - UNAUDITED

~~(In thousands except share data)~~


	Preferred Stock			Common Stock			Additional				Treasury Stock			Accumulated Other
							Paid-in		Retained					Comprehensive
(in thousands except share data)	Shares	Amount		Shares	Amount		Capital		Earnings		Shares	Amount		Income/(Loss)		Total
Balance at March 31, 2020	6,000,000	$	150,000	50,408,195	$	504	$	979,939	$	1,637,392	(417)	$	(8)	$	4,769	$	2,772,596

Comprehensive loss:
Net loss	—	—		—	—		—		(34,316)		—	—		—		(34,316)
Change in unrealized gain on available-for-sale securities, net of taxes	—	—		—	—		—		—		—	—		(4,293)		(4,293)
Total comprehensive loss																(38,609)

Stock-based compensation expense recognized in earnings	—	—		—	—		3,322		—		—	—		—		3,322

Preferred stock dividend	—	—		—	—		—		(2,437)		—	—		—		(2,437)
Issuance of stock related to stock-based awards	—	—		27,894	—		(117)		—		—	—		—		(117)


Balance at June 30, 2020	6,000,000	$	150,000	50,436,089	$	504	$	983,144	$	1,600,639	(417)	$	(8)	$	476	$	2,734,755

Balance at March 31, 2021	6,300,000	$	450,000	50,558,184	$	505	$	984,207	$	1,781,215	(417)	$	(8)	$	(56,437)	$	3,159,482

Comprehensive income:
Net income	—	—		—	—		—		73,481		—	—		—		73,481
Change in unrealized gain on available-for-sale securities, net of taxes	—	—		—	—		—		—		—	—		30,048		30,048
Total comprehensive income																103,529

Stock-based compensation expense recognized in earnings	—	—		—	—		8,315		—		—	—		—		8,315
Preferred stock dividend	—	—		—	—		—		(6,317)		—	—		—		(6,317)
Issuance of stock related to stock-based awards	—	—		34,434	1		(53)		—		—	—		—		(52)
Redemption of preferred stock	(6,000,000)	(150,000)		—	—		—		—		—	—		—		(150,000)


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

Preferred Stock Common Stock Treasury Stock
Shares Amount Shares Amount
Additional
Paid-in
Capital

Retained
Earnings
Shares Amount
Accumulated
Other
Comprehensive
Income (Loss),
Net of Taxes
Total
Balance at December 31, 2015 (audited) 6,000,000
$ 150,000
45,874,224
$ 459
$ 714,546
$ 757,818
(417 ) $ (8 ) $ 718
$ 1,623,533
Comprehensive income:
Net income —
—
—
—
—
106,733
—
—
—
106,733
Change in unrealized gain on available-for-sale securities, net of taxes of $43 —
—
—
—
—
—
—
—
(78 ) (78 )
Total comprehensive income 106,655
Tax benefit related to exercise of stock-based awards —
—
—
—
1,213
—
—
—
—
1,213
Stock-based compensation expense recognized in earnings —
—
—
—
3,466
—
—
—
—
3,466
Preferred stock dividend —
—
—
—
—
(7,313 ) —
—
—
(7,313 )
Issuance of stock related to stock-based awards —
—
135,688
1
(1,773 ) —
—
—
—
(1,772 )
Balance at September 30, 2016 6,000,000
$ 150,000
46,009,912
$ 460
$ 717,452
$ 857,238
(417 ) $ (8 ) $ 640
$ 1,725,782

Balance at December 31, 2016 (audited) 6,000,000
$ 150,000
49,504,079
$ 495
$ 955,468
$ 903,187
(417 ) $ (8 ) $ 415
$ 2,009,557
Comprehensive income:
Net income —
—
—
—
—
152,321
—
—
—
152,321
Change in unrealized gain on available-for-sale securities, net of taxes of $8 —
—
—
—
—
—
—
—
14
14
Total comprehensive income 152,335
Stock-based compensation expense recognized in earnings —
—
—
—
5,717
—
—
—
—
5,717
Preferred stock dividend —
—
—
—
—
(7,313 ) —
—
—
(7,313 )
Issuance of stock related to stock-based awards —
—
84,568
1
(1,934 ) —
—
—
—
(1,933 )
Issuance of common stock related to warrants —
—
33,595
—
—
—
—
—
—
—
Balance at September 30, 2017 6,000,000
$ 150,000
49,622,242
$ 496
$ 959,251
$ 1,048,195
(417 ) $ (8 ) $ 429
$ 2,158,363

See accompanying notes to consolidated financial statements.

TEXAS CAPITAL BANCSHARES, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY - UNAUDITED - CONTINUED


	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, 2019 (audited)	6,000,000	$	150,000	50,338,158	$	503	$	978,205	$	1,663,671	(417)	$	(8)	$	8,950	$	2,801,321
Impact of adoption of new accounting standards, net of taxes(1)	—	—		—	—		—		(7,154)		—	—		—		(7,154)
Comprehensive loss:
Net loss	—	—		—	—		—		(51,003)		—	—		—		(51,003)
Change in unrealized gain/(loss) on available-for-sale securities, net of taxes	—	—		—	—		—		—		—	—		(8,474)		(8,474)
Total comprehensive loss																(59,477)

Stock-based compensation expense recognized in earnings	—	—		—	—		6,549		—		—	—		—		6,549

Preferred stock dividend	—	—		—	—		—		(4,875)		—	—		—		(4,875)
Issuance of stock related to stock-based awards	—	—		97,931	1		(1,610)		—		—	—		—		(1,609)


Balance at June 30, 2020	6,000,000	$	150,000	50,436,089	$	504	$	983,144	$	1,600,639	(417)	$	(8)	$	476	$	2,734,755

Balance at December 31, 2020 (audited)	6,000,000	$	150,000	50,470,867	$	504	$	991,898	$	1,713,056	(417)	$	(8)	$	15,774	$	2,871,224

Comprehensive income:
Net income	—	—		—	—		—		145,419		—	—		—		145,419
Change in unrealized gain/(loss) on available-for-sale securities, net of taxes	—	—		—	—		—		—		—	—		(42,163)		(42,163)
Total comprehensive income																103,256

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


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

(1) Represents the impact of adopting Accounting Standard Update (“ASU”) 2016-13. See Note 1 to the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2020 for more information.

See accompanying notes to consolidated financial statements.

TEXAS CAPITAL BANCSHARES, INC.

CONSOLIDATED STATEMENTS OF CASH ~~FLOWS—~~FLOWS - UNAUDITED

~~(In thousands)~~


								Six months ended June 30,
(in thousands)							(in thousands)	2021		2020
Operating activities							Operating activities
Net income/(loss)							Net income/(loss)	$	145,419	$	(51,003)
Adjustments to reconcile net income/(loss) to net cash provided by operating activities:							Adjustments to reconcile net income/(loss) to net cash provided by operating activities:
Provision for credit losses							Provision for credit losses	(25,000)		196,000

Depreciation and amortization							Depreciation and amortization	47,531		31,320
Net (gain)/loss on sale of loans held for sale							Net (gain)/loss on sale of loans held for sale	(2,502)		(26,023)
Increase/(decrease) in valuation allowance on mortgage servicing rights							Increase/(decrease) in valuation allowance on mortgage servicing rights	(16,448)		20,818

Stock-based compensation expense							Stock-based compensation expense	14,804		7,029

Purchases and originations of loans held for sale							Purchases and originations of loans held for sale	(1,409,716)		(4,931,981)
Proceeds from sales and repayments of loans held for sale							Proceeds from sales and repayments of loans held for sale	1,618,331		7,022,960

	Nine months ended September 30,
	2017			2016
Operating activities
Net income	$	152,321		$	106,733
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses	42,000			68,000
Depreciation and amortization	19,624			16,179
Increase in valuation allowance on mortgage servicing rights	216			414
Bank owned life insurance (BOLI) income	(1,562		)	(1,592		)
Stock-based compensation expense	15,021			6,175
Excess tax benefits from stock-based compensation arrangements	—			(1,328		)
Purchases and originations of loans held for sale	(4,315,065		)	(1,927,702		)
Proceeds from sales and repayments of loans held for sale	4,282,910			1,352,322
Net (gain) loss on sale of loans held for sale and other assets	1,005			(1,307		)
Technology write-off	5,285			—
Changes in operating assets and liabilities:							Changes in operating assets and liabilities:
Accrued interest receivable and other assets	(68,672		)	(79,267		)	Accrued interest receivable and other assets	85,388		(74,155)
Accrued interest payable and other liabilities	8,434			34,172			Accrued interest payable and other liabilities	(19,164)		57,795
Net cash provided by (used in) operating activities	141,517			(427,201		)
Net cash provided by operating activities							Net cash provided by operating activities	438,643		2,252,760
Investing activities							Investing activities
Purchases of available-for-sale securities	(97,381		)	(1,278		)
Maturities and calls of available-for-sale securities	94,775			265
Principal payments received on available-for-sale securities	3,278			4,528
Purchases of investment securities							Purchases of investment securities	(903,395)		(10,813)

Principal payments received on investment securities							Principal payments received on investment securities	240,891		5,168
Originations of mortgage finance loans	(62,284,036		)	(74,594,117		)	Originations of mortgage finance loans	(88,516,423)		(94,837,775)
Proceeds from pay-offs of mortgage finance loans	61,139,089			74,599,234			Proceeds from pay-offs of mortgage finance loans	88,823,033		94,034,998
Net increase in loans held for investment, excluding mortgage finance loans	(1,856,253		)	(943,534		)
Proceeds from sale of mortgage servicing rights							Proceeds from sale of mortgage servicing rights	108,646		0
Net increase/(decrease) in loans held for investment, excluding mortgage finance loans							Net increase/(decrease) in loans held for investment, excluding mortgage finance loans	174,095		(207,635)
Purchase of premises and equipment, net	(9,056		)	(1,526		)	Purchase of premises and equipment, net	(1,516)		(2,344)
Proceeds from sale of foreclosed assets	767			62

Net cash used in investing activities	(3,008,817		)	(936,366		)	Net cash used in investing activities	(74,669)		(1,018,401)
Financing activities							Financing activities
Net increase in deposits	2,064,426			3,060,504
Net increase/(decrease) in deposits							Net increase/(decrease) in deposits	(2,157,026)		3,709,102
Costs from issuance of stock related to stock-based awards and warrants	(1,933		)	(1,772		)	Costs from issuance of stock related to stock-based awards and warrants	(2,926)		(1,609)

Net proceeds from issuance of preferred stock							Net proceeds from issuance of preferred stock	289,723		0
Redemption of preferred stock							Redemption of preferred stock	(150,000)		0
Preferred dividends paid	(7,313		)	(7,313		)	Preferred dividends paid	(10,096)		(4,875)
Net increase in other borrowings	500,000			170,000
Excess tax benefits from stock-based compensation arrangements	—			1,328
Decrease in Federal funds purchased and repurchase agreements	(26,079		)	(61,631		)
Net cash provided by financing activities	2,529,101			3,161,116
Net increase (decrease) in cash and cash equivalents	(338,199		)	1,797,549
Net increase/(decrease) in other borrowings							Net increase/(decrease) in other borrowings	(1,000,000)		300,000

Net increase/(decrease) in federal funds purchased and repurchase agreements							Net increase/(decrease) in federal funds purchased and repurchase agreements	(97,270)		54,024
Net proceeds from issuance of long-term debt							Net proceeds from issuance of long-term debt	639,440		0
Redemption of long-term debt							Redemption of long-term debt	(111,000)		0

Net cash provided by/(used in) financing activities							Net cash provided by/(used in) financing activities	(2,599,155)		4,056,642
Net increase/(decrease) in cash and cash equivalents							Net increase/(decrease) in cash and cash equivalents	(2,235,181)		5,291,001
Cash and cash equivalents at beginning of period	2,839,352			1,790,870			Cash and cash equivalents at beginning of period	9,206,380		4,425,583
Cash and cash equivalents at end of period	$	2,501,153		$	3,588,419		Cash and cash equivalents at end of period	$	6,971,199	$	9,716,584
Supplemental disclosures of cash flow information:							Supplemental disclosures of cash flow information:
Cash paid during the period for interest	$	80,037		$	48,119		Cash paid during the period for interest	$	58,869	$	112,217
Cash paid during the period for income taxes	72,485			68,716			Cash paid during the period for income taxes	36,701		19,835
Transfers from loans/leases to OREO and other repossessed assets	—			18,822

See accompanying notes to consolidated financial statements.

~~TEXAS CAPITAL BANCSHARES, INC.~~

NOTES TO CONSOLIDATED FINANCIAL ~~STATEMENTS—~~STATEMENTS - UNAUDITED

(1) ~~OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES~~Operations and Summary of Significant Accounting Policies

Organization and Nature of Business

Texas Capital Bancshares, Inc. (the “Company”), a Delaware corporation, was incorporated in November 1996 and commenced banking operations in December 1998. The consolidated financial statements of the Company include the accounts of ~~Texas Capital Bancshares, Inc.~~the Company and its wholly owned subsidiary, Texas Capital Bank, National Association (the “Bank”). We serve the needs of commercial businesses and ~~successful~~ professionals and entrepreneurs located in Texas as well as operate several lines of business serving a regional ~~and~~or national ~~clientèle~~clientele of commercial borrowers. We are primarily a secured lender, with the majority of our ~~greatest concentration~~loans held for investment, excluding mortgage finance loans and other national lines of ~~loans~~business, being made to businesses headquartered or with operations in Texas. Our national lines of business provide specialized lending products to businesses throughout the United States.

Basis of Presentation

Our 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. ~~In that regard, ASU 2016-09,~~ ~~"Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting,"~~ ("ASU 2016-09") became effective for us on January 1, 2017. ASU 2016-09 requires that excess tax benefits and deficiencies be recognized as a component of income taxes within the income statement. Additionally, ASU 2016-09 requires that all income tax-related cash flows resulting from share-based payments be reported as operating activities in the statement of cash flows. Previously, income tax benefits at award settlement were reported as a reduction to operating cash flows and an increase to financing cash flows to the extent that those benefits exceeded the income tax benefits reported in earnings during the award's vesting period. We have elected to apply that change in cash flow presentation on a prospective basis. ASU 2016-09 also requires that companies make an accounting policy election regarding forfeitures, to either estimate the number of awards that are expected to vest or account for them when they occur. We have elected to recognize forfeitures as they occur. The impact of this change and that of the remaining provisions of ASU 2016-09 did not have a significant impact on our financial statements.

The consolidated interim financial statements ~~have been prepared without audit. Certain~~are unaudited and certain information and ~~footnote~~ disclosures in the notes to consolidated financial statements that are presented in accordance with GAAP have been condensed or omitted. In the opinion of management, the interim financial statements include all normal and recurring adjustments and the disclosures made are adequate to make the interim financial information not misleading. The consolidated financial statements have been prepared in accordance with GAAP for interim financial information and the instructions to Form 10-Q adopted by the U.S. Securities and Exchange Commission (“SEC”). Accordingly, the financial statements do not include all of the information and ~~footnotes~~notes to the consolidated financial statements required by GAAP for complete annual financial statements and should be read in conjunction with our consolidated financial statements, and notes thereto, for the year ended December 31, ~~2016,~~2020, included in our Annual Report on Form 10-K ~~filed with~~for the ~~SEC on February 17, 2017~~year ended December 31, 2020 (the ~~“2016~~“2020 Form 10-K”). Operating results for the interim periods disclosed herein are not necessarily indicative of the results that may be expected for a full year or any future period.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. Actual results could differ from those estimates. The allowance for ~~loan~~credit losses, the fair value of ~~stock-based compensation awards, the fair value of mortgage servicing rights ("MSRs")~~financial instruments and the status of contingencies are particularly susceptible to significant change.

(2) ~~EARNINGS PER COMMON SHARE~~

Earnings Per Share

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


	Three months ended June 30,				Six months ended June 30,
(in thousands except share and per share data)	2021		2020		2021		2020
Numerator:
Net income/(loss)	$	73,481	$	(34,316)	$	145,419	$	(51,003)
Preferred stock dividends	6,317		2,437		10,096		4,875
Net income/(loss) available to common stockholders	$	67,164	$	(36,753)	$	135,323	$	(55,878)
Denominator:
Denominator for basic earnings per share—weighted average shares	50,580,184		50,392,394		50,549,236		50,401,401
Effect of employee stock-based awards(1)	513,476		23,937		553,851		71,749

Denominator for dilutive earnings per share—adjusted weighted average shares and assumed conversions	51,093,660		50,416,331		51,103,087		50,473,150
Basic earnings/(loss) per common share	$	1.33	$	(0.73)	$	2.68	$	(1.11)
Diluted earnings/(loss) per common share	$	1.31	$	(0.73)	$	2.65	$	(1.11)

(1)SARs and RSUs outstanding of 98,079 at June 30, 2021 and 510,095 at June 30, 2020 have not been included in diluted earnings/(loss) per common share ~~(in thousands except per share data):~~

because to do so would have been antidilutive for the periods presented.

Three months ended
September 30, Nine months ended
September 30,
2017 2016 2017 2016
Numerator:
Net income $ 58,684
$ 42,725
$ 152,321
$ 106,733
Preferred stock dividends 2,438
2,438
7,313
7,313
Net income available to common stockholders 56,246
40,287
$ 145,008
99,420
Denominator:
Denominator for basic earnings per share— weighted average shares 49,607,028
45,980,517
49,573,456
45,931,357
Effect of employee stock-based awards(1)
214,468
118,885
235,011
119,021
Effect of warrants to purchase common stock 429,370
410,281
431,551
382,578
Denominator for dilutive earnings per share—adjusted weighted average shares and assumed conversions 50,250,866
46,509,683
50,240,018
46,432,956
Basic earnings per common share $ 1.13
$ 0.88
$ 2.93
$ 2.16
Diluted earnings per common share $ 1.12
$ 0.87
$ 2.89
$ 2.14


~~(1)~~	SARs and RSUs outstanding of 6,200 at September 30, 2017 and 319,476 at September 30, 2016 have not been included in diluted earnings per share because to do so would have been anti-dilutive for the periods presented.

(3) ~~SECURITIES~~Investment Securities

Available-for-Sale Debt Securities

The following is a summary of available-for-sale ~~securities (in thousands):~~debt securities:


(in thousands)	Amortized Cost(1)		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
June 30, 2021
Available-for-sale debt securities:
U.S. government agency securities	$	125,000	$	0	$	(2,585)	$	122,415
Residential mortgage-backed securities	3,477,491		771		(41,116)		3,437,146

Tax-exempt asset-backed securities	173,427		12,527		0		185,954
Credit risk transfer (“CRT”) securities	14,713		0		(3,000)		11,713
Total	$	3,790,631	$	13,298	$	(46,701)	$	3,757,228

December 31, 2020
Available-for-sale debt securities:
U.S. government agency securities	$	125,000	$	1	$	(1,412)	$	123,589
Residential mortgage-backed securities	2,818,518		11,566		(1,128)		2,828,956
Tax-exempt asset-backed securities	184,940		14,236		0		199,176
Credit risk transfer securities	14,713		0		(3,296)		11,417
Total	$	3,143,171	$	25,803	$	(5,836)	$	3,163,138

(1)Excludes accrued interest receivable of $6.9 million and $6.0 million at June 30, 2021 and December 31, 2020, respectively, that is recorded in accrued interest receivable and other assets on the consolidated balance sheets.

September 30, 2017

Amortized
Cost

Gross
Unrealized
Gains

Gross
Unrealized
Losses

Estimated
Fair
Value
Available-for-sale securities:

Residential mortgage-backed securities $ 11,402

$ 756
$ —
$ 12,158
Equity securities(1) 12,161

266
(361 ) 12,066

$ 23,563

$ 1,022
$ (361 ) $ 24,224

December 31, 2016
Amortized Cost
Gross Unrealized Gains
Gross Unrealized Losses
Estimated
Fair
Value
Available-for-sale securities:

Residential mortgage-backed securities $ 14,680
$ 972
$ —
$ 15,652
Municipals 275
—
—
275
Equity securities(1) 9,280
27
(360 ) 8,947

$ 24,235
$ 999
$ (360 ) $ 24,874


~~(1)~~	~~Equity securities consist of Community Reinvestment Act funds and investments related to our non-qualified deferred compensation plan.~~

The amortized cost and estimated fair value, excluding accrued interest receivable, and weighted average yield of available-for-sale debt securities are presented below by contractual ~~maturity (in thousands, except percentage data):~~maturity:


(in thousands, except percentage data)	Less Than One Year			After One Through Five Years			After Five Through Ten Years			After Ten Years			Total
June 30, 2021
Available-for-sale:
U.S. government agency securities:(1)
Amortized cost	$	0		$	0		$	125,000		$	0		$	125,000
Estimated fair value	0			0			122,415			0			122,415
Weighted average yield(3)	0		%	0		%	1.13		%	0		%	1.13		%
Residential mortgage-backed securities:(1)
Amortized cost	$	0		$	356		$	17,354		$	3,459,781		$	3,477,491
Estimated fair value	0			395			16,787			3,419,964			3,437,146
Weighted average yield(3)	0		%	4.59		%	1.08		%	1.19		%	1.19		%







Tax-exempt asset-backed securities:(1)
Amortized Cost	$	0		$	0		$	0		$	173,427		$	173,427
Estimated fair value	0			0			0			185,954			185,954
Weighted average yield(2)(3)	0		%	0		%	0		%	4.95		%	4.95		%
CRT securities:(1)
Amortized Cost	$	0		$	0		$	0		$	14,713		$	14,713
Estimated fair value	0			0			0			11,713			11,713
Weighted average yield(3)	0		%	0		%	0		%	0.92		%	0.92		%
Total available-for-sale debt securities:
Amortized cost													$	3,790,631
Estimated fair value													$	3,757,228

December 31, 2020
Available-for-sale:
U.S. government agency securities:(1)
Amortized cost	$	0		$	0		$	125,000		$	0		$	125,000
Estimated fair value	0			0			123,589			0			123,589
Weighted average yield(3)	0		%	0		%	1.13		%	0		%	1.13		%
Residential mortgage-backed securities:(1)
Amortized cost	$	0		$	545		$	17,500		$	2,800,473		$	2,818,518
Estimated fair value	0			605			17,490			2,810,861			2,828,956
Weighted average yield(3)	0		%	4.58		%	1.08		%	1.25		%	1.25		%
Tax-exempt asset-backed securities:(1)
Amortized Cost	$	0		$	0		$	0		$	184,940		$	184,940
Estimated fair value	0			0			0			199,176			199,176
Weighted average yield(2)(3)	0		%	0		%	0		%	4.92		%	4.92		%
CRT securities:(1)
Amortized Cost	$	0		$	0		$	0		$	14,713		$	14,713
Estimated fair value	0			0			0			11,417			11,417
Weighted average yield(3)	0		%	0		%	0		%	0.15		%	0.15		%
Total available-for-sale debt securities:
Amortized cost													$	3,143,171
Estimated fair value													$	3,163,138

(1)Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without prepayment penalties.

(2)Yields have been adjusted to a tax equivalent basis assuming a 21% federal tax rate.

(3)Yields are calculated based on amortized cost.

September 30, 2017

Less Than
One Year

After One
Through
Five Years

After Five
Through
Ten Years

After Ten
Years

Total
Available-for-sale:

Residential mortgage-backed securities:(1)

Amortized cost 689
396
2,177
8,140
11,402
Estimated fair value 708
440
2,405
8,605
12,158
Weighted average yield(3)
4.53 % 5.97 % 5.48 % 3.01 % 3.68 %
Equity securities:(4)

Amortized cost 12,161
—
—
—
12,161
Estimated fair value 12,066
—
—
—
12,066
Total available-for-sale securities:
Amortized cost $ 23,563
Estimated fair value $ 24,224

December 31, 2016

Less Than
One Year

After One
Through
Five Years

After Five
Through
Ten Years

After Ten
Years

Total
Available-for-sale:

Residential mortgage-backed securities:(1)

Amortized cost $ 9
$ 2,047
$ 3,147
$ 9,477
$ 14,680
Estimated fair value 9
2,104
3,495
10,044
15,652
Weighted average yield(3)
5.50 % 4.70 % 5.55 % 2.84 % 3.68 %
Municipals:(2)

Amortized cost 275
—
—
—
275
Estimated fair value 275
—
—
—
275
Weighted average yield(3)
5.61 % — % — % — % 5.61 %
Equity securities:(4)

Amortized cost 9,280
—
—
—
9,280
Estimated fair value 8,947
—
—
—
8,947
Total available-for-sale securities:
Amortized cost $ 24,235
Estimated fair value $ 24,874


~~(1)~~	~~Actual maturities may differ from contractual maturities because borrowers may have the right to prepay obligations with or without prepayment penalties.~~


~~(2)~~	~~Yields have been adjusted to a tax equivalent basis assuming a 35% federal tax rate.~~


~~(3)~~	~~Yields are calculated based on amortized cost.~~


~~(4)~~	~~These equity securities do not have a stated maturity.~~

~~At September 30, 2017, securities with carrying values of $2.7 million and $8.0 million were pledged to secure certain deposits and repurchase agreements, respectively.~~

The following table discloses ~~as of September 30, 2017 and December 31, 2016,~~ our ~~investment~~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 (in thousands):~~months:

September 30, 2017 Less Than 12 Months
12 Months or Longer
Total

Fair
Value

Unrealized
Loss

Fair
Value

Unrealized
Loss

Fair
Value

Unrealized
Loss
Equity securities $ —
$ —
$ 6,139
$ (361 ) $ 6,139
$ (361 )

Less Than 12 Months
12 Months or Longer
Total
December 31, 2016
Fair
Value

Unrealized
Loss

Fair
Value

Unrealized
Loss

Fair
Value

Unrealized
Loss
Equity securities $ 1,015
$ (6 ) $ 6,146
$ (354 ) $ 7,161
$ (360 )


	Less Than 12 Months				12 Months or Longer				Total
(in thousands)	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
June 30, 2021
U.S. government agency securities	$	122,415	$	(2,585)	$	0	$	0	$	122,415	$	(2,585)
Residential mortgage-backed securities	3,257,258		(41,116)		0		0		3,257,258		(41,116)

CRT securities	0		0		11,713		(3,000)		11,713		(3,000)
Total	$	3,379,673	$	(43,701)	$	11,713	$	(3,000)	$	3,391,386	$	(46,701)
December 31, 2020
U.S. government agency securities	$	98,588	$	(1,412)	$	0	$	0	$	98,588	$	(1,412)
Residential mortgage-backed securities	354,387		(1,128)		0		0		354,387		(1,128)
CRT securities	0		0		11,417		(3,296)		11,417		(3,296)
Total	$	452,975	$	(2,540)	$	11,417	$	(3,296)	$	464,392	$	(5,836)

At ~~September~~June 30, ~~2017,~~2021, we ~~owned one security~~had 114 securities in an unrealized loss ~~position. The security is a publicly traded equity fund~~position, comprised of 5 U.S. government agency securities, 2 CRT securities and ~~is subject to market pricing volatility. We do~~107 residential mortgage-backed securities. Based upon our June 30, 2021 review of securities with unrealized losses we have determined that all losses resulted from factors not ~~believe this unrealized loss is “other-than-temporary” as of September 30, 2017.~~deemed credit-related. We have evaluated the near-term prospects of ~~the investment~~each securities portfolio in relation to the severity ~~and duration~~ of the ~~impairment~~unrealized losses and ~~based~~adverse conditions related to the securities among other factors. Based on that evaluation management has determined that we have the ability and intent to hold the ~~investment~~securities until recovery of fair ~~value.~~value and have recorded the unrealized losses in accumulated other comprehensive income (“AOCI”).

Available-for-sale debt securities with carrying values of approximately $26.3 million and $1.3 million were pledged to secure certain customer repurchase agreements and deposits, respectively, at June 30, 2021. The comparative amounts at December 31, 2020 were $31.7 million and $1.9 million, respectively.

~~(4) LOANS HELD FOR INVESTMENT AND ALLOWANCE FOR LOAN LOSSES~~Equity Securities

Equity securities consist of investments that qualify for consideration under the regulations implementing the Community Reinvestment Act and investments related to our non-qualified deferred compensation plan. At ~~September~~June 30, ~~2017~~2021 and December 31, ~~2016, loans~~2020, we had $41.0 million and $33.8 million, respectively, in equity securities recorded at fair value. The following is a summary of unrealized and realized gains/(losses) recognized on equity securities included in other non-interest income in the consolidated statements of income and other comprehensive income:


	Three months ended June 30,				Six months ended June 30,
(in thousands)	2021		2020		2021		2020
Net gains/(losses) recognized during the period	$	3,268	$	2,912	$	3,646	$	(65)
Less: Realized net gains/(losses) recognized during the period on equity securities sold	351		(226)		749		(245)
Unrealized net gains/(losses) recognized during the period on equity securities still held	$	2,917	$	3,138	$	2,897	$	180

(4) Loans Held for Investment and Allowance for Credit Losses on Loans

Loans held for investment ~~were~~are summarized by portfolio segment as ~~follows (in thousands):~~follows:


(in thousands)	June 30, 2021		December 31, 2020
Commercial	$	9,054,764	$	8,861,580
Energy	618,371		766,217
Mortgage finance(1)	8,772,799		9,079,409

Real estate	5,564,623		5,794,624


Gross loans held for investment(2)	24,010,557		24,501,830
Unearned income (net of direct origination costs)	(69,193)		(70,970)
Allowance for credit losses on loans	(221,511)		(254,615)
Total loans held for investment, net(2)	$	23,719,853	$	24,176,245

September 30,
2017 December 31,
2016
Commercial $ 8,810,825
$ 7,291,545
Mortgage finance 5,642,285
4,497,338
Construction 2,099,355
2,098,706
Real estate 3,683,564
3,462,203
Consumer 70,436
34,587
Leases 259,720
185,529
Gross loans held for investment 20,566,185
17,569,908
Deferred income (net of direct origination costs) (95,494 ) (71,559 )
Allowance for loan losses (182,929 ) (168,126 )
Total loans held for investment $ 20,287,762
$ 17,330,223

~~Commercial Loans and Leases.~~ Our commercial loan portfolio is comprised of lines of credit for working capital and term loans and leases to finance equipment and other business assets. Our energy production loans are generally collateralized with proven reserves based on appropriate valuation standards and take into account the risk of oil and gas price volatility. Our commercial loans and leases are underwritten after carefully evaluating and understanding the borrower’s ability to operate profitably. Our underwriting standards are designed to promote relationship banking rather than to make loans on a transaction basis. Our lines of credit typically are limited to a percentage of the value of the assets securing the line. Lines of credit and term loans typically are reviewed annually, or more frequently, as needed, and are supported by accounts receivable, inventory, equipment and other assets of our clients’ businesses.

~~Mortgage Finance Loans.~~ Our mortgage finance loans consist of ownership interests purchased in single-family residential mortgages funded through our mortgage finance group. These loans are typically held on our balance sheet for 10 to 20 days. We have agreements with mortgage lenders and purchase interests in individual loans they originate. All loans are underwritten consistent with established programs for permanent financing with financially sound investors. Substantially all loans are conforming loans.(1) Balances ~~as of September~~at June 30, ~~2017~~2021 and December 31, ~~2016~~2020 are stated net of ~~$150.7~~$617.9 million and ~~$839.0 million~~$1.2 billion of participations sold, respectively.

~~Construction Loans.~~ ~~Our construction loan portfolio consists primarily~~(2) Excludes accrued interest receivable of ~~single-~~$53.8 million and multi-family residential properties and commercial projects used in manufacturing, warehousing, service or retail businesses. Our construction loans generally have terms of one to three years. We typically make construction loans to developers, builders and contractors that have an established record of successful project completion and loan repayment and have a substantial equity investment in the borrowers. Loan amounts are derived primarily from the Bank's evaluation of expected cash flows available to service debt from stabilized projects under hypothetically stressed conditions. Construction loans are also based in part upon estimates of costs and value associated with the completed project. Sources of repayment for these types of loans may be pre-committed permanent loans from other lenders, sales of developed property, or an interim loan commitment from us until permanent financing is obtained. The nature of these loans makes ultimate repayment sensitive to overall economic conditions. Borrowers may not be able to correct conditions of default in loans, increasing risk of exposure to classification, non-performing status, reserve allocation and actual credit loss and foreclosure. These loans typically have floating rates and commitment fees.

~~Real Estate Loans.~~ A portion of our real estate loan portfolio is comprised of loans secured by properties other than market risk or investment-type real estate. Market risk loans are real estate loans where the primary source of repayment is expected to come from the sale, permanent financing or lease of the real property collateral. We generally provide temporary financing for commercial and residential property. These loans are viewed primarily as cash flow loans and secondarily as loans secured by real estate. Our real estate loans generally have maximum terms of five to seven years, and we provide loans with both floating and fixed rates. We generally avoid long-term loans for commercial real estate held for investment. Real estate loans may be more adversely affected by conditions in the real estate markets or in the general economy. Appraised values may be highly variable due to market conditions and the impact of the inability of potential purchasers and lessees to obtain financing and a lack of transactions$56.5 million at ~~comparable values.~~

~~At September~~June 30, ~~2017~~2021 and December 31, ~~2016, we had a blanket floating lien on certain real estate-secured loans, mortgage finance loans and certain securities used as collateral for Federal Home Loan Bank (“FHLB”) borrowings.~~

~~Summary of Loan Loss Experience~~

~~The allowance for loan losses~~2020, respectively, that is ~~comprised of general reserves, specific reserves for impaired loans and an additional qualitative reserve based on our estimate of losses inherent~~recorded in the portfolio at the balance sheet date, but not yet identified with specified loans. We consider the allowance at September 30, 2017 to be appropriate, given management's assessment of losses inherent in the portfolio as of the evaluation date, the significant growth in the loan and lease portfolio, current economic conditions in our market areasaccrued interest receivable and other ~~factors.~~assets on the consolidated balance sheets.

The following tables summarize ~~the credit risk profile~~our gross loans held for investment by year of ~~our loan portfolio by~~origination and internally assigned ~~grades and non-accrual status as of September 30, 2017 and December 31, 2016 (in thousands):~~credit grades:


(in thousands)	2021		2020		2019		2018		2017		2016 and prior		Revolving lines of credit		Revolving lines of credit converted to term loans		Total
June 30, 2021
Commercial
(1-7) Pass	$	637,105	$	3,394,502	$	602,181	$	441,326	$	209,229	$	297,669	$	3,082,499	$	59,164	$	8,723,675
(8) Special mention	0		3,575		82,607		48,393		8,464		5,633		21,060		6,660		176,392
(9) Substandard - accruing	0		1,288		27,441		25,620		9,988		31,354		16,621		7,029		119,341
(9+) Non-accrual	0		6,105		3,243		846		5,549		11,945		7,315		353		35,356
Total commercial	$	637,105	$	3,405,470	$	715,472	$	516,185	$	233,230	$	346,601	$	3,127,495	$	73,206	$	9,054,764
Energy
(1-7) Pass	$	2,500	$	0	$	0	$	3,539	$	7,743	$	21,621	$	487,723	$	0	$	523,126
(8) Special mention	0		0		0		0		0		0		52,035		0		52,035
(9) Substandard - accruing	0		0		0		0		0		10,344		0		0		10,344
(9+) Non-accrual	9,908		0		0		0		0		12,813		10,145		0		32,866
Total energy	$	12,408	$	0	$	0	$	3,539	$	7,743	$	44,778	$	549,903	$	0	$	618,371
Mortgage finance
(1-7) Pass	$	77,749	$	825,516	$	908,556	$	750,947	$	536,746	$	5,673,285	$	0	$	0	$	8,772,799
(8) Special mention	0		0		0		0		0		0		0		0		0
(9) Substandard - accruing	0		0		0		0		0		0		0		0		0
(9+) Non-accrual	0		0		0		0		0		0		0		0		0
Total mortgage finance	$	77,749	$	825,516	$	908,556	$	750,947	$	536,746	$	5,673,285	$	0	$	0	$	8,772,799
Real estate
CRE
(1-7) Pass	$	182,837	$	468,969	$	811,387	$	706,881	$	301,041	$	531,045	$	46,790	$	38,402	$	3,087,352
(8) Special mention	0		16,327		30,667		38,126		74,135		50,797		0		0		210,052
(9) Substandard - accruing	17,850		0		309		46,923		53,179		66,710		0		5,022		189,993
(9+) Non-accrual	0		0		0		0		0		206		0		0		206
RBF
(1-7) Pass	127,790		106,195		30,165		13,214		562		11,863		594,642		0		884,431
(8) Special mention	0		0		0		0		0		0		0		0		0
(9) Substandard - accruing	0		0		0		0		0		0		0		0		0
(9+) Non-accrual	0		0		0		0		0		0		0		0		0
Other
(1-7) Pass	51,092		183,013		149,031		94,703		95,927		171,454		43,935		29,716		818,871
(8) Special mention	0		0		2,115		0		0		0		0		1,018		3,133
(9) Substandard - accruing	0		0		0		4,194		14,255		21,195		0		0		39,644
(9+) Non-accrual	0		0		0		0		908		2,987		0		14,099		17,994
Secured by 1-4 family
(1-7) Pass	38,055		63,661		57,792		28,368		41,393		74,893		4,545		0		308,707
(8) Special mention	0		0		0		0		0		1,758		0		0		1,758
(9) Substandard - accruing	0		0		0		0		0		2,268		0		0		2,268
(9+) Non-accrual	0		0		0		0		0		214		0		0		214
Total real estate	$	417,624	$	838,165	$	1,081,466	$	932,409	$	581,400	$	935,390	$	689,912	$	88,257	$	5,564,623
Total loans held for investment	$	1,144,886	$	5,069,151	$	2,705,494	$	2,203,080	$	1,359,119	$	7,000,054	$	4,367,310	$	161,463	$	24,010,557

September 30, 2017
Commercial
Mortgage
Finance
Construction Real Estate Consumer Leases Total
Grade:
Pass $ 8,541,821
$ 5,642,285
$ 2,085,300
$ 3,611,667
$ 69,974
$ 242,335
$ 20,193,382
Special mention 28,288
—
14,055
34,804
369
—
77,516
Substandard-accruing 124,329
—
—
35,275
93
17,385
177,082
Non-accrual 116,387
—
—
1,818
—
—
118,205
Total loans held for investment $ 8,810,825
$ 5,642,285
$ 2,099,355
$ 3,683,564
$ 70,436
$ 259,720
$ 20,566,185

December 31, 2016
Commercial
Mortgage
Finance
Construction Real Estate Consumer Leases Total
Grade:
Pass $ 6,941,310
$ 4,497,338
$ 2,074,859
$ 3,430,346
$ 34,249
$ 181,914
$ 17,160,016
Special mention 69,447
—
10,901
21,932
—
3,532
105,812
Substandard-accruing 115,848
—
12,787
7,516
138
—
136,289
Non-accrual 164,940
—
159
2,409
200
83
167,791
Total loans held for investment $ 7,291,545
$ 4,497,338
$ 2,098,706
$ 3,462,203
$ 34,587
$ 185,529
$ 17,569,908


(in thousands)	2020		2019		2018		2017		2016		2015 and prior		Revolving lines of credit		Revolving lines of credit converted to term loans		Total
December 31, 2020
Commercial
(1-7) Pass	$	1,259,949	$	2,816,425	$	543,438	$	374,455	$	192,060	$	213,212	$	3,020,353	$	40,253	$	8,460,145
(8) Special mention	2,664		115,015		38,751		26,423		1,983		290		19,971		22,797		227,894
(9) Substandard - accruing	15,773		15,854		18,068		32,241		15,297		19,639		22,932		1,641		141,445
(9+) Non-accrual	1,820		8,360		377		1,292		802		15,157		3,836		452		32,096
Total commercial	$	1,280,206	$	2,955,654	$	600,634	$	434,411	$	210,142	$	248,298	$	3,067,092	$	65,143	$	8,861,580
Energy
(1-7) Pass	$	0	$	12,020	$	7,598	$	26,931	$	0	$	23,750	$	553,970	$	0	$	624,269
(8) Special mention	0		0		0		0		0		13,358		76,866		0		90,224
(9) Substandard - accruing	0		0		0		0		0		0		0		0		0
(9+) Non-accrual	0		0		0		5,705		1,972		8,009		36,038		0		51,724
Total energy	$	0	$	12,020	$	7,598	$	32,636	$	1,972	$	45,117	$	666,874	$	0	$	766,217
Mortgage finance
(1-7) Pass	$	755,309	$	1,063,641	$	821,122	$	483,436	$	106,013	$	5,849,888	$	0	$	0	$	9,079,409
(8) Special mention	0		0		0		0		0		0		0		0		0
(9) Substandard - accruing	0		0		0		0		0		0		0		0		0
(9+) Non-accrual	0		0		0		0		0		0		0		0		0
Total mortgage finance	$	755,309	$	1,063,641	$	821,122	$	483,436	$	106,013	$	5,849,888	$	0	$	0	$	9,079,409
Real estate
CRE
(1-7) Pass	$	352,688	$	892,831	$	923,762	$	444,587	$	208,426	$	451,283	$	62,336	$	61,133	$	3,397,046
(8) Special mention	3,475		11,170		6,485		88,633		11,153		17,623		0		1,247		139,786
(9) Substandard - accruing	0		327		47,708		11,601		32,645		30,766		0		15,940		138,987
(9+) Non-accrual	0		0		0		0		5,749		4,852		0		0		10,601
RBF
(1-7) Pass	162,397		60,077		65,271		3,727		5,888		8,483		551,703		0		857,546
(8) Special mention	0		353		0		0		0		0		0		0		353
(9) Substandard - accruing	0		0		0		0		0		0		0		0		0
(9+) Non-accrual	0		0		0		0		0		0		0		0		0
Other
(1-7) Pass	190,995		150,787		119,696		120,817		82,465		113,105		16,630		39,129		833,624
(8) Special mention	0		6,700		2,240		0		1,843		7,195		0		1,018		18,996
(9) Substandard - accruing	0		0		2,567		14,452		3,301		14,453		0		0		34,773
(9+) Non-accrual	0		0		0		927		5,524		6,403		0		14,496		27,350
Secured by 1-4 family
(1-7) Pass	58,515		63,031		46,623		54,096		72,527		31,880		4,697		0		331,369
(8) Special mention	646		0		0		635		0		1,768		0		0		3,049
(9) Substandard - accruing	0		0		0		817		0		109		0		0		926
(9+) Non-accrual	0		0		0		0		0		218		0		0		218
Total real estate	$	768,716	$	1,185,276	$	1,214,352	$	740,292	$	429,521	$	688,138	$	635,366	$	132,963	$	5,794,624
Total loans held for investment	$	2,804,231	$	5,216,591	$	2,643,706	$	1,690,775	$	747,648	$	6,831,441	$	4,369,332	$	198,106	$	24,501,830

The following table details activity in the allowance for ~~loan~~credit losses ~~by portfolio segment for the nine months ended September 30, 2017 and 2016.~~on loans. Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories.


(in thousands)																					(in thousands)	Commercial		Energy		Mortgage Finance		Real Estate		Total
Six months ended June 30, 2021																					Six months ended June 30, 2021
Allowance for credit losses on loans:																					Allowance for credit losses on loans:
Beginning balance																					Beginning balance	$	73,061	$	84,064	$	4,699	$	92,791	$	254,615

September 30, 2017
(in thousands)	Commercial		Mortgage Finance		Construction			Real Estate		Consumer			Leases			Additional Qualitative Reserve			Total
Beginning balance	$	128,768	$	—	$	13,144		$	19,149	$	241		$	1,124		$	5,700		$	168,126
Provision for loan losses	21,388		—		4,431			12,948		221			2,774			1,899			43,661
Provision for credit losses on loans																					Provision for credit losses on loans	12,035		(23,768)		352		(12,932)		(24,313)
Charge-offs	32,146		—		59			290		180			—			—			32,675		Charge-offs	3,863		6,418		0		1,192		11,473
Recoveries	3,574		—		104			74		56			9			—			3,817		Recoveries	1,358		1,324		0		0		2,682
Net charge-offs (recoveries)	28,572		—		(45		)	216		124			(9		)	—			28,858		Net charge-offs (recoveries)	2,505		5,094		0		1,192		8,791
Ending balance	$	121,584	$	—	$	17,620		$	31,881	$	338		$	3,907		$	7,599		$	182,929	Ending balance	$	82,591	$	55,202	$	5,051	$	78,667	$	221,511
Period end amount allocated to:
Loans individually evaluated for impairment	$	24,410	$	—	$	—		$	26	$	—		$	—		$	—		$	24,436
Loans collectively evaluated for impairment	97,174		—		17,620			31,855		338			3,907			7,599			158,493
Ending balance	$	121,584	$	—	$	17,620		$	31,881	$	338		$	3,907		$	7,599		$	182,929

September 30, 2016
(in thousands)	Commercial		Mortgage Finance		Construction			Real Estate		Consumer			Leases			Additional Qualitative Reserve			Total

Six months ended June 30, 2020																					Six months ended June 30, 2020
Allowance for credit losses on loans:																					Allowance for credit losses on loans:
Beginning balance	$	112,446	$	—	$	6,836		$	13,381	$	338		$	3,931		$	4,179		$	141,111	Beginning balance	$	102,254	$	60,253	$	2,265	$	30,275	$	195,047
Provision for loan losses	65,446		—		1,607			1,981		(23		)	(2,646		)	(226		)	66,139
Impact of Current Expected Credit Loss (“CECL”) adoption																					Impact of Current Expected Credit Loss (“CECL”) adoption	(15,740)		24,154		2,031		(1,860)		8,585
Provision for credit losses on loans																					Provision for credit losses on loans	28,850		117,963		299		45,823		192,935
Charge-offs	34,232		—		—			528		40			—			—			34,800		Charge-offs	32,940		100,098		0		0		133,038
Recoveries	7,829		—		34			36		16			71			—			7,986		Recoveries	770		423		0		0		1,193
Net charge-offs (recoveries)	26,403		—		(34		)	492		24			(71		)	—			26,814		Net charge-offs (recoveries)	32,170		99,675		0		0		131,845
Ending balance	$	151,489	$	—	$	8,477		$	14,870	$	291		$	1,356		$	3,953		$	180,436	Ending balance	$	83,194	$	102,695	$	4,595	$	74,238	$	264,722
Period end amount allocated to:
Loans individually evaluated for impairment	$	42,674	$	—	$	24		$	136	$	30		$	—		$	—		$	42,864
Loans collectively evaluated for impairment	108,815		—		8,453			14,734		261			1,356			3,953			137,572
Ending balance	$	151,489	$	—	$	8,477		$	14,870	$	291		$	1,356		$	3,953		$	180,436

~~The table below presents the activity in the portion of the allowance~~We recorded a $25.0 million negative provision for credit losses ~~related to losses on unfunded commitments~~ for the ~~three and nine~~six months ended ~~September~~June 30, ~~2017~~2021, compared to a provision of $196.0 million for the same period in 2020. The decreased provision resulted primarily from decreases in charge-offs and ~~2016 (in thousands). This liability is recorded in other liabilities~~non-accrual loans, as well as improvement in the ~~consolidated balance sheet.~~

Three months ended September 30, Nine months ended September 30,
2017 2016 2017 2016
Beginning balance $ 9,205
$ 9,355
$ 11,422
$ 9,011
Provision for off-balance sheet credit losses 556
1,517
(1,661 ) 1,861
Ending balance $ 9,761
$ 10,872
$ 9,761
$ 10,872

~~We have traditionally maintained an additional qualitative reserve component~~economic outlook as the economy continues to ~~compensate for~~recover from the ~~uncertainty and complexity in estimating loan and lease losses including factors and conditions that may not be fully reflected in the determination and application~~impacts of the ~~allowance allocation percentages. The increase~~COVID-19 pandemic. We recorded $8.8 million in net charge-offs during the ~~additional qualitative reserve at September~~six months ended June 30, 2017 was primarily driven by a $4.5 million provision related to the potential impact to our loan portfolio from Hurricanes Harvey and Irma ("Hurricanes"). This qualitative factor serves to measure 1) the impact on incurred credit losses resulting from the Hurricanes and 2) the imprecision in the identification and measurement of loans impacted by the Hurricanes. We believe the level of additional qualitative reserve at September 30, 2017 is warranted due to the continued uncertain economic environment which has produced losses, including those resulting from borrowers' misstatement of financial information or inaccurate certification of collateral values. Such losses are not necessarily correlated with historical loss trends or general economic conditions. Our methodology used to calculate the allowance considers historical losses; however, the historical loss rates for specific product types or credit risk grades may not fully incorporate the effects of continued uncertainty regarding the economy or the complete identification of loans impacted by the aforementioned weather events.

Our recorded investment in loans as of September 30, 2017, December 31, 2016 and September 30, 2016 related to each balance in the allowance for loan losses by portfolio segment and disaggregated on the basis of our impairment methodology was as follows (in thousands):

September 30, 2017
Commercial
Mortgage
Finance
Construction Real Estate Consumer Leases Total
Loans individually evaluated for impairment $ 117,426
$ —
$ —
$ 2,117
$ —
$ —
$ 119,543
Loans collectively evaluated for impairment 8,693,399
5,642,285
2,099,355
3,681,447
70,436
259,720
20,446,642
Total $ 8,810,825
$ 5,642,285
$ 2,099,355
$ 3,683,564
$ 70,436
$ 259,720
$ 20,566,185

December 31, 2016
Commercial
Mortgage
Finance
Construction Real Estate Consumer Leases Total
Loans individually evaluated for impairment $ 166,669
$ —
$ 159
$ 3,751
$ 200
$ 83
$ 170,862
Loans collectively evaluated for impairment 7,124,876
4,497,338
2,098,547
3,458,452
34,387
185,446
17,399,046
Total $ 7,291,545
$ 4,497,338
$ 2,098,706
$ 3,462,203
$ 34,587
$ 185,529
$ 17,569,908

September 30, 2016
Commercial
Mortgage
Finance
Construction Real Estate Consumer Leases Total
Loans individually evaluated for impairment $ 168,014
$ —
$ 159
$ 3,787
$ 200
$ —
$ 172,160
Loans collectively evaluated for impairment 6,885,965
4,961,159
2,150,294
3,388,044
27,354
96,878
17,509,694
Total $ 7,053,979
$ 4,961,159
$ 2,150,453
$ 3,391,831
$ 27,554
$ 96,878
$ 17,681,854

Generally we place loans on non-accrual when there is a clear indication that the borrower’s cash flow may not be sufficient to 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. Interest income is subsequently recognized on a cash basis as long as the remaining unpaid principal amount of the loan is deemed to be fully collectible. If collectability is questionable, then cash payments are applied to principal. As of September 30, 2017, none of our non-accrual loans were earning on a cash basis2021, compared to ~~$811,000~~$131.8 million during the same period in 2020. Criticized loans totaled $891.6 million at ~~December 31, 2016.~~ June 30, 2021, compared to $1.0 billion at June 30, 2020.

A loan is ~~placed back on accrual status~~considered collateral-dependent when ~~both principal~~the borrower is experiencing financial difficulty and ~~interest are current and it~~repayment is ~~probable that we will~~expected to be ~~able to collect all amounts due (both principal and interest) according to~~provided substantially through the ~~terms~~operation or sale of the ~~loan agreement.~~

~~A loan~~collateral. The following table summarizes collateral-dependent gross loans held for investment is considered impaired when, based on current information and events, it is probable that we will be unable to collect all amounts due (both principal and interest) according to the terms of the original loan agreement. In accordance with ASC 310, ~~Receivables, we have also included all restructured and formerly restructured loans in our impaired loan totals. The following tables detail our impaired loans,~~ by ~~portfolio class,~~collateral type as ~~of September 30, 2017 and December 31, 2016 (in thousands):~~follows:


	Collateral Type
(in thousands)	Real Property		Total
June 30, 2021



Real estate


Other	$	908	$	908

Total collateral-dependent loans held for investment	$	908	$	908

September 30, 2017

Recorded
Investment

Unpaid
Principal
Balance

Related
Allowance

Average
Recorded
Investment

Interest
Income
Recognized
With no related allowance recorded:
Commercial
Business loans $ 23,561
$ 24,983
$ —
$ 23,513
$ —
Energy 32,378
37,221
—
39,196
—
Construction
Market risk —
—
—
—
—
Real estate
Market risk —
—
—
—
—
Commercial 1,700
1,700
—
2,388
—
Secured by 1-4 family —
—
—
—
—
Consumer —
—
—
—
—
Leases —
—
—
—
—
Total impaired loans with no allowance recorded $ 57,639
$ 63,904
$ —
$ 65,097
$ —
With an allowance recorded:
Commercial
Business loans $ 12,267
$ 12,267
$ 3,226
$ 15,689
$ —
Energy 49,220
62,259
21,184
53,839
6
Construction
Market risk —
—
—
35
—
Real estate
Market risk 299
299
6
548
—
Commercial —
—
—
—
—
Secured by 1-4 family 118
118
20
649
—
Consumer —
—
—
44
—
Leases —
—
—
18
—
Total impaired loans with an allowance recorded $ 61,904
$ 74,943
$ 24,436
$ 70,822
$ 6
Combined:
Commercial
Business loans $ 35,828
$ 37,250
$ 3,226
$ 39,202
$ —
Energy 81,598
99,480
21,184
93,035
6
Construction
Market risk —
—
—
35
—
Real estate
Market risk 299
299
6
548
—
Commercial 1,700
1,700
—
2,388
—
Secured by 1-4 family 118
118
20
649
—
Consumer —
—
—
44
—
Leases —
—
—
18
—
Total impaired loans $ 119,543
$ 138,847
$ 24,436
$ 135,919
$ 6

December 31, 2016

Recorded
Investment

Unpaid
Principal
Balance

Related
Allowance

Average
Recorded
Investment

Interest
Income
Recognized
With no related allowance recorded:
Commercial
Business loans $ 23,868
$ 27,992
$ —
$ 12,361
$ —
Energy 46,753
54,522
—
54,075
—
Construction
Market risk —
—
—
2,778
—
Real estate
Market risk —
—
—
—
—
Commercial 2,083
2,083
—
4,483
38
Secured by 1-4 family —
—
—
—
—
Consumer —
—
—
—
—
Leases —
—
—
403
—
Total impaired loans with no allowance recorded $ 72,704
$ 84,597
$ —
$ 74,100
$ 38
With an allowance recorded:
Commercial
Business loans $ 21,303
$ 21,303
$ 7,055
$ 22,277
$ —
Energy 74,745
88,987
27,350
73,637
24
Construction
Market risk 159
159
24
53
—
Real estate
Market risk 1,342
1,342
20
3,000
—
Commercial —
—
—
—
—
Secured by 1-4 family 326
326
113
435
—
Consumer 200
200
30
67
—
Leases 83
83
13
548
—
Total impaired loans with an allowance recorded $ 98,158
$ 112,400
$ 34,605
$ 100,017
$ 24
Combined:
Commercial
Business loans $ 45,171
$ 49,295
$ 7,055
$ 34,638
$ —
Energy 121,498
143,509
27,350
127,712
24
Construction
Market risk 159
159
24
2,831
—
Real estate
Market risk 1,342
1,342
20
3,000
—
Commercial 2,083
2,083
—
4,483
38
Secured by 1-4 family 326
326
113
435
—
Consumer 200
200
30
67
—
Leases 83
83
13
951
—
Total impaired loans $ 170,862
$ 196,997
$ 34,605
$ 174,117
$ 62

~~Average impaired loans outstanding during the nine months ended September 30, 2017 and 2016 totaled $135.9 million and $174.9 million, respectively.~~

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


(in thousands)	30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due(1)		Total Past Due		Non-Accrual Loans(2)		Current		Total		Non-Accrual With No Allowance
June 30, 2021
Commercial	$	16,215	$	1,555	$	7,607	$	25,377	$	35,356	$	8,994,031	$	9,054,764	$	12,451


Energy	0		0		0		0		32,866		585,505		618,371		9,908
Mortgage finance loans	0		0		0		0		0		8,772,799		8,772,799		0




Real estate
CRE	0		0		0		0		206		3,487,397		3,487,603		0
RBF	0		0		0		0		0		884,431		884,431		0
Other	888		3,672		0		4,560		17,994		857,088		879,642		2,777


Secured by 1-4 family	0		37		64		101		214		312,632		312,947		0


Total loans held for investment	$	17,103	$	5,264	$	7,671	$	30,038	$	86,636	$	23,893,883	$	24,010,557	$	25,136

(1)Loans past due 90 days and still accruing includes premium finance loans of ~~September 30, 2017 (in thousands):~~

30-59 Days
Past Due

60-89 Days
Past Due

Greater
Than 90
Days and
Accruing(1)

Total Past
Due
Non-accrual Current Total
Commercial
Business loans $ 25,301
$ 18,704
$ 8,892
$ 52,897
$ 34,789
$ 7,635,061
$ 7,722,747
Energy 9,950
4,484
—
14,434
81,598
992,046
1,088,078
Mortgage finance loans —
—
—
—
—
5,642,285
5,642,285
Construction
Market risk 663
—
—
663
—
2,074,537
2,075,200
Secured by 1-4 family —
—
—
—
—
24,155
24,155
Real estate
Market risk 1,301
—
—
1,301
—
2,639,169
2,640,470
Commercial 1,839
—
—
1,839
1,700
782,185
785,724
Secured by 1-4 family 2,798
—
—
2,798
118
254,454
257,370
Consumer —
—
—
—
—
70,436
70,436
Leases 11,701
—
—
11,701
—
248,019
259,720
Total loans held for investment $ 53,553
$ 23,188
$ 8,892
$ 85,633
$ 118,205
$ 20,362,347
$ 20,566,185


~~(1)~~	~~Loans past due 90 days and still accruing includes premium finance loans of $8.4~~$3.0 million. These loans are generally secured by obligations of insurance carriers to refund premiums on canceled insurance policies. The refund of premiums from the insurance carriers can take 180 days or longer from the cancellation date.

~~Restructured~~ loans are ~~loans~~generally secured by obligations of insurance carriers to refund premiums on ~~which, due to~~canceled insurance policies. The receipt of the ~~borrower’s financial difficulties, we have granted a concession that we would not otherwise consider for borrowers~~refund of ~~similar credit quality. This may include a transfer of real estate or other assets~~premiums from the ~~borrower, a modification~~insurance carriers can take 180 days or longer from the cancellation date.

(2)As of loan terms, or a combination of the two. Modifications of terms that could potentially qualify as a restructuring include reduction of the contractual interest rate, extension of the maturity date at a contractual interest rate lower than the current rate for new debt with similar risk, a reduction of the face amount of debt or forgiveness of either principal or accrued interest. At SeptemberJune 30, ~~2017~~2021 and December 31, ~~2016,~~2020, NaN of our non-accrual loans were earning interest income on a cash basis. Additionally, 0 interest income was recognized on non-accrual loans for the six months ended June 30, 2021. Accrued interest of $468,000 was reversed during the six months ended June 30, 2021.

As of June 30, 2021 and December 31, 2020, we did not have any loans considered restructured that were not on non-accrual. Of the non-accrual loans at ~~September~~June 30, ~~2017~~2021 and December 31, ~~2016, $12.0~~2020, $24.4 million and ~~$18.1~~$45.4 million, respectively, met the criteria for restructured. These loans had no unfunded commitments at their respective balance sheet dates. A loan continues to qualify as restructured until a consistent payment history or change in borrower’s financial condition has been evidenced, generally over no less than twelve months. Assuming that the restructuring agreement specifies an interest rate at the time of the restructuring that is greater than or equal to the rate that we are willing to accept for a new extension of credit with comparable risk, then the loan no longer has to be considered a restructuring if it is in compliance with the modified terms in calendar years after the year of the restructure.

~~The following table summarizes, for the nine months ended September 30, 2017 and 2016,~~We did not have any loans that were restructured during ~~2017 and 2016 (in thousands):~~

September 30, 2017
Number of Restructured Loans Balance at Restructure Balance at Period-End
Energy loans 1
$ 1,070
$ —
Commercial business loans 1
$ 599
$ 721
Total new restructured loans in 2017 2
$ 1,669
$ 721

September 30, 2016
Number of Restructured Loans Balance at Restructure Balance at Period-End
Energy loans 2
$ 14,235
$ 13,289
Total new restructured loans in 2016 2
$ 14,235
$ 13,289

~~The restructured loans generally include terms to temporarily place loans on interest only, extend~~ the payment terms or reduce the interest rate. We did not forgive any principal on the above loans. The restructuring of the loans did not have a significant impact on our allowance for loan losses at September 30, 2017 or 2016.

~~The following table provides information on how restructured loans were modified during the nine~~six months ended ~~September~~June 30, ~~2017 and 2016 (in thousands):~~

Nine months ended September 30,
2017 2016
Extended maturity $ 721
$ —
Adjusted payment schedule —
12,647
Combination of maturity extension and payment schedule adjustment —
642
Other —
—
Total $ 721
$ 13,289

2021 or 2020. As of ~~September~~June 30, ~~2017~~2021 and ~~2016,~~2020, we did not have any loans that were restructured within the last 12 months that subsequently defaulted.

(5) ~~OREO AND VALUATION ALLOWANCE FOR LOSSES ON OREO~~Certain Transfers of Financial Assets

~~The table below presents a summary~~On April 20, 2021, we entered into an agreement to sell our portfolio of ~~the activity related~~mortgage servicing rights (“MSRs”) and to ~~OREO (in thousands):~~

Three months ended September 30, Nine months ended September 30,
2017 2016 2017 2016
Beginning balance $ 18,689
$ 18,727
$ 18,961
$ 278
Additions —
282
—
18,822
Sales (457 ) —
(729 ) (91 )
Valuation allowance for OREO (101 ) —
(101 ) —
Ending balance $ 18,131
$ 19,009
$ 18,131
$ 19,009

~~When foreclosure occurs,~~transition 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. Subsequent write-downs required for declines in value are recorded through a valuation allowance or taken directly to the assets and charged to other non-interest expense.

~~(6) CERTAIN TRANSFERS OF FINANCIAL ASSETS~~

~~Through our~~ Mortgage Correspondent Aggregation ~~("MCA"~~(“MCA”) ~~business, we commit~~program to ~~purchase residential~~a third-party. The sale of MSRs was completed on June 1, 2021, and the transfer of servicing on the underlying mortgage loans ~~from independent correspondent lenders and deliver those loans into~~is expected to occur on August 1, 2021. Transition activities began immediately following the secondary market via whole loan sales to independent third parties or in securitization transactions to Ginnie Mae and government sponsored entities ("GSEs") such as Fannie Mae and Freddie Mac. We have elected to carry these loans at fair value based on sales commitments and market quotes. Gains and losses on the sale of mortgage loans held for sale and changes in the fair valueexecution of the ~~loans held for sale~~agreement and are ~~included in other non-interest income on the consolidated income statement.~~

~~Residential mortgage loans held for sale are subject~~expected to ~~both credit and interest rate risk. Credit risk is managed through underwriting policies and procedures, including collateral requirements, which are generally accepted~~be significantly complete by the secondary loan markets. Exposure to interest rate fluctuations is partially mitigated through forward sales contracts, which set the price for loans that will be delivered in the next 60 to 90 days.

~~The table below presents the unpaid principal balance of loans held for sale and related fair values at~~ September 30, ~~2017 and December 31, 2016 (in thousands):~~

September 30, 2017 December 31, 2016
Outstanding balance $ 957,560
$ 980,414
Fair value 955,983
968,929
Fair value over/(under) outstanding balance $ (1,577 ) $ (11,485 )

~~No loans held for sale were 90 days or more past due or on non-accrual as of September 30, 2017 and December 31, 2016.~~2021.

The table below presents a reconciliation of the changes in loans held for sale:


	Six Months Ended June 30,
(in thousands)	2021		2020
Outstanding balance(1):
Beginning balance	$	281,137	$	2,568,362
Loans purchased and originated	1,409,716		4,931,981
Payments and loans sold	(1,625,973)		(7,052,942)
Ending balance	64,880		447,401
Fair value adjustment:
Beginning balance	2,028		8,772
Increase/(decrease) to fair value	(3,161)		(1,592)
Ending balance	(1,133)		7,180
Loans held for sale at fair value	$	63,747	$	454,581

(1) Includes $44.1 million of loans held for sale that are carried at lower of cost or market as of December 31, 2020, as well as $5.8 million as of December 31, 2019.

NaN loans held for ~~the nine months ended September~~sale were on non-accrual as of June 30, ~~2017~~2021. At December 31, 2020 we had $7.0 million in non-accrual loans held for sale, comprised of one loan previously reported in loans held for investment that was transferred to loans held for sale as of December 31, 2020 and ~~2016 (in thousands):~~subsequently sold at carrying value. At June 30, 2021 and December 31, 2020, we had $2.7 million and $16.7 million, respectively, of loans held for sale that were 90 days or more past due. The $2.7 million in loans held for sale that were 90 days or more past due at June 30, 2021 was comprised of loans guaranteed by U.S. government agencies

Nine months ended September 30,
2017 2016
Beginning balance $ 968,929
$ 86,075
Loans purchased 4,315,065
1,927,702
Payments and loans sold (4,337,919 ) (1,368,987 )
Change in fair value 9,908
3,894
Ending balance $ 955,983
$ 648,684
that were purchased out of Ginnie Mae securities and recorded as loans held for sale, at fair value, on the balance sheet. Interest on these past due loans accrues at the debenture rate guaranteed by the U.S. government. At December 31, 2020, $3.3 million of the $16.7 million in loans held for sale that were 90 days or more past due were loans guaranteed by U.S. government agencies that were purchased out of Ginnie Mae securities and recorded as loans held for sale, at fair value, on the balance sheet and $13.4 million were loans that, pursuant to Ginnie Mae servicing guidelines, we have the unilateral right, but not the obligation, to repurchase if defined delinquent loan criteria are met, and therefore must record as held for sale on our balance sheet regardless of whether the repurchase option has been exercised.

~~We generally~~From time to time we retain the right to service the loans sold through the MCA program, creating MSRs which are recorded as assets on our consolidated balance ~~sheet.~~sheets. A summary of MSR activity ~~for the nine months ended September 30, 2017 and 2016~~ is as ~~follows (in thousands):~~follows:


	Six months ended June 30,
(in thousands)	2021		2020
MSRs:
Balance, beginning of year	$	131,391	$	70,707
Capitalized servicing rights	15,835		45,397
Amortization	(18,629)		(14,032)
Sales	(127,281)		0
Balance, end of period	$	1,316	$	102,072
Valuation allowance:
Balance, beginning of year	$	25,967	$	5,803
Change in valuation allowance	(25,967)		20,818
Balance, end of period	$	0	$	26,621
MSRs, net	$	1,316	$	75,451
MSRs, fair value	$	1,326	$	75,451

Nine months ended September 30,
2017 2016
MSRs:
Balance, beginning of year(1) $ 28,536
$ 423
    Capitalized servicing rights 54,614
16,344
    Amortization (5,304 ) (891 )
Balance, end of period $ 77,846
$ 15,876
Valuation allowance:
Balance, beginning of year $ —
$ —
    Increase in valuation allowance 216
414
Balance, end of period $ 216
$ 414
MSRs, net(1) $ 77,630
$ 15,462
MSRs, fair value $ 78,940
$ 15,970


~~(1)~~	~~MSRs are reported on the consolidated balance sheets at lower of amortized cost or market.~~

At ~~September~~June 30, ~~2017~~2021 and December 31, ~~2016,~~2020, our ~~servicing~~ portfolio of MSRs was comprised of residential mortgage loans ~~had an~~with outstanding principal ~~balance~~balances of ~~$6.1~~$129.3 million and $13.8 billion, ~~and $2.2 billion,~~ respectively.

In connection with the servicing of these loans, we ~~maintain~~

hold deposits in the name of investors representing escrow funds for taxes and insurance, ~~in the name of investors,~~ as well as collections in transit to such investors. These escrow funds are segregated and held in separate non-interest-bearing deposit accounts at the Bank. These deposits, included in total non-interest-bearing deposits on the consolidated balance sheets, were ~~$81.4 million~~insignificant at ~~September~~June 30, ~~2017~~2021 and ~~$21.0~~$152.6 million at December 31, ~~2016.~~2020.

~~The estimated fair value of the MSR assets is obtained~~To mitigate exposure to potential impairment charges from ~~an independent third party and reviewed by management on a quarterly basis. MSRs do not trade~~adverse changes in ~~an active, open market with readily observable prices; as such,~~ the fair value of ~~MSRs~~our MSR portfolio, we enter into certain derivative contracts, as is ~~determined using a discounted cash flow model to calculate~~further discussed in Note 11 - Derivative Financial Instruments. The following summarizes the present value of the estimated future net servicing income. The assumptions utilized in the discounted cash flow model are based on market data for comparable collateral, where available. Each quarter, management and the independent third party discuss the key assumptions used ~~in the discounted cash flow model and make adjustments as necessary to estimate the fair value of the MSRs. As of September 30, 2017 and December 31, 2016,~~by management ~~used the following assumptions~~ to determine the fair value of MSRs:


	September 30, 2017		December 31, 2016			June 30, 2021		December 31, 2020
Average discount rates	9.95	%	9.96	%	Average discount rates	9.00	%	9.09	%
Expected prepayment speeds	9.79	%	7.91	%	Expected prepayment speeds	9.48	%	16.37	%
Weighted average life, in years	7.1		8.0
Weighted-average life, in years					Weighted-average life, in years	7.1		4.9

A sensitivity analysis of changes in the fair value of our MSR portfolio resulting from certain key assumptions is presented in the following ~~table (in thousands):~~table:


	September 30, 2017			December 31, 2016
(in thousands)							(in thousands)	June 30, 2021		December 31, 2020
50 bp adverse change in prepayment speed	$	(10,667	)	$	(2,833	)	50 bp adverse change in prepayment speed	$	(162)	$	(12,203)
100 bp adverse change in prepayment speed	(25,043		)	(6,812		)	100 bp adverse change in prepayment speed	(285)		(16,062)

These sensitivities are hypothetical and actual results may differ materially due to a number of factors. The effect on fair value of a 10% variation in assumptions generally cannot be determined with confidence because the relationship of the change in assumptions to the fair value may not be linear. Additionally, the impact of a variation in a particular assumption on the fair value is calculated while holding other assumptions constant. In reality, changes in one factor may ~~lead to~~be correlated with changes in other factors, which could impact the ~~above hypothetical effects.~~sensitivity analysis as presented.

In conjunction with the sale and securitization of loans held for sale, we may be exposed to liability resulting from recourse agreements and repurchase agreements. If it is determined subsequent to our sale of a loan that the loan sold is in breach of the representations or warranties made in the applicable sale agreement, we may have an obligation to either (a) repurchase the loan for the unpaid principal balance, accrued interest and related advances, (b) indemnify the purchaser against any loss it suffers or (c) make the purchaser whole for the economic benefits of the loan.

~~Our~~ repurchase, indemnification and make whole obligations vary based upon the terms of the applicable agreements, the nature of the asserted breach and the status of the mortgage loan at the time a claim is made. We establish reserves for estimated losses of this nature inherent in the origination of mortgage loans by estimating the losses inherent in the population of all loans sold based on trends in claims and actual loss severities experienced. The reserve includes accruals for probable contingent losses in addition to those identified in the pipeline of claims received. The estimation process is designed to include amounts based on any actual losses experienced from actual repurchase activity.

Because the MCA business commenced in late 2015, we have limited historical data to support the establishment of a reserve. The baseline for the repurchase reserve uses historical loss factors obtained from industry data that are applied to loan pools originated and sold during the nine months ended September 30, 2017 and 2016. The historical industry data loss factors and experienced losses are accumulated for each sale vintage and applied to more recent sale vintages to estimate inherent losses not yet realized.make-whole agreements. Our estimated exposure related to ~~these loans was $1.2 million at September 30, 2017~~those agreements totaled $648,000 and $621,000 at ~~September~~June 30, ~~2016~~2021 and December 31, 2020, respectively, and is recorded in other liabilities inon the consolidated balance sheets. ~~We had $14,000~~$47,000 in ~~losses due to repurchase, indemnification or~~ make-whole ~~obligations~~obligation payments were made during the ~~nine~~six months ended June 30, 2021 compared to $4.5 million during the six months ended June 30, 2020.

(6) Long-term Debt

From November 2002 to September 2006 various Texas Capital Statutory Trusts were created and subsequently issued floating rate trust preferred securities in various private offerings totaling $113.4 million. For the three and six months ended June 30, 2021, the combined weighted-average interest rate on the trust preferred subordinated debentures was 2.14% and 2.17%, respectively, compared to 3.02% and 3.41%, respectively, for the same periods in 2020. The details of the trust preferred subordinated debentures as of June 30, 2021 are summarized below:

(dollar amounts in thousands)

Texas Capital
Bancshares
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

$10,310

$25,774

$41,238

Floating or fixed rate securities

Floating

Interest rate on subordinated debentures

3 month LIBOR

+ 3.35%

3 month LIBOR

+ 3.25%

3 month LIBOR

+ 1.51%

3 month LIBOR

+ 1.60%

3 month LIBOR

+ 1.71%

Maturity date

November 2032

April 2033

December 2035

June 2036

December 2036

On September 21, 2012, the Company issued $111.0 million of subordinated notes. The notes mature in September 2042 and bear interest at a rate of 6.50% per annum, payable quarterly. The indenture governing the notes contains customary covenants and restrictions. These notes were redeemed on June 21, 2021.

On January 31, 2014, the Bank issued $175.0 million of subordinated notes in an offering to institutional investors exempt from registration under Section 3(a)(2) of the Securities Act of 1933 and 12 C.F.R. Part 16. The notes mature in January 2026 and bear interest at a rate of 5.25% per annum, payable semi-annually. The notes are unsecured and are subordinate to the Bank’s obligations to its depositors, its obligations under banker’s acceptances and letters of credit, certain obligations to Federal Reserve Banks and the FDIC and the Bank’s obligations to its other creditors, except any obligations which expressly rank on a parity with or junior to the notes. The notes qualify as Tier 2 capital for regulatory capital purposes, subject to applicable limitations. At the beginning of each of the last five years of the life of the notes, 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 2021, the amount of the notes that qualify as Tier 2 capital has been reduced by 20%.

On March 9, 2021, the Bank issued and sold $275 million of senior unsecured credit-linked notes. The notes mature on September 30, ~~2017~~2024, and ~~no losses during~~accrue interest at a rate equal to the ~~nine~~higher of LIBOR plus 4.50% or 4.25%, payable quarterly on each of March 31, June 30, September 30 and December 31. For the three and six months ended ~~2016.~~

June 30, 2021, the weighted-average interest rate on the notes was 5.62% and 5.60%, respectively. The notes effectively transfer the risk of first losses on a $2.2 billion reference pool of the Bank’s mortgage warehouse loans to the purchasers of the notes in an amount up to $275.0 million. In the event of a failure to pay by the relevant mortgage originator, insolvency of the relevant mortgage originator, or restructuring of such loans that results in a loss on a loan included in the reference pool, the principal balance of the notes will be reduced to the extent of such loss and recognized as a debt extinguishment gain within non-interest income on our consolidated statements of income and other comprehensive income. The purchasers of the notes have the option to acquire the underlying mortgage loan collateralizing the reference warehouse line of credit in lieu of a principal reduction on the notes. Losses on our warehouse lines of credit have not generally been significant. The notes are recorded in long-term debt on our consolidated balance sheets and accounted for at amortized cost. The fair value of the credit-linked note is based on observable inputs, when available, and as such are categorized as Level 2 liabilities. Because the notes are variable rate debt, the fair value approximates carrying value.

On May 6, 2021, the Company issued and sold $375.0 million of subordinated notes. The notes mature in May 2031 and bear interest at a fixed rate of 4.00% per annum, payable semi-annually. Net proceeds from the transaction were $370.7 million providing additional capital to be used for general corporate purposes. A portion of the proceeds were also used to redeem the Company’s 6.50% fixed rate subordinated notes, as is described above. The indenture governing the notes contains customary covenants and restrictions.

(7) ~~FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK~~Financial Instruments with Off-Balance Sheet Risk

The ~~Bank is a party to~~table below presents our financial instruments with off-balance sheet risk, as well as the activity in the ~~normal course of business~~allowance for off-balance sheet credit losses related to ~~meet the financing needs of its customers. These~~those financial ~~instruments include commitments to extend credit and standby letters of credit that involve varying degrees of credit risk~~instruments. This allowance is recorded in ~~excess of the amount recognized in~~other liabilities on the consolidated balance sheets. The Bank’s exposure to credit loss in the event of non-performance by the other party to the financial instrument for commitments to extend credit and standby letters of credit is represented by the contractual amount of these instruments. The Bank 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.




	Three months ended June 30,				Six months ended June 30,
(in thousands)	2021		2020		2021		2020
Beginning balance of allowance for off-balance sheet credit losses	$	17,147	$	10,174	$	17,434	$	8,640
Impact of CECL adoption	—		—		0		563
Provision for off-balance sheet credit losses	(400)		2,094		(687)		3,065
Ending balance of allowance for off-balance sheet credit losses	$	16,747	$	12,268	$	16,747	$	12,268

(in thousands)					June 30, 2021		December 31, 2020
Commitments to extend credit - period end balance					$	8,228,992	$	8,530,453
Standby letters of credit - period end balance					$	328,726	$	268,894

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 Bank evaluates each customer’s credit-worthiness on a case-by-case basis.

Standby letters of credit are conditional commitments issued by the Bank 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.

~~The table below summarizes our off-balance sheet financial instruments whose contract amounts represented credit risk (in thousands):~~

September 30, 2017 December 31, 2016
Commitments to extend credit $ 6,539,498
$ 5,704,381
Standby letters of credit 203,070
171,266

(8) ~~REGULATORY MATTERS~~Regulatory Restrictions

The Company and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory (and possibly additional discretionary) actions by regulators that, if undertaken, could have a direct material adverse effect on the Company’s and the Bank’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and the Bank must meet specific capital guidelines that involve quantitative measures of the Company’s and the Bank’s assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices. The Company’s and the Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.

The Basel III regulatory capital framework (the ~~"Basel~~“Basel III Capital ~~Rules"~~Rules”) adopted by U.S. federal regulatory authorities, among other things, (i) ~~establish~~establishes the capital measure called ~~"Common~~“Common Equity Tier ~~1" ("CET1"~~1” (“CET1”), (ii) ~~specify~~specifies that Tier 1 capital consist of CET1 and ~~"Additional~~“Additional Tier 1 ~~Capital"~~Capital” instruments meeting stated requirements, (iii) ~~define CET1 narrowly by requiring~~requires that most deductions/adjustments to regulatory capital measures be made to CET1 and not to ~~the~~ other components of capital and (iv) ~~set forth~~defines the ~~acceptable~~ scope of the deductions/adjustments to the ~~specified~~ capital measures. ~~The Basel III Capital Rules became effective for us on January 1, 2015 with certain transition provisions fully phased in on January 1, 2019.~~

Additionally, the Basel III Capital Rules require that we maintain a 2.5% capital conservation buffer with respect to each of ~~the~~ CET1, Tier 1 and total capital to risk-weighted assets, which provides for capital levels that exceed the minimum risk-based capital adequacy requirements. The capital conservation buffer is subject to a three year phase-in period that began on January 1, 2016 and will be fully phased in on January 1, 2019 at 2.5%. The required phase-in capital conservation buffer during 2017 is 1.25% and was 0.625% during 2016. 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.

In February 2019, the federal bank regulatory agencies issued a final rule (the “2019 CECL Rule”) that revised certain capital regulations to account for changes to credit loss accounting under GAAP. The 2019 CECL Rule included a transition option that allows banking organizations to phase in, over a three-year period, the day-one adverse effects of adopting the new accounting standard related to the measurement of current expected credit losses on their regulatory capital ratios (three-year CECL transition option). In March 2020, the federal bank regulatory agencies issued an interim final rule that maintains the three-year CECL transition option of the 2019 CECL Rule and also provides banking organizations that were required under GAAP to implement CECL before the end of 2020 the option to delay for two years an estimate of the effect of CECL on regulatory capital, relative to the incurred loss methodology's effect on regulatory capital, followed by a three-year transition period (five-year CECL transition option). We adopted CECL on January 1, 2020 and have elected to utilize the five-year CECL transition option.

Quantitative measures established by ~~these regulations~~regulation to ensure capital adequacy require the Company and the Bank to maintain minimum amounts and ratios of CET1, Tier 1 and total capital to risk-weighted assets and of Tier 1 capital to average assets, each as defined in the regulations. Management believes, as of ~~September~~June 30, ~~2017,~~2021, that the Company and the Bank ~~met~~meet all capital adequacy requirements to which they are subject.

Financial institutions are categorized as well capitalized or adequately capitalized, based on minimum total risk-based, ~~capital,~~ Tier 1 risk-based, ~~capital,~~ CET1 and Tier 1 leverage ratios. As shown in the table below, the Company’s capital ratios exceeded the regulatory definition of adequately capitalized as of ~~September~~June 30, ~~2017~~2021 and December 31, ~~2016.~~2020. Based upon the

information in its most recently filed call report, the Bank met the capital ratios necessary to be well capitalized. The regulatory authorities can apply changes in classification of assets and such changes may retroactively subject the Company to changes in capital ratios. Any

such ~~changes~~change could ~~result in reducing~~reduce one or more capital ratios below well-capitalized status. In addition, a change may result in imposition of additional assessments by the FDIC or could result in regulatory actions that could have a material ~~adverse~~ effect on our ~~financial~~ condition and results of operations.

Because our Bank had less than $15.0 billion in total consolidated assets as of December 31, 2009, we are allowed to continue to classify our trust preferred securities, all of which were issued prior to May 19, 2010, as Tier 1 capital.

The table below summarizes our actual and required capital ratios under the Basel III Capital ~~Rules:~~Rules. The ratios presented below include the effects of our election to utilize the five-year CECL transition described above.


	Actual				Minimum Capital Required					Capital Required to be Well Capitalized
(dollars in thousands)	Capital Amount		Ratio			Capital Amount		Ratio			Capital Amount	Ratio
June 30, 2021
CET1
Company	$	2,835,896	10.53	%		$	1,885,230	7.00	%		N/A	N/A
Bank	2,897,617		10.76	%		1,884,671		7.00	%		1,750,052	6.50	%
Total capital (to risk-weighted assets)
Company	3,978,147		14.77	%		2,827,845		10.50	%		N/A	N/A
Bank	3,469,176		12.89	%		2,827,006		10.50	%		2,692,387	10.00	%
Tier 1 capital (to risk-weighted assets)
Company	3,245,896		12.05	%		2,289,208		8.50	%		N/A	N/A
Bank	3,057,617		11.36	%		2,288,529		8.50	%		2,153,910	8.00	%
Tier 1 capital (to average assets)(1)
Company	3,245,896		8.38	%		1,548,586		4.00	%		N/A	N/A
Bank	3,057,617		7.90	%		1,548,104		4.00	%		1,935,130	5.00	%
December 31, 2020
CET1
Company	$	2,708,150	9.35	%		$	2,026,400	7.00	%		N/A	N/A
Bank	2,744,211		9.48	%		2,025,417		7.00	%		1,880,745	6.50	%
Total capital (to risk-weighted assets)
Company	3,498,737		12.08	%		3,039,600		10.50	%		N/A	N/A
Bank	3,375,983		11.67	%		3,038,126		10.50	%		2,893,453	10.00	%
Tier 1 capital (to risk-weighted assets)
Company	2,968,150		10.25	%		2,460,628		8.50	%		N/A	N/A
Bank	2,904,211		10.04	%		2,459,435		8.50	%		2,314,763	8.00	%
Tier 1 capital (to average assets)(1)
Company	2,968,150		7.52	%		1,578,651		4.00	%		N/A	N/A
Bank	2,904,211		7.36	%		1,578,207		4.00	%		1,972,758	5.00	%

Actual Minimum Capital Required - Basel III Phase-In Schedule Minimum capital Required - Basel III Fully Phased-In Required to be Considered Well Capitalized
Capital Amount Ratio Capital Amount Ratio Capital Amount Ratio Capital Amount Ratio
As of September 30, 2017:
CET1
    Company $ 1,989,547
8.35 % $ 1,369,699
5.75 % $ 1,667,460
7.00 % N/A
N/A
    Bank 1,930,836
8.11 % 1,369,659
5.75 % 1,667,411
7.00 % 1,548,311
6.50 %
Total capital (to risk-weighted assets)
    Company 2,722,408
11.43 % 2,203,429
9.25 % 2,501,189
10.50 % N/A
N/A
    Bank 2,505,209
10.52 % 2,203,365
9.25 % 2,501,117
10.50 % 2,382,016
10.00 %
Tier 1 capital (to risk-weighted assets)
    Company 2,248,403
9.44 % 1,727,012
7.25 % 2,024,772
8.50 % N/A
N/A
    Bank 2,089,692
8.77 % 1,726,962
7.25 % 2,024,714
8.50 % 1,905,613
8.00 %
Tier 1 capital (to average assets)(1)
    Company 2,248,403
9.57 % 939,319
4.00 % 939,319
4.00 % N/A
N/A
    Bank 2,089,692
8.90 % 939,139
4.00 % 939,139
4.00 % 1,173,924
5.00 %
As of December 31, 2016:
CET1
    Company $ 1,841,219
8.97 % $ 1,052,205
5.13 % $ 1,437,159
7.00 % N/A
N/A
    Bank 1,735,496
8.45 % 1,051,989
5.13 % 1,436,863
7.00 % 1,334,244
6.50 %
Total capital (to risk-weighted assets)
    Company 2,561,663
12.48 % 1,770,766
8.63 % 2,155,715
10.50 % N/A
N/A
    Bank 2,297,528
11.19 % 1,770,421
8.63 % 2,155,295
10.50 % 2,052,683
10.00 %
Tier 1 capital (to risk-weighted assets)
    Company 2,101,071
10.23 % 1,360,154
6.63 % 1,745,103
8.50 % N/A
N/A
    Bank 1,895,348
9.23 % 1,359,888
6.63 % 1,744,762
8.50 % 1,642,147
8.00 %
Tier 1 capital (to average assets)(1)
    Company 2,101,071
9.34 % 900,268
4.00 % 900,268
4.00 % N/A
N/A
    Bank 1,895,348
8.42 % 900,070
4.00 % 900,070
4.00 % 1,125,087
5.00 %
(1)    The Tier 1 capital ratio (to average assets) is not impacted by the Basel III Capital Rules; however, the Federal Reserve Board and the FDIC may require the Company and the Bank, respectively, to maintain a Tier 1 capital ratio (to average assets) above the required minimum.


~~(1)~~	The Tier 1 capital ratio (to average assets) is not impacted by the Basel III Capital Rules; however, it should be noted that 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.

Our mortgage finance loan volumes can increase significantly at ~~month end,~~month-end, causing a meaningful difference between ending ~~balance~~ and average ~~balance~~balances for any period. ~~At September 30, 2017, our total mortgage finance loans were $5.6 billion compared to the average for the three months ended September 30, 2017 of $4.8 billion.~~ As CET1, Tier 1 and total capital ratios are calculated using quarter-end risk-weighted assets and our mortgage finance loans are 100% risk-weighted (excluding MCA loans held for sale, which receive lower risk weights), the ~~quarter-end~~period-end fluctuation in these balances can significantly impact our reported ratios. ~~We manage capital allocated~~Due to ~~mortgage finance~~

~~loans based on changing trends in average balances, as well as~~ the ~~inherent~~actual risk ~~associated with the assets which implies a risk weight that is significantly different than the regulatory risk weight,~~profile and liquidity of this asset class, we do not believe that the ~~quarter-end~~period-end balance is representative of risk characteristics that would justify higher allocations, and while we manage capital ~~allocations. However,~~allocated to mortgage finance loans based on changing trends in average balances, we ~~continue to~~do monitor our capital allocation to confirm that all capital levels remain above well-capitalized levels. To better align the actual risk profile of this asset class to its required capital allocation, the Bank issued and sold senior unsecured credit-linked notes in the first quarter of 2021 that effectively transfer the risk of first losses on a $2.2 billion reference pool of the Bank's mortgage warehouse loans to the purchasers of the notes in an amount up to $275.0 million. The issuance of these notes decreases the required risk-weight on the $2.2 billion reference pool, which significantly improves our reported ratios.

Dividends that may be paid by ~~subsidiary~~ banks are routinely restricted by various regulatory authorities. The amount that can be paid in any calendar year without prior approval of ~~the~~our Bank’s regulatory agencies cannot exceed the lesser of the net profits (as defined) for that year plus the net profits for the preceding two calendar years, or retained earnings. The Basel III Capital Rules further limit the amount of dividends that may be paid by our Bank. No dividends were declared or paid on our common stock during the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2021, or ~~2016.~~during the year ended December 31, 2020.

(9) ~~STOCK-BASED COMPENSATION~~Stock-based Compensation

We have long-term incentive plans under which stock-based compensation awards are granted to employees and directors by the board of directors, or its designated committee. Grants are subject to vesting requirements and may include, among other things, nonqualified stock options, stock appreciation rights ~~("SARs"~~(“SARs”), restricted stock units ~~("RSUs"~~(“RSUs”), restricted stock and performance units, or any combination thereof. There are 2,550,000 total shares authorized for grant under the plans.

~~Stock-based~~The table below summarizes our stock-based compensation ~~expense presented below consists of awards granted from 2011 through September 30, 2017.~~expense:


	Three months ended September 30,				Nine months ended September 30,					Three months ended June 30,				Six months ended June 30,
(in thousands)	2017		2016		2017		2016		(in thousands)	2021		2020		2021		2020
Stock-settled awards:									Stock-settled awards:
SARs	$	64	$	74	$	210	$	233

RSUs	2,184		1,145		5,491		3,223		RSUs	$	8,315	$	3,313	$	13,775	$	6,532
Restricted stock	8		4		16		10		Restricted stock	0		9		1		17
Cash-settled performance units	3,811		1,227		9,304		2,709
Cash-settled units									Cash-settled units	121		338		1,028		480
Total	$	6,067	$	2,450	$	15,021	$	6,175	Total	$	8,436	$	3,660	$	14,804	$	7,029


(in thousands except period data)	June 30, 2021
Unrecognized compensation expense related to unvested stock-settled awards	$	45,429
Weighted average period over which expense is expected to be recognized, in years	2.3

(in thousands) September 30, 2017
Unrecognized compensation expense related to unvested stock-settled awards $ 19,426
Weighted average period over which expense is expected to be recognized, in years 3.1

(10) ~~FAIR VALUE DISCLOSURES~~

~~ASC 820,~~ Fair Value ~~Measurements and~~ Disclosures (“ASC 820”), defines fair value, establishes a framework for measuring fair value under GAAP and requires enhanced disclosures about fair value measurements. Fair value is defined under ASC 820 as the price that would be received for an asset or paid to transfer a liability (an exit price) in the principal market for the asset or liability in an orderly transaction between market participants on the measurement date.

We determine the fair market values of our assets and liabilities measured at fair value on a recurring and nonrecurring basis using the fair value hierarchy as prescribed in ASC 820. ~~The standard describes three levels~~See Note 1 - Operations and Summary of ~~inputs that may be used to measure~~Significant Accounting Policies in our 2020 Form 10-K for information regarding the fair value ~~as provided below.~~


~~Level 1~~	Quoted prices in active markets for identical assets or liabilities. This category includes the assets and liabilities related to our non-qualified deferred compensation plan where values are based on quoted market prices for identical equity securities in an active market.

~~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 2 assets include U.S. government and agency mortgage-backed debt securities, municipal bonds, and Community Reinvestment Act funds. This category also includes loans held for sale and derivative assets and liabilities where values are obtained from independent pricing services using observable market data.

~~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. This category includes impaired loans and OREO where collateral values have been based on third party appraisals; comparative sales data typically used in appraisals may be unavailable or more subjective with respect to some asset classes due to lack of market activity.

hierarchy and a description of the methods and significant assumptions used by the Company in estimating its fair value disclosures for financial instruments.

Assets and liabilities measured at fair value ~~at September 30, 2017 and December 31, 2016~~ are as ~~follows (in thousands):~~follows:


	Fair Value Measurements Using
(in thousands)	Level 1		Level 2		Level 3
June 30, 2021
Available-for-sale debt securities:(1)
U.S. government agency securities	$	0	$	122,415	$	0
Residential mortgage-backed securities	0		3,437,146		0

Tax-exempt asset-backed securities	0		0		185,954
CRT securities	0		0		11,713
Equity securities(1)(2)	33,906		7,141		0
Loans held for sale(3)	0		55,520		8,227
Loans held for investment(4)	0		0		908

Derivative assets(5)	0		64,349		0
Derivative liabilities(5)	0		64,347		0
Non-qualified deferred compensation plan liabilities(6)	29,552		0		0

December 31, 2020
Available-for-sale debt securities:(1)
U.S. government agency securities	$	0	$	123,589	$	0
Residential mortgage-backed securities	0		2,828,956		0
Tax-exempt asset-backed securities	0		0		199,176
CRT securities	0		0		11,417
Equity securities(1)(2)	26,593		7,239		0
Loans held for sale(3)	0		232,147		6,933
Loans held for investment(4)	0		0		21,209

Derivative assets(5)	0		102,720		0
Derivative liabilities(5)	0		99,255		0
Non-qualified deferred compensation plan liabilities(6)	26,593		0		0

Fair Value Measurements Using
September 30, 2017 Level 1 Level 2 Level 3
Available-for-sale securities:(1)
Residential mortgage-backed securities $ —
$ 12,158
$ —
Equity securities(2) 4,905
7,161
—
Loans held for sale (3) —
955,983
—
Loans held for investment(4) (6) —
—
21,022
OREO(5) (6) —
—
18,131
Derivative assets(7) —
25,130
—
Derivative liabilities(7) —
24,048
—
Non-qualified deferred compensation plan liabilities (8) 4,961
—
—

December 31, 2016
Available-for-sale securities:(1)
Residential mortgage-backed securities $ —
$ 15,652
$ —
Municipals —
275
—
Equity securities(2) 1,786
7,161
—
Loans held for sale(3) —
968,929
—
Loans held for investment(4) (6) —
—
52,323
OREO(5) (6) —
—
18,961
Derivative assets(7) —
37,878
—
Derivative liabilities(7) —
26,240
—
Non-qualified deferred compensation plan liabilities (8) 1,811
—
—


~~(1)~~	(1)Securities are measured at ~~fair value on a recurring basis, generally monthly.~~


~~(2)~~	~~Equity securities consist of Community Reinvestment Act funds and investments related to our non-qualified deferred compensation plan.~~


~~(3)~~	~~Loans held for sale, excluding Small Business Administration loans, are measured at fair value on a recurring basis, generally monthly.~~


~~(4)~~	~~Includes impaired loans that have been measured for impairment at the fair value of the loan’s collateral.~~


~~(5)~~	~~OREO is transferred from loans to OREO at fair value less selling costs.~~


~~(6)~~	~~Loans held for investment and OREO are measured on a nonrecurring basis, generally annually or more often as warranted by market and economic conditions.~~


~~(7)~~	~~Derivative assets and liabilities are measured at fair value on a recurring basis, generally quarterly.~~


~~(8)~~	Non-qualified deferred compensation plan liabilities represent the fair value of the obligation to the employee, which corresponds to the fair value of the invested assets, and are measured at fair value on a recurring basis, generally monthly.

~~Level 3 Valuations~~

Financial instruments are considered Level 3 when their values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable. Level 3 financial instruments include those for which the determination of fair value ~~requires significant management judgment or estimation. Currently, we measure the fair value for certain collateral dependent impaired loans and OREO~~ on a ~~nonrecurring~~recurring basis, ~~as described below.~~generally monthly, except for tax-exempt asset-backed securities and CRT securities which are measured quarterly.

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

(3)Loans held for ~~investment~~sale purchased through the MCA program are measured at fair value on a recurring basis, generally monthly.

~~At September 30, 2017 and December 31, 2016,~~(4)Includes certain ~~impaired~~collateral-dependent loans held for investment ~~were reported at fair value through~~for which a specific allocation of the allowance for ~~loan~~credit losses is based upon the fair value of the loan’s underlying collateral. These loans held for investment are measured on a nonrecurring basis, generally annually or more often as warranted by market and economic conditions.

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

(6)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 Realized/Unrealized Gains (Losses)
(in thousands)	Balance at Beginning of Period		Purchases / Additions		Sales / Reductions		Realized		Unrealized		Balance at End of Period
Three months ended June 30, 2021
Available-for-sale debt securities:(1)
Tax-exempt asset-backed securities	$	181,566	$	0	$	(142)	$	0	$	4,530	$	185,954
CRT securities	11,465		0		0		0		248		11,713
Loans held for sale(2)	7,275		1,148		(246)		0		50		8,227
Three months ended June 30, 2020
Available-for-sale debt securities:(1)
Tax-exempt asset-backed securities	$	191,474	$	8,470	$	(132)	$	0	$	(8,395)	$	191,417
CRT securities	8,015		0		0		0		2,938		10,953
Loans held for sale(2)	6,694		107		(780)		88		50		6,159

Six months ended June 30, 2021
Available-for-sale debt securities:(1)
Tax-exempt asset-backed securities	$	199,176	$	0	$	(11,513)	$	0	$	(1,709)	$	185,954
CRT securities	11,417		0		0		0		296		11,713
Loans held for sale(2)	6,933		1,685		(525)		5		129		8,227
Six months ended June 30, 2020
Available-for-sale debt securities:(1)
Tax-exempt asset-backed securities	$	197,027	$	8,470	$	(4,485)	$	0	$	(9,595)	$	191,417
CRT securities	11,964		0		0		0		(1,011)		10,953
Loans held for sale(2)	7,043		320		(1,464)		116		144		6,159

(1)Unrealized gains/(losses) on available-for-sale debt securities are recorded in AOCI and relate to assets that remain outstanding at period end. Realized gains/(losses) are recorded in other non-interest income.

(2)Realized and unrealized gains/(losses) on loans held for sale are recorded in gain/(loss) on sale of loans held for sale.

Tax-exempt asset-backed securities

The fair value of tax-exempt asset-backed securities is based on a discounted cash flow model, which utilizes Level 3, or unobservable, inputs, the most significant of which were a discount rate and a weighted-average life. At June 30, 2021, the discount rates utilized ranged from 2.29% to 2.37% and the weighted-average life ranged from 5.0 to 5.1 years. On a combined amortized cost weighted-average basis a discount rate of 2.33% and weighted-average life of 5.0 years were utilized to determine the fair value of these securities at June 30, 2021. At December 31, 2020, the combined weighted-average discount rate and weighted-average life utilized were 2.49% and 5.5 years, respectively.

CRT securities

The fair value of CRT securities is based on a discounted cash flow model, which utilizes Level 3, or unobservable, inputs, the most significant of which were a discount rate and a weighted-average life. At June 30, 2021, the discount rates utilized ranged from 3.09% to 7.97% and the weighted-average life ranged from 5.4 years to 10.0 years. On a combined amortized cost

weighted-average basis a discount rate of 4.72% and a weighted-average life of 6.9 years were utilized to determine the fair value of these securities at June 30, 2021. At December 31, 2020, the combined weighted-average discount rate and combined weighted-average life utilized were 4.36% and 7.5 years, respectively.

Loans held for sale

The fair value of loans held for sale using Level 3 inputs include loans that cannot be sold through normal sale channels and thus require significant management judgment or estimation when determining the fair value. The fair value of such loans is generally based upon quoted prices of comparable loans with a liquidity discount applied. At June 30, 2021, the fair value of these loans was calculated using a weighted-average discounted price of 99.2%, compared to 97.2% at December 31, 2020.

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 ~~$21.0 million~~$908,000 fair value of loans held for investment at ~~September~~June 30, ~~2017~~2021 reported above includes ~~impaired~~ loans ~~held for investment~~ with a carrying ~~value of $28.3 million~~values that, ~~were reduced by specific allowance allocations totaling $7.3 million~~ based on collateral valuations utilizing Level 3 ~~valuation inputs.~~inputs, equate to their fair value. The ~~$52.3~~$21.2 million fair value of loans held for investment at December 31, ~~2016~~2020 reported above includes ~~impaired~~ loans with a carrying value of ~~$74.1~~$25.3 million that were reduced by specific ~~valuation~~ allowance allocations totaling ~~$21.8~~$4.1 million based on collateral valuations utilizing Level 3 ~~valuation inputs. Fair values were based on third party appraisals.~~

~~OREO~~

Certain foreclosed assets, upon initial recognition, are recorded at fair value less estimated selling costs. At September 30, 2017 and December 31, 2016, OREO had a carrying value of $18.1 million million and $19.0 million, respectively, with a valuation allowance of $101,000 at September 30, 2017 and none at December 31, 2016. The fair value of OREO was computed based on third party appraisals, which are Level 3 valuation inputs.

Fair Value of Financial Instruments

GAAP requires disclosure 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. This disclosure does not and is not intended to represent the fair value of the Company.

A summary of the carrying amounts and estimated fair values of financial instruments is as ~~follows (in thousands):~~follows:


	June 30, 2021				December 31, 2020
(in thousands)	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
Financial assets:
Level 1 inputs:
Cash and cash equivalents	$	6,971,199	$	6,971,199	$	9,206,380	$	9,206,380
Investment securities	33,906		33,906		26,593		26,593
Level 2 inputs:
Investment securities	3,566,702		3,566,702		2,959,784		2,959,784
Loans held for sale	55,520		55,520		232,147		232,147
Derivative assets	64,349		64,349		102,720		102,720
Level 3 inputs:
Investment securities	197,667		197,667		210,593		210,593
Loans held for sale	8,227		8,227		6,933		6,933
Loans held for investment, net	23,719,853		23,775,475		24,176,245		24,233,185
Financial liabilities:
Level 2 inputs:
Federal funds purchased and repurchase agreements	14,481		14,481		111,751		111,751


Other borrowings	2,000,000		2,000,000		3,000,000		3,000,000
Long-term debt	927,386		952,792		395,896		405,110


Derivative liabilities	64,347		64,347		99,255		99,255
Level 3 inputs:
Deposits	28,839,563		28,839,971		30,996,589		30,997,980

September 30, 2017 December 31, 2016

Carrying
Amount

Estimated
Fair Value
Carrying
Amount Estimated
Fair Value
Financial assets:
   Level 1 inputs:
Cash and cash equivalents $ 2,501,153
$ 2,501,153
$ 2,839,352
$ 2,839,352
Securities, available-for-sale 4,905
4,905
1,786
1,786
   Level 2 inputs:
Securities, available-for-sale 19,319
19,319
23,088
23,088
Loans held for sale 955,983
955,983
968,929
968,929
Derivative assets 25,130
25,130
37,878
37,878
   Level 3 inputs:
Loans held for investment, net 20,287,762
20,274,939
17,330,223
17,347,199
Financial liabilities:
   Level 2 inputs:
Federal funds purchased 75,800
75,800
101,800
101,800
Customer repurchase agreements 7,696
7,696
7,775
7,775
Other borrowings 2,500,000
2,500,000
2,000,000
2,000,000
Subordinated notes 281,315
287,686
281,044
304,672
Derivative liabilities 24,048
24,048
26,240
26,240
   Level 3 inputs:
Deposits 19,081,257
19,081,954
17,016,831
17,017,221
Trust preferred subordinated debentures 113,406
113,406
113,406
113,406

~~The following methods and assumptions were used by the Company in estimating its fair value disclosures for financial instruments:~~

~~Cash and cash equivalents~~

The carrying amounts reported in the consolidated balance sheets for cash and cash equivalents approximate their fair value, and these financial instruments are characterized as Level 1 assets in the fair value hierarchy.

~~Securities available-for-sale~~

Within the securities available-for-sale portfolio, we hold equity securities related to our non-qualified deferred compensation plan which are valued using quoted market prices for identical equity securities in an active market. These financial instruments are classified as Level 1 assets in the fair value hierarchy. The fair value of the remaining investment portfolio is based on prices obtained from independent pricing services which are based on quoted market prices for the same or similar securities, and these financial instruments are characterized as Level 2 assets in the fair value hierarchy. We have obtained documentation from the primary pricing service we use about their processes and controls over pricing. In addition, on a quarterly basis we independently verify the prices that we receive from the service provider using two additional independent pricing sources. Any significant differences are investigated and resolved.

~~Loans held for sale~~

~~Fair value for loans held for sale is derived from quoted market prices for similar loans, and these financial instruments are characterized as Level 2 assets in the fair value hierarchy.~~

~~Loans held for investment, net~~

Loans held for investment are characterized as Level 3 assets in the fair value hierarchy. For variable-rate loans held for investment that reprice frequently with no significant change in credit risk, fair values are generally based on carrying values. The fair value for all other loans held for investment is estimated using discounted cash flow analyses, using interest rates currently being offered for loans with similar terms to borrowers of similar credit quality. The carrying amount of accrued interest approximates its fair value.

~~Derivatives~~

The estimated fair value of the interest rate swaps and caps 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, we independently verify the fair value using an additional independent pricing source. Any significant differences are investigated and resolved. The derivative instruments related to the loans held for sale portfolio include loan purchase commitments and forward sales commitments. Loan purchase commitments are valued based upon the fair value of the underlying mortgage loans to be purchased, which is based on observable market data for similar loans. Forward sales commitments are valued based upon the quoted market prices from brokers. As such, these loan purchase commitments and forward sales commitments are classified as Level 2 assets or liabilities in the fair value hierarchy.

~~Deposits~~

Deposits are characterized as Level 3 liabilities in the fair value hierarchy. The carrying amounts for variable-rate money market accounts approximate their fair value. The fair values of fixed-term certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities.

~~Federal funds purchased, customer repurchase agreements, other borrowings, subordinated notes and trust preferred subordinated debentures~~

The carrying value reported in the consolidated balance sheets for Federal funds purchased, customer repurchase agreements and other short-term, floating rate borrowings approximates their fair value, and these financial instruments are characterized as Level 2 liabilities in the fair value hierarchy. The fair value of any fixed rate short-term borrowings and trust preferred subordinated debentures are estimated using a discounted cash flow calculation that applies interest rates currently being offered on similar borrowings, and these financial instruments are characterized as Level 3 liabilities in the fair value hierarchy. The subordinated notes are publicly, though infrequently, traded, are valued based on market prices and are characterized as Level 2 liabilities in the fair value hierarchy.

(11) ~~DERIVATIVE FINANCIAL INSTRUMENTS~~

The fair value of derivative positions outstanding is included in accrued interest receivable and other assets and other liabilities in the accompanying consolidated balance sheets on a net basis when a right of offset exists, based on transactions with a single counterparty that are subject to a legally enforceable master netting agreement.

During the three and nine months ended September 30, 2017 and 2016, we entered into certain interest rate derivative positions that were not designated as hedging instruments. These derivative positions relate to transactions in which we enter into an interest rate swap, cap and/or floor with a customer while at the same time entering into an offsetting interest rate swap, cap and/or floor with another financial institution. In connection with each swap transaction, we agree to pay interest to the customer on a notional amount at a variable interest rate and receive interest from the customer on a similar notional amount at a fixed interest rate. At the same time, we agree to pay another financial institution the same fixed interest rate on the same notional amount and receive the same variable interest rate on the same notional amount. The transaction allows our customer to effectively convert a variable rate loan to a fixed rate. Because we act as an intermediary for our customer, changes in the fair value of the underlying derivative contracts substantially offset each other and do not have a material impact on our results of operations.

During the three and nine months ended September 30, 2017 and 2016, we entered into loan purchase commitment contracts with mortgage originators to purchase residential mortgage loans at a future date, as well as forward sales commitment contracts to sell residential mortgage loans at a future date.

Derivative Financial Instruments

The notional amounts and estimated fair values of ~~interest rate~~ derivative positions outstanding ~~at September 30, 2017 and December 31, 2016~~ are presented in the following ~~tables (in thousands):~~table:


																		June 30, 2021						December 31, 2020
	September 30, 2017								December 31, 2016											Estimated Fair Value						Estimated Fair Value
	Estimated Fair Value								Estimated Fair Value
	Notional Amount		Asset Derivative			Liability Derivative			Notional Amount		Asset Derivative			Liability Derivative
Non-hedging interest rate derivatives:
(in thousands)																	(in thousands)	Notional Amount		Asset Derivative		Liability Derivative		Notional Amount		Asset Derivative		Liability Derivative
Non-hedging derivatives:																	Non-hedging derivatives:
Financial institution counterparties:																	Financial institution counterparties:
Commercial loan/lease interest rate swaps	$	1,376,915	$	1,650		$	23,390		$	1,144,367	$	1,754		$	25,421		Commercial loan/lease interest rate swaps	$	1,902,259	$	948	$	64,195	$	1,922,956	$	71	$	96,246
Commercial loan/lease interest rate caps	267,765		295			1			210,996		819			—			Commercial loan/lease interest rate caps	217,739		65		0		565,634		34		0
Foreign currency forward contracts																	Foreign currency forward contracts	5,015		31		0		6,667		214		78
Customer counterparties:																	Customer counterparties:
Commercial loan/lease interest rate swaps	1,376,915		23,390			1,650			1,144,367		25,421			1,754			Commercial loan/lease interest rate swaps	1,902,259		64,195		948		1,922,956		96,246		71
Commercial loan/lease interest rate caps	267,765		1			295			210,996		—			819			Commercial loan/lease interest rate caps	217,739		0		65		565,634		0		34
Economic hedging interest rate derivatives:
Foreign currency forward contracts																	Foreign currency forward contracts	5,015		0		31		6,667		78		214
Economic hedging derivatives to hedge:																	Economic hedging derivatives to hedge:
Residential MSRs:																	Residential MSRs:
Interest rate swap futures																	Interest rate swap futures	3,000		19		4		320,000		474		0
Forward sale commitments																	Forward sale commitments	1,000		3		0		155,000		551		0
Loans held for sale:																	Loans held for sale:
Loan purchase commitments	168,784		279			363			237,805		1,351			—			Loan purchase commitments	2,800		36		0		332,145		5,123		8
Forward sales commitments	1,022,613		1,166			—			1,218,000		10,287			—
Forward sale commitments																	Forward sale commitments	20,000		0		52		485,326		0		2,675
Gross derivatives			26,781			25,699					39,632			27,994			Gross derivatives			65,297		65,295				102,791		99,326
Offsetting derivative assets/liabilities			(1,651		)	(1,651		)			(1,754		)	(1,754		)	Offsetting derivative assets/liabilities			(948)		(948)				(71)		(71)
Net derivatives included in the consolidated balance sheets			$	25,130		$	24,048				$	37,878		$	26,240		Net derivatives included in the consolidated balance sheets			$	64,349	$	64,347			$	102,720	$	99,255

The ~~weighted average~~weighted-average received and paid interest rates for interest rate swaps outstanding ~~at September 30, 2017 and December 31, 2016~~ were as follows:

September 30, 2017
Weighted Average Interest Rate December 31, 2016
Weighted Average Interest Rate
Received Paid Received Paid
Non-hedging interest rate swaps 3.46 % 4.43 % 3.17 % 4.58 %


	June 30, 2021 Weighted-Average Interest Rate				December 31, 2020 Weighted-Average Interest Rate
	Received		Paid		Received		Paid
Non-hedging interest rate swaps	2.83	%	1.20	%	3.14	%	1.38	%

The ~~weighted average~~weighted-average strike rate for outstanding interest rate caps was ~~2.50%~~2.68% at ~~September~~June 30, ~~2017~~2021 and ~~2.45%~~3.41% at December 31, ~~2016.~~2020.

Our credit exposure on derivative instruments is limited to the net favorable value and interest payments by each counterparty. In ~~such~~some cases collateral may be required from the counterparties involved if the net value of the derivative instruments ~~exceed~~exceeds a nominal ~~amount considered to be immaterial.~~amount. Our credit exposure associated with these instruments, net of any collateral pledged, was approximately ~~$25.1~~$64.3 million at ~~September~~June 30, ~~2017~~2021, and approximately ~~$37.9~~$102.7 million at December 31, ~~2016, which primarily relates to Bank customers.~~2020. Collateral levels are monitored and adjusted on a regular basis for changes in interest rate swap ~~values.~~and cap values, as well as for changes in the value of forward sale commitments. At ~~September~~June 30, ~~2017,~~2021, we had ~~$35.1~~$72.4 million in cash collateral pledged for these derivatives, of which ~~$28.0~~$70.2 million was included in interest-bearing deposits in other banks and ~~$7.1~~$2.2 million was included in accrued interest receivable and other assets. At December 31, ~~2016,~~2020, we had ~~$24.8~~$108.3 million in cash collateral pledged for these derivatives, ~~all~~ of which $104.4 million was included in interest-bearing ~~deposits.~~

deposits in other banks and $3.9 million was included in accrued interest receivable and other assets.

We also enter into credit risk participation agreements with financial institution counterparties for interest rate swaps related to loans in which we are either a participant or a lead bank. The risk participation agreements entered into by us as a participant bank provide credit protection to the financial institution counterparty should the borrower fail to perform on its interest rate derivative contract with that financial institution. We are party to 9 risk participation agreements where we are a participant bank with a notional amount of $118.1 million at June 30, 2021, compared to 9 risk participation agreements having a notional amount of $119.5 million at December 31, 2020. The maximum estimated exposure to these agreements, assuming 100% default by all obligors, was approximately $4.3 million at June 30, 2021 and $6.0 million at December 31, 2020. The fair value of these exposures was insignificant to the consolidated financial statements at both June 30, 2021 and December 31, 2020. Risk participation agreements entered into by us as the lead bank provide credit protection to us should the borrower fail to perform on its interest rate derivative contract with us. We are party to 15 risk participation agreements where we are the lead

bank having a notional amount of $160.1 million at June 30, 2021, compared to 16 agreements having a notional amount of $165.9 million at December 31, 2020.

(12) ~~NEW ACCOUNTING PRONOUNCEMENTS~~Material Transactions Affecting Stockholders' Equity

~~ASU 2017-09 "Compensation-Stock Compensation (Topic 718)-Scope~~On March 3, 2021, we completed an issuance of ~~Modification Accounting"~~ ~~("ASU 2017-09"~~5.75% fixed rate non-cumulative perpetual preferred stock, Series B, with a liquidation preference of $1,000 per share (equivalent to $25 per depositary share) (the “Series B Preferred Stock”) ~~clarifies~~and an issuance and sale of 12,000,000 depositary shares, each representing a 1/40th interest in a share of the Series B Preferred Stock. Dividends on the Series B Preferred Stock are not cumulative and will be paid when ~~changes~~declared by our board of directors to the extent that we have legally available funds to pay dividends. If declared, dividends will accrue and be payable quarterly, in arrears, on the liquidation preference amount, on a non-cumulative basis, at a rate of 5.75% per annum. Holders of preferred stock will not have voting rights, except with respect to certain changes in the terms ~~or conditions~~ of ~~a share-based payment must~~the preferred stock, certain dividend non-payments and as otherwise required by applicable law. Net proceeds from the sale totaled $289.7 million, providing additional capital to be used for general corporate purposes. A portion of the proceeds were also used to redeem, in whole, our 6.50% non-cumulative perpetual preferred stock Series A, par value $0.01 per share, in accordance with its terms.

On June 15, 2021 we redeemed all 6,000,000 outstanding shares of our 6.50% non-cumulative perpetual preferred stock, Series A.

(13) New Accounting Standards

ASU 2020-04, “Reference Rate Reform (Topic 848)” (“ASU 2020-04”) provides optional expedients and exceptions for applying GAAP to loan and lease agreements, derivative contracts and other transactions affected by the anticipated transition away from LIBOR toward new interest rate benchmarks. For transactions that are modified because of reference rate reform and that meet certain scope guidance (i) modifications of loan agreements should be accounted for by prospectively adjusting the effective interest rate and the modification will be considered “minor” so that any existing unamortized origination fees/costs would carry forward and continue to be amortized and (ii) modifications of lease agreements should be accounted for as ~~modifications. Under~~a continuation of the existing agreement with no reassessments of the lease classification and the discount rate or remeasurements of lease payments that otherwise would be required for modifications not accounted for as separate contracts. ASU ~~2017-09,~~2020-04 also provides numerous optional expedients for derivative accounting. ASU 2020-04 is effective March 12, 2020 through December 31, 2022. An entity may elect to apply ASU 2020-04 for contract modifications as of January 1, 2020, or prospectively from a date within an ~~entity should account for changes~~interim period that includes or is subsequent to March 12, 2020, up to the ~~terms~~date that the financial statements are available to be issued. Once elected for a Topic or ~~conditions of a share-based payment as a modification unless~~an Industry Subtopic within the Codification, the amendments in this ASU must be applied prospectively for all eligible contract modifications for that Topic or Industry Subtopic. We anticipate this ASU will simplify any modifications we execute between the selected start date (yet to be determined) and December 31, 2022 that are directly related to LIBOR transition by allowing prospective recognition of the ~~following are met: 1)the fair value~~continuation of the ~~modified award is the same as the fair value~~contract, rather than extinguishment of the original award immediately before modification, 2) the vesting conditions of the modified award are the same as the vesting conditions of the original award immediately before modification, and 3) the classification of the modified award as an equity instrument or a liability instrument is the same as the classification of the original award immediately before modification. ASU 2017-09 will be effective for us on January 1, 2018, and is not expected to have a significant impact on our financial statements.

~~ASU 2016-15~~ ~~"Statement of Cash Flows (Topic 230)"~~ ~~("ASU 2016-15") is intended to reduce the diversity~~old contract resulting in practice around how certain transactions are classified within the statement of cash flows. ASU 2016-15 will be effective for us on January 1, 2018 and is not expected to have a significant impact on our consolidated financial statements.

~~ASU 2016-13~~ ~~"Financial Instruments - Credit Losses (Topic 326)"~~ ("ASU 2016-13") requires an entity to utilize a new impairment model known as the current expected credit loss ("CECL") model to estimate its lifetime "expected credit loss" and record an allowance that, when deducted from the amortized cost basis of the financial asset, presents the net amount expected to be collected on the financial asset. The CECL model is expected to result in more timely recognition of credit losses. ASU 2016-13 also requires new disclosures for financial assets measured at amortized cost, loans and available-for-sale debt securities. Entities will apply the standard's provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is adopted. ASU 2016-13 will be effective for us on January 1, 2020.writing off unamortized fees/costs. We are evaluating the ~~impact adoption~~impacts of this ASU ~~2016-13 will have on our consolidated financial statements~~ and ~~disclosures.~~

~~ASU 2016-02 "Leases (Topic 842)~~" ("ASU 2016-02") requires that lessees and lessors recognize lease assets and lease liabilities on the balance sheet and disclose key information about leasing arrangements. ASU 2016-02 will be effective for us on January 1, 2019. We have not yet ~~selected a~~determined whether LIBOR transition ~~method as we are in the process of determining the effect of the standard~~and this ASU will have material effects on our business operations and consolidated financial ~~statements and disclosures.~~

~~ASU 2014-09 "Revenue from Contracts with Customers (Topic 606)"~~ ("ASU 2014-09") implements a common revenue standard that clarifies the principles for recognizing revenue. The core principle of ASU 2014-09 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU 2014-09 establishes a five-step model which entities must follow to recognize revenue and removes inconsistencies and weaknesses in existing guidance. The guidance does not apply to revenue associated with financial instruments, including loans and securities that are accounted for under other GAAP, which comprises a significant portion of our revenue stream. Adoption of ASU 2014-09 may require us to amend how we recognize certain recurring revenue streams related to trust fees, which are recorded in non-interest income; however, we do not expect adoption of ASU 2014-09 to have a material impact on our consolidated financial statements and disclosures. We plan to adopt the revenue recognition guidance in the first quarter of 2018 with a cumulative effect adjustment to opening retained earnings, if management deems such adjustment significant. Our implementation efforts to date include identification of revenue streams within the scope of the guidance, and we are in the process of reviewing revenue contracts.

~~QUARTERLY FINANCIAL SUMMARIES – UNAUDITED~~

~~Consolidated Daily Average Balances, Average Yields and Rates~~

~~(In thousands)~~

statements.

For the three months ended
September 30, 2017 For the three months ended
September 30, 2016

Average
Balance

Revenue/
Expense

Yield/
Rate

Average
Balance
Revenue/
Expense
Yield/
Rate
Assets
Securities – taxable $ 86,087
$ 340
1.57 % $ 26,051
$ 228
3.47 %
Securities – non-taxable(2)
—
—
— % 564
8
5.82 %
Federal funds sold and securities purchased under resale agreements 205,938
642
1.24 % 369,215
455
0.49 %
Deposits in other banks 2,383,060
7,544
1.26 % 3,192,141
4,080
0.51 %
Loans held for sale 1,009,703
9,882
3.88 % 430,869
3,662
3.38 %
Loans held for investment, mortgage finance 4,847,530
42,294
3.46 % 4,658,804
36,655
3.13 %
Loans held for investment(1)(2)
14,427,980
178,839
4.92 % 12,591,561
137,407
4.34 %
Less reserve for loan losses 172,774
—
—
168,086
—
—
Loans held for investment, net 19,102,736
221,133
4.59 % 17,082,279
174,062
4.05 %
Total earning assets 22,787,524
239,541
4.17 % 21,101,119
182,495
3.44 %
Cash and other assets 713,778
588,440

Total assets $ 23,501,302
$ 21,689,559

Liabilities and Stockholders’ Equity
Transaction deposits $ 2,145,324
$ 4,359
0.81 % $ 2,301,362
$ 1,960
0.34 %
Savings deposits 7,618,843
17,152
0.89 % 6,177,681
6,228
0.40 %
Time deposits 496,076
924
0.74 % 501,701
763
0.61 %
Total interest-bearing deposits 10,260,243
22,435
0.87 % 8,980,744
8,951
0.40 %
Other borrowings 1,821,837
5,726
1.25 % 1,607,613
1,860
0.46 %
Subordinated notes 281,256
4,191
5.91 % 280,895
4,191
5.94 %
Trust preferred subordinated debentures 113,406
930
3.25 % 113,406
752
2.64 %
Total interest-bearing liabilities 12,476,742
33,282
1.06 % 10,982,658
15,754
0.57 %
Demand deposits 8,764,263
8,849,725

Other liabilities 116,998
135,141

Stockholders’ equity 2,143,299
1,722,035

Total liabilities and stockholders’ equity $ 23,501,302
$ 21,689,559

Net interest income(2)
$ 206,259
$ 166,741

Net interest margin 3.59 % 3.14 %
Net interest spread 3.11 % 2.87 %
Loan spread(3)
4.02 % 3.83 %


~~(1)~~	~~The loan averages include non-accrual loans and are stated net of unearned income.~~


~~(2)~~	~~Taxable equivalent rates used where applicable.~~


~~(3)~~	~~Yield on loans, net of reserves, less funding cost including all deposits and borrowed funds.~~

For the nine months ended September 30, 2017 For the nine months ended September 30, 2016

Average
Balance

Revenue/
Expense

Yield/
Rate

Average
Balance

Revenue/
Expense

Yield/
Rate
Assets
Securities – taxable $ 61,212
$ 851
1.86 % $ 27,160
$ 722
3.55 %
Securities – non-taxable(2)
74
3
4.85 % 629
27
5.74 %
Federal funds sold and securities purchased under resale agreements 218,777
1,606
0.98 % 328,971
1,209
0.49 %
Deposits in other banks 2,645,145
19,935
1.01 % 2,905,251
11,115
0.51 %
Loans held for sale 973,016
27,652
3.80 % 238,987
6,106
3.41 %
Loans held for investment, mortgage finance 3,811,298
98,798
3.47 % 4,266,573
99,666
3.12 %
Loans held for investment(1)(2) 13,714,390
485,226
4.73 % 12,260,752
395,901
4.31 %
Less reserve for loan losses 171,029
—
—
157,880
—
—
Loans held for investment, net 17,354,659
584,024
4.50 % 16,369,445
495,567
4.04 %
Total earning assets 21,252,883
634,071
3.99 % 19,870,443
514,746
3.46 %
Cash and other assets 651,270
546,553

Total assets $ 21,904,153
$ 20,416,996

Liabilities and Stockholders’ Equity
Transaction deposits $ 2,054,701
$ 9,445
0.61 % $ 2,171,776
$ 5,085
0.31 %
Savings deposits 7,189,274
40,575
0.75 % 6,299,965
19,441
0.41 %
Time deposits 460,046
2,241
0.65 % 499,366
2,217
0.59 %
Total interest-bearing deposits 9,704,021
52,261
0.72 % 8,971,107
26,743
0.40 %
Other borrowings 1,539,208
11,626
1.01 % 1,455,888
4,628
0.25 %
Subordinated notes 281,167
12,573
5.98 % 280,805
12,573
5.98 %
Trust preferred subordinated debentures 113,406
2,641
3.11 % 113,406
2,203
2.59 %
Total interest-bearing liabilities 11,637,802
79,101
0.91 % 10,821,206
46,147
0.55 %
Demand deposits 8,062,792
7,786,562

Other liabilities 112,505
132,506

Stockholders’ equity 2,091,054
1,676,722

Total liabilities and stockholders’ equity $ 21,904,153
$ 20,416,996

Net interest income(2)
$ 554,970
$ 468,599

Net interest margin 3.49 % 3.15 %
Net interest spread 3.08 % 2.91 %
Loan spread(3) 4.02 % 3.82 %


~~(1)~~	~~The loan averages include non-accrual loans and are stated net of unearned income.~~


~~(2)~~	~~Taxable equivalent rates used where applicable.~~


~~(3)~~	~~Yield on loans, net of reserves, less funding cost including all deposits and borrowed funds.~~


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

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

The following discussion and analysis of our financial condition as of June 30, 2021 and December 31, 2020 and results of operations for the three and six month periods ended June 30, 2021 and June 30, 2020 should be read in conjunction with our consolidated financial statements and the related notes to the consolidated financial statements for the year ended December 31, 2020, and the other information included in our Annual Report on Form 10-K for the year ended December 31, 2020 (the “2020 Form 10-K”). Certain risks, uncertainties and other factors, including those set forth under “Risk Factors” in Part I, Item 1A of the 2020 Form 10-K may cause actual results to differ materially from the results discussed in the forward-looking statements appearing in this discussion and analysis.

Forward-Looking Statements

Certain statements and financial analysis contained in this report that are not historical facts ~~are forward-looking statements made pursuant to~~may constitute “forward-looking statements” within the ~~safe harbor provisions~~meaning of federal securities laws. Forward-looking statements may also be contained in our future filings with SEC, in press releases and in oral and written statements made by us or with our approval that are not statementsthe Private Securities Litigation Reform Act of ~~historical fact.~~1995. These forward-looking statements are based on our beliefs, assumptions and expectations of our future performance taking into account all information ~~currently~~ available to ~~us. Words~~us at the time such statements are made. Forward-looking statements may often be identified by the use of words such as ~~“believes,”~~ “expects,” “estimates,” “anticipates,” “plans,” “goals,” “objectives,” ~~“expects,”~~ “intends,” “seeks,” “likely,” ~~“targeted,” “continue,” “remain,” “will,”~~ “should,” “may” “could” and other similar ~~expressions are intended to identify forward-looking statements but are not the exclusive means of identifying such statements.~~expressions.

Forward-looking statements may include, among other things and without limitation, statements about the credit quality of our loan portfolio, general economic conditions in the United States and in our markets, including the continued impact on our customers from ~~declines and~~ volatility in oil and gas prices, the ~~impact on~~material risks and uncertainties for the U.S. and world economies and for our ~~loan and deposit portfolios as a result of Hurricanes Harvey and Irma,~~business, resulting from the COVID-19 pandemic, expectations regarding rates of default orand loan losses, volatility in the mortgage industry, our business strategies and our expectations about future financial performance, future growth and earnings, the appropriateness of our allowance for ~~loan~~credit losses and provision for credit losses, the impact of ~~increased~~changing regulatory requirements and legislative changes on our business, increased competition, interest rate risk, new lines of business, new product or service offerings and new technologies.

Forward-looking statements are subject to various risks and uncertainties, which 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. Important factors that could cause actual results to differ materially from ~~the~~those expressed or implied by such forward-looking statements include, but are not limited to, the following:

•Deterioration of the credit quality of our loan portfolio or declines in the value of collateral related to external factors such as commodity prices, real estate values or interest rates, increased default rates and loan losses or adverse changes in the industry concentrations of our loan ~~portfolio.~~portfolio attributed to changes in the U.S. economy in general or the Texas economy specifically.

~~Changing~~•The adverse effect of the COVID-19 pandemic on us and our customers, employees and third-party service providers; the material adverse impacts of the COVID-19 pandemic on our business, financial position, operations and prospects. It is not possible to accurately predict the extent, severity or duration of the COVID-19 pandemic or to what level and when normal economic and operational conditions will return. This also includes the incurrence of material costs and liabilities associated with legal and regulatory proceedings, investigations, inquiries and related matters with respect to the financial services industry, including those directly involving us or our Bank and arising from our participation in government stimulus programs responding to the economic impact of the COVID-19 pandemic.

•Operational issues stemming from, and/or capital spending necessitated by, the potential need to adapt to industry changes in information technology systems, on which we are highly dependent. This also includes the failure to manage information systems risk or to prevent cyber-incidents against us, our customers or our third-party vendors, or to manage risks from failures, disruptions or security breaches affecting us, our customers or our third-party vendors, which risks have been materially enhanced by our increased reliance on technology to support associates working outside our offices.

•The costs and effects of cyber-incidents or other ~~developments adversely affecting~~failures, disruptions or security breaches of our ~~commercial, entrepreneurial~~systems or those our third-party providers.

•Changes in interest rates, which may affect our net income and ~~professional customers.~~other future cash flows, or the market value of our assets, including the market value of investment securities.

•Changes in the value of commercial and residential real estate securing our loans or in the demand for credit to support the purchase and ownership of such assets.

•Changing economic conditions or other developments adversely affecting our commercial, entrepreneurial and professional customers.

•Adverse economic or market conditions and other factors in Texas, the United States or internationally that could affect the credit quality of our loan portfolio or our operating performance, including any conditions or factors affecting our middle market customers and their ability to continue to meet their loan obligations.

•The failure to correctly assess and model the assumptions supporting our allowance for ~~loan~~credit losses, causing it to become inadequate in the event of deteriorations in loan quality and increases in ~~charge-offs.~~charge-offs, or increases or decreases to our allowance for credit losses as a result of the implementation of CECL.

•Changes in the U.S. economy in general or the Texas economy specifically resulting in deterioration of credit quality, increases in non-performing assets or charge-offs or reduced demand for credit or other financial services we offer, including the effects from declines in the level of drilling and production related to ~~the continued~~ volatility in oil and gas ~~prices.~~prices and the effects of the COVID-19 pandemic.

•Adverse changes in economic or market conditions, in Texas, the United States or internationally, that could affect the credit quality of our loan portfolio or our operating ~~performance, which~~performance.

•Unexpected market conditions, regulatory changes or changes in our credit ratings that could, among other things, cause access to capital market transactions and other sources of funding to become more difficult to obtain on terms and conditions that are acceptable to us.

•The inadequacy of our available funds to meet our deposit, debt and other obligations as they become due, or our failure to maintain our capital ratios as a result of adverse changes in our operating performance or financial condition, or changes in applicable regulations or regulator interpretation of regulations impacting our business or the characterization or risk weight of our assets.

•The failure to effectively balance our funding sources with cash demands by depositors and borrowers.

~~The~~•Material failures of our accounting estimates and risk management processes based on management judgment, or the supporting analytical and forecasting models.

•Failure of our risk management strategies and procedures, including failure ~~to manage~~or circumvention of our ~~information systems risk or to prevent cyber-attacks against us or our third party vendors, or to manage risks from disruptions or security breaches affecting our third party vendors.~~controls.

•The failure to effectively manage our interest rate risk resulting from unexpectedly large or sudden changes in interest rates, ~~or rate or~~ maturity imbalances in our assets and liabilities, ~~and~~ potential adverse effects to our borrowers including their inability to repay loans with increased interest ~~rates.~~rates and the impact to our net interest income from the increasing cost of interest-bearing deposits.

•The failure of our enterprise risk management framework, our compliance program, or our corporate governance and supervisory oversight functions to timely identify and address emerging risks adequately, which may result in unexpected losses.

•Uncertainty regarding the upcoming transition away from the London Interbank Offered Rate, or LIBOR, toward new interest rate benchmarks and our ability to successfully implement any new interest rate benchmarks.

•Legislative and regulatory changes imposing further restrictions and costs on our business, a failure to ~~remain~~maintain well capitalized or well managed status or any regulatory enforcement actions brought against us and uncertainty related to future implementation and enforcement of regulatory requirements resulting from the current political environment.

•The effect of changes in laws, regulations, policies and guidelines (including, among others, laws, regulations, policies and guidelines concerning taxes, banking, accounting, securities and monetary and fiscal policies) with which we and our subsidiaries must generally comply, including those promulgated by the U.S. government, U.S. Department of Treasury and the Federal Reserve and any changes made by the new Biden Administration and the effects of any such changes on our business and results of operations.

•The failure to successfully execute our business strategy, which may include expanding into new markets, developing and launching new lines of business or new products and services within the expected timeframes and budgets, completing planned merger, acquisition or sale transactions or to successfully manage the risks related to the development and implementation of these new businesses, products or services.

•The failure to identify, attract and retain key personnel or the loss of key individuals or groups of employees.

~~Adverse changes in economic or business conditions that impact the financial markets or our customers.~~

~~Structural changes in the markets for origination, sale and servicing of residential mortgages.~~

•Increased or more effective competition from banks and other financial service providers in our markets.

•Structural changes in the markets for origination, sale and servicing of residential mortgages.

•Uncertainty in the pricing of mortgage loans that we purchase, and later sell or securitize, as well as competition for the ~~MSRs~~mortgage servicing rights related to these loans and related interest rate risk or price risk resulting from retaining ~~MSRs,~~mortgage servicing rights, and the potential effects of higher interest rates on our ~~MCA~~Mortgage Correspondent Aggregation loan volumes.

~~Material failures of our accounting estimates and risk management processes based on management judgment, or the supporting analytical and forecasting models.~~

~~Failure of our risk management strategies and procedures, including failure or circumvention of our controls.~~

•Credit risk resulting from our exposure to counterparties.

•An increase in the incidence or severity of fraud, illegal payments, security breaches and other illegal acts impacting our subsidiary, Texas Capital Bank, National Association (the “Bank”) and our customers.

•The failure to maintain adequate regulatory capital to support our ~~business.~~

~~Unavailability~~business, including the unavailability of funds obtained from borrowing or capital transactions or from our Bank to fund our obligations.

Incurrence of material costs and liabilities associated with legal and regulatory proceedings and related matters with respect to the financial services industry, including those directly involving us or our Bank.

•Environmental liability associated with properties related to our lending activities.

•Severe weather, natural disasters, acts of war or terrorism and other external events.

Actual outcomes and results may differ materially from what is expressed in our forward-looking statements and from our historical financial results due to the factors discussed above or elsewhere in this report or disclosed in our other ~~SEC~~U.S. Securities and Exchange Commission (“SEC”) filings. Forward-looking statements included herein speak only as of the date hereof and should not be relied upon as representing our expectations or beliefs as of any date subsequent to the date of this report. Except as required by law, we undertake no obligation to revise any forward-looking statements contained in this report, whether as a result of new information, future events or otherwise. The factors discussed herein are not intended to be a complete summary of all risks and uncertainties that may affect our businesses. ~~For a more detailed discussion of these and other factors that may affect our business, see "Risk Factors" in the 2016 Form 10-K and other filings we have made with the SEC.~~ Though we strive to monitor and mitigate risk, we cannot anticipate all potential economic, operational and financial developments that may adversely impact our operations and our financial results. Forward-looking statements should not be viewed as predictions and should not be the primary basis upon which investors evaluate an investment in our securities.

Overview of Our Business Operations

We commenced our banking operations in December 1998. An important aspect of our growth strategy has been our ability to effectively service and manage ~~effectively~~ a large number of loans and deposit accounts in multiple markets in Texas, as well as several lines of business serving a regional or national clientele of commercial borrowers. Accordingly, we have created an operations infrastructure sufficient to support our lending and banking operations that we continue to ~~build out~~supplement and optimize as needed to serve a larger customer base and specialized industries.

Outstanding energy loans totaled $1.2 billion, or approximately 6% of total loans, at September 30, 2017. Unfunded energy loan commitments increased by $93.5 million to $624.3 million (51% of outstanding energy loans) at September 30, 2017 compared to $530.8 million at December 31, 2016. We recorded $19.8 million in energy net charge-offsSignificant transactions affecting our financial statements during the ~~nine~~three months ended ~~September 30, 2017 compared to $19.8 million for the same period in 2016. Energy non-accruals decreased to $81.6 million at September 30, 2017 compared to $82.6 million at~~ June 30, ~~2017~~2021 included:

•Sale of our portfolio of mortgage servicing rights (“MSRs”) and ~~$129.3~~transition of the Mortgage Correspondent Aggregation (“MCA”) program to a third-party. For additional information, see Note 5 - Certain Transfers of Financial Assets in the accompanying notes to the consolidated financial statements included elsewhere in this report;

•Issuance and sale of $375.0 million of 4.00% fixed-to-fixed rate subordinated notes due 2031. For additional information, see Note 6 - Long-Term Debt in the accompanying notes to the consolidated financial statements included elsewhere in this report;

•Redemption of our 6.50% non-cumulative perpetual preferred stock, Series A (the “Series A Preferred Stock”). For additional information, see Note 12 - Material Transactions Affecting Stockholders' Equity in the accompanying notes to the consolidated financial statements included elsewhere in this report;

•Redemption of our 6.50% subordinated notes due 2042. For additional information, see Note 6 - Long-Term Debt in the accompanying notes to the consolidated financial statements included elsewhere in this report; and

•In May 2021 the Bank, applied to the Texas Department of Banking to convert from a national association to a Texas state-chartered bank. If approved and the conversion is completed, the Texas Department of Banking will be the Bank's primary regulator, the Federal Deposit Insurance Corporation will be the Bank's primary federal regulator and the Federal Reserve will continue to be the Company's primary federal regulator. The application is currently being reviewed.

Impact of COVID-19 Pandemic

The COVID-19 pandemic and related restrictive measures taken by governments, businesses and individuals have caused and continue to cause unprecedented uncertainty, volatility and disruption in financial markets and in governmental, commercial and consumer activity in the United States and globally, including the markets that we serve. As the restrictive measures began to be eased during the latter part of 2020 and continue to be eased during 2021, the U.S. economy has begun to improve from 2020, and with the availability and distribution of COVID-19 vaccines, we anticipate continued improvements in commercial and consumer activity and the U.S. economy. During the first quarter of 2021, the governor of Texas removed all restrictions initially set in place which has allowed businesses, including ours as well as our clients' businesses, to reopen at ~~September 30, 2016.~~full capacities.

While positive headwinds exist, we recognize that our business and consumer customers are continuing to experience varying degrees of financial distress, which we expect to continue, though to a lesser degree, throughout 2021. Commercial activity has improved, but has not returned to the levels existing prior to the outbreak of the COVID-19 pandemic, which may result in our

customers’ inability to meet their loan obligations to us. In addition, the economic pressures and uncertainties related to the COVID-19 pandemic have seemingly resulted in changes in consumer spending behaviors, which may negatively impact the demand for loans and other services we offer. Our borrowing base includes customers in industries such as energy, hotel/lodging, restaurants, entertainment, retail and commercial real estate, which have been significantly impacted by the COVID-19 pandemic. We recognize that these industries may take longer to recover as consumers may be hesitant to return to full social interaction or may change their spending habits on a more permanent basis as a result of the COVID-19 pandemic. We continue to ~~proactively~~monitor these customers closely.

We have taken deliberate actions to meet our goal of ensuring that we have the balance sheet strength to serve our clients and communities, including by seeking to increase our liquidity and manage our ~~energy portfolio~~assets and ~~overall credit quality,~~liabilities in order to maintain a strong capital position; however, future economic conditions are subject to significant uncertainty. Uncertainties associated with the COVID-19 pandemic include the duration of any COVID-19 outbreaks and any related variants, the availability and effectiveness of COVID-19 vaccines, the impact to our customers, employees and vendors and the impact to the economy as a whole. COVID-19 had a significant adverse impact on our business, financial position and operating results for the year ended December 31, 2020 and while uncertainty still exists, we believe we are ~~appropriately reserved against further energy-related losses.~~well-positioned to operate effectively through the present economic environment.

Effective June 1, 2021, we returned to pre-pandemic business operations and brought 100% of our workforce back into the office. Our branch locations are currently open and operating during normal business hours. We continue to take additional precautions within our branch locations, including enhanced cleaning procedures, to ensure the safety of our customers and our employees.

The following discussion and analysis presents the significant factors affecting our financial condition as of September 30, 2017 and December 31, 2016 and results of operations for the three and nine months in the periods ended September 30, 2017 and 2016. This discussion should be read in conjunction with our consolidated financial statements and notes to the financial statements appearing in Part I, Item 1 of this report.

Results of Operations

Summary of Performance

We reported net income of ~~$58.7~~$73.5 million and net income available to common stockholders of ~~$56.2~~$67.2 million ~~or $1.12 per diluted common share,~~ for the ~~third~~second quarter of ~~2017~~2021 compared to a net ~~income~~loss of ~~$42.7~~$34.3 million and net ~~income~~loss available to common stockholders of ~~$40.3~~$36.8 million ~~or $0.87~~for the second quarter of 2020. On a fully diluted basis, earnings per ~~diluted~~ common share were $1.31 for the ~~third~~second quarter of ~~2016.~~2021, compared to a loss per common share of $0.73 for the second quarter of 2020. Return on average common equity (“ROE”) was ~~11.20%~~9.74% and return on average assets ~~("ROA"~~(“ROA”) was ~~0.99%~~0.76% for the ~~third~~second quarter of ~~2017,~~2021, compared to ~~10.20%~~a negative 5.48% and ~~0.78%~~negative 0.36%, respectively, for the ~~third~~second quarter of ~~2016.~~2020. The increase in net income, ROE and ROA for the second quarter of 2021 resulted primarily from ~~increases in net interest income and non-interest income and~~ a $119.0 million decrease in ~~the~~ provision for credit ~~losses that exceeded growth in non-interest expense. ROA also benefited from more effective utilization of liquidity balances as balances were deployed into higher yielding loan categories.~~losses.

Net income and net income available to common stockholders for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2021 totaled ~~$152.3~~$145.4 million and ~~$145.0~~$135.3 million, respectively, ~~or $2.89 per diluted common share,~~ compared to net ~~income~~loss and net ~~income~~loss available to common stockholders of ~~$106.7~~$51.0 million and ~~$99.4~~$55.9 million, respectively, ~~or $2.14 per diluted common share,~~ for the same period in ~~2016.~~2020. On a fully diluted basis, earnings per common share were $2.65 for the six months ended June 30, 2021, compared to a loss per common share of $1.11 for the same period in 2020. ROE was ~~9.99%~~9.91% and ROA was ~~0.93%~~0.75% for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2021, compared to ~~8.70%~~a negative 4.16% and ~~0.70%~~$0.28%, respectively, for the nine months ended September 30, 2016. The increase in ROE and ROA for the first nine months of 2017 resulted from increases in net interest income and non-interest income and a decrease in the provision for credit losses that exceeded growth in non-interest expense. ROA also benefited from more effective utilization of liquidity balances and an increase in net interest margin.

~~Net income increased $16.0 million, or 37%, for the three months ended September 30, 2017, as compared to the~~ same period in 2016. The increase was primarily the result of a $37.6 million increase in net interest income, a $2.0 million decrease in the provision for credit losses and a $2.3 million increase in non-interest income, offset by a $20.0 million increase in non-interest expense and a $5.9 million increase in income tax expense. Net income increased $45.6 million, or 43%, for the nine months ended September 30, 2017, as compared to the same period in 2016. The increase was primarily the result of an $82.1 million increase in net interest income, a $26.0 million decrease in the provision for credit losses and a $12.9 million increase in non-interest income, offset by a $56.9 million increase in non-interest expense and a $18.6 million increase in income tax expense.2020.

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

~~Net Interest Income~~QUARTERLY FINANCIAL SUMMARIES - UNAUDITED

~~Net interest income was $204.4 million for the third quarter~~Consolidated Daily Average Balances, Average Yields and Rates


	Three months ended June 30, 2021						Three months ended June 30, 2020
(in thousands except percentages)	Average Balance		Revenue/ Expense		Yield/ Rate		Average Balance		Revenue/ Expense		Yield/ Rate
Assets
Investment securities – taxable	$	3,361,696	$	9,222	1.10	%	$	38,829	$	185	1.92	%
Investment securities – non-taxable(2)	181,574		2,147		4.74	%	195,806		2,327		4.78	%
Federal funds sold and securities purchased under resale agreements	713		—		0.18	%	245,434		77		0.13	%
Interest-bearing deposits in other banks	11,583,046		2,961		0.10	%	10,521,240		2,314		0.09	%
Loans held for sale	93,164		781		3.36	%	380,624		2,547		2.69	%
Loans held for investment, mortgage finance	7,462,223		57,401		3.09	%	8,676,521		74,518		3.45	%
Loans held for investment(1)(2)	15,242,975		152,515		4.01	%	17,015,041		170,970		4.04	%
Less reserve for credit losses on loans	241,676		—		—		236,823		—		—
Loans held for investment, net	22,463,522		209,916		3.75	%	25,454,739		245,488		3.88	%
Total earning assets	37,683,715		225,027		2.40	%	36,836,672		252,938		2.76	%
Cash and other assets	996,946						1,075,864
Total assets	$	38,680,661					$	37,912,536
Liabilities and Stockholders’ Equity
Transaction deposits	$	3,795,152	$	5,395	0.57	%	$	3,923,966	$	5,998	0.61	%
Savings deposits	11,296,382		8,990		0.32	%	12,537,467		13,510		0.43	%
Time deposits	1,755,993		1,886		0.43	%	3,434,388		12,786		1.50	%
Total interest-bearing deposits	16,847,527		16,271		0.39	%	19,895,821		32,294		0.65	%
Other borrowings	2,349,718		502		0.09	%	3,612,263		4,745		0.53	%
Long-term debt	881,309		10,723		4.88	%	395,658		5,043		5.13	%


Total interest-bearing liabilities	20,078,554		27,496		0.55	%	23,903,742		42,082		0.71	%
Demand deposits	15,139,546						10,865,896
Other liabilities	274,401						293,698
Stockholders’ equity	3,188,160						2,849,200
Total liabilities and stockholders’ equity	$	38,680,661					$	37,912,536
Net interest income(2)			$	197,531					$	210,856
Net interest margin					2.10	%					2.30	%
Net interest spread					1.85	%					2.05	%
Loan spread(3)					3.55	%					3.43	%

(1)The loan averages include non-accrual loans and are stated net of ~~2017, compared to $166.7 million for the third quarter~~unearned income.

(2)Taxable equivalent rates used where applicable.

(3)Yield on loans, net of 2016. The increase was due to an increase in average earning assets of $1.7 billion as compared to the third quarter of 2016, as well as the effect of increases in interest rates on loan yields. The increase in average earning assets included a $578.8 million increase in average loans held for sale, a $2.0 billion increase in average net loans held for investment and a $59.5 million increase in average securities, offset by a $972.4 million decrease in average liquidity assets. For the quarter ended September 30, 2017, average net loans held for investment, liquidity assets and loans held for sale represented approximately 84%, 11% and 5%, respectively, of average earning assets compared to approximately 81%, 17% and 2% for the same quarter of 2016.

Average interest-bearing liabilities for the quarter ended September 30, 2017 increased $1.5 billion from the third quarter of 2016, which included a $1.3 billion increase in average interest-bearing deposits and a $214.2 million increase in other borrowings. Average demand deposits were $8.8 billion for the quarter ended September 30, 2016, compared to $8.8 billion for the same period at 2017. The averagereserves, less funding cost ~~of total~~including all deposits and borrowed ~~funds increased to 0.54% for the third quarter~~funds.


	Six months ended June 30, 2021						Six months ended June 30, 2020
(in thousands except percentages)	Average Balance		Revenue/ Expense		Yield/ Rate		Average Balance		Revenue/ Expense		Yield/ Rate
Assets
Investment securities – taxable	$	3,294,117	$	17,334	1.06	%	$	40,814	$	459	2.26	%
Investment securities – non-taxable(2)	189,137		4,394		4.69	%	195,692		4,744		4.88	%
Federal funds sold and securities purchased under resale agreements	2,649		1		0.08	%	222,580		691		0.62	%
Interest-bearing deposits in other banks	11,711,282		5,893		0.10	%	8,373,594		21,900		0.53	%
Loans held for sale	167,830		2,376		2.85	%	1,758,502		30,027		3.43	%
Loans held for investment, mortgage finance	7,818,014		122,343		3.16	%	7,865,602		129,842		3.32	%
Loans held for investment(1)(2)	15,349,838		301,711		3.96	%	16,806,908		372,751		4.46	%
Less reserve for loan losses	248,151		—		—		219,330		—		—
Loans held for investment, net	22,919,701		424,054		3.73	%	24,453,180		502,593		4.13	%
Total earning assets	38,284,716		454,052		2.39	%	35,044,362		560,414		3.22	%
Cash and other assets	1,030,625						1,026,193
Total assets	$	39,315,341					$	36,070,555
Liabilities and Stockholders’ Equity
Transaction deposits	$	3,893,015	$	11,256	0.58	%	$	3,848,517	$	19,580	1.02	%
Savings deposits	12,088,776		19,778		0.33	%	11,803,448		49,471		0.84	%
Time deposits	1,978,879		5,241		0.53	%	3,138,461		25,417		1.63	%
Total interest-bearing deposits	17,960,670		36,275		0.41	%	18,790,426		94,468		1.01	%
Other borrowings	2,517,128		3,094		0.25	%	3,316,259		14,996		0.91	%
Long-term debt	674,171		16,466		4.93	%	395,614		10,307		5.24	%

Total interest-bearing liabilities	21,151,969		55,835		0.53	%	22,502,299		119,771		1.07	%
Demand deposits	14,782,509						10,434,696
Other liabilities	291,925						282,283
Stockholders’ equity	3,088,938						2,851,277
Total liabilities and stockholders’ equity	$	39,315,341					$	36,070,555
Net interest income(2)			$	398,217					$	440,643
Net interest margin					2.10	%					2.53	%
Net interest spread					1.86	%					2.15	%
Loan spread(3)					3.49	%					3.41	%

(1)The loan averages include non-accrual loans and are stated net of ~~2017 compared to 0.22% for the same period~~unearned income.

(2)Taxable equivalent rates used where applicable.

(3)Yield on loans, net of ~~2016. The~~reserves, less funding cost ~~of interest-bearing liabilities increased from 0.57% for the quarter ended September 30, 2016 to 1.06% for the same period of 2017.~~

Net interest income was $550.7 million for the nine months ended September 30, 2017, compared to $468.6 million for the same period of 2016. The increase was due to an increase in average earning assets of $1.4 billion as compared to the nine months ended September 30, 2016, as well as the effect of increases in interest rates on loan yields. The increase in average earning assets included a $734.0 million increase in average loans held for sale, a $985.2 million increase in average net loans held for investment and a $33.5 million increase in average securities, offset by a $370.3 million decrease in average liquidity assets. For the nine months ended September 30, 2017, average net loans held for investment, liquidity assets and loans held for sale represented approximately 82%, 13% and 5%, respectively, of average earning assets compared to approximately 83%, 16% and 1% for the same period of 2016.

Average interest-bearing liabilities for the nine months ended September 30, 2017 increased $816.6 million from the same period of 2016, which included a $732.9 million increase in average interest-bearing deposits and a $83.3 million increase in other borrowings. Average demand deposits increased from $7.8 billion for the nine months ended September 30, 2016 to $8.1 billion for the nine months ended September 30, 2017. The average cost of totalincluding all deposits and borrowed funds increased to 0.44% for the nine months ended September 30, 2017 compared to 0.23% for the same period of 2016. The cost of interest-bearing liabilities increased from 0.55% for the nine months ended September 30, 2016 to 0.91% for the same period of 2017.funds.

Volume/Rate Analysis

The following table ~~(in thousands)~~ presents the changes in taxable-equivalent net interest income ~~between the three and nine month periods ended September 30, 2017 and September 30, 2016~~ and identifies the changes due to differences in the average volume of earning assets and interest-bearing liabilities and the changes due to differences in the average interest rate on those assets and liabilities.



	Three months ended June 30, 2021/2020						Six months ended June 30, 2021/2020
	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	$	8,857	$	35,456	$	(26,599)	$	16,525	$	71,399	$	(54,874)
Loans held for sale	(1,766)		(1,923)		157		(27,651)		(27,243)		(408)
Loans held for investment, mortgage finance loans	(17,117)		(10,416)		(6,701)		(7,499)		(1,620)		(5,879)
Loans held for investment	(18,455)		(17,800)		(655)		(71,040)		(31,671)		(39,369)
Federal funds sold and securities purchased under resale agreements	(77)		(79)		2		(690)		(681)		(9)
Interest-bearing deposits in other banks	647		238		409		(16,007)		17,968		(33,975)
Total	(27,911)		5,476		(33,387)		(106,362)		28,152		(134,514)
Interest expense:
Transaction deposits	(603)		(195)		(408)		(8,324)		594		(8,918)
Savings deposits	(4,520)		(1,327)		(3,193)		(29,693)		4,603		(34,296)
Time deposits	(10,900)		(6,260)		(4,640)		(20,176)		(9,101)		(11,075)
Other borrowings	(4,243)		(1,664)		(2,579)		(11,902)		(2,801)		(9,101)
Long-term debt	5,680		6,194		(514)		6,159		7,114		(955)
Total	(14,586)		(3,252)		(11,334)		(63,936)		409		(64,345)
Net interest income	$	(13,325)	$	8,728	$	(22,053)	$	(42,426)	$	27,743	$	(70,169)

(1)Yield/rate and volume variances are allocated to yield/rate.

(2)Taxable equivalent rates used where applicable assuming a 21% tax rate.

Net Interest Income

Three months ended
September 30, 2017/2016

Nine months ended
September 30, 2017/2016
Net Change Due To(1) Net Change Due To(1)
Change Volume Yield/Rate Change Volume Yield/Rate
Interest income:
Securities(2)
$ 104
$ 517
$ (413 ) $ 105
$ 888
$ (783 )
Loans held for sale 6,220
4,931
1,289
21,546
18,737
2,809
Loans held for investment, mortgage finance loans 5,639
1,489
4,150
(868 ) (10,625 ) 9,757
Loans held for investment(2) 41,432
20,089
21,343
89,325
46,895
42,430
Federal funds sold 187
(202 ) 389
397
(404 ) 801
Deposits in other banks 3,464
(1,040 ) 4,504
8,820
(994 ) 9,814
Total 57,046
25,784
31,262
119,325
54,497
64,828
Interest expense:
Transaction deposits 2,399
(134 ) 2,533
4,355
(274 ) 4,629
Savings deposits 10,924
1,453
9,471
21,139
2,741
18,398
Time deposits 161
(9 ) 170
23
(174 ) 197
Borrowed funds 3,866
248
3,618
6,998
265
6,733
Long-term debt 178
5
173
439
—
439
Total 17,528
1,563
15,965
32,954
2,558
30,396
Net interest income $ 39,518
$ 24,221
$ 15,297
$ 86,371
$ 51,939
$ 34,432

Net interest income was $197.0 million for the three months ended June 30, 2021, compared to $209.9 million for the same period in 2020. The decrease was primarily due to declines in total average loans and earning asset yields, partially offset by an increase in loan fees and declining cost of funds.


~~(1)~~	~~Yield/rate and volume variances are allocated to yield/rate.~~


~~(2)~~	~~Taxable equivalent rates are used where applicable and assume a 35% tax rate.~~

Average earning assets for the three months ended June 30, 2021 increased $847.0 million compared to the same period in 2020, and included a $3.3 billion increase in average total investment securities, reflecting the deployment of excess liquidity into higher-yielding investment securities, and an $817.1 million increase in average liquidity assets, partially offset by a $3.3 billion decrease in average total loans. Throughout 2020, management took deliberate actions to increase liquidity balances to ensure we had the balance sheet strength to serve our clients during the COVID-19 pandemic. Through the first six months of 2021 these balances have remained elevated, although they are beginning to run off as we have purchased investment securities and proactively exited certain high-cost indexed deposit products. The decrease in average loans held for sale compared to the second quarter of 2020 resulted from the transition of the MCA program to a third-party. Average interest-bearing liabilities for the three months ended June 30, 2021 decreased $3.8 billion compared to the same period in 2020, primarily due to a $3.0 billion decrease in average interest-bearing deposits and a $1.3 billion decrease in average other borrowings, partially offset by a $485.7 million increase in average long-term debt. Average demand deposits for the three months ended June 30, 2021 increased to $15.1 billion from $10.9 billion for the three months ended June 30, 2020.

Net interest margin ~~which is defined as the ratio of net interest income to average earning assets, was 3.59%~~ for the ~~third quarter of 2017~~three months ended June 30, 2021 was 2.10% compared to ~~3.14%~~2.30% for the ~~third quarter of 2016.~~same period in 2020. The ~~year-over-year increase~~decrease was primarily due to the effect of ~~increases in~~declining interest rates on earning asset yields and a shift in earning asset composition, primarily increases in lower-yielding investment securities and liquidity assets, partially offset by increases in loan ~~yields attributable~~fees and lower funding costs compared to ~~our highly asset-sensitive balance sheet.~~ the second quarter of 2020.

The yield on total loans held for investment ~~increased~~decreased to ~~4.59%~~3.75% for the ~~third quarter of 2017~~three months ended June 30, 2021 compared to ~~4.05%~~3.88% for the ~~third quarter of 2016~~same period in 2020, and the yield on earning assets ~~increased~~decreased to ~~4.17%~~2.40% for the ~~third~~three months ended June 30, 2021 compared to 2.76% for the same period in 2020. The average cost of total deposits decreased to 0.20% for the second quarter of ~~2017 compared to 3.44%~~2021 from 0.42% for the ~~third~~second quarter of ~~2016. Funding costs, including demand deposits~~2020 and ~~borrowed funds, increased to 0.54% for the third quarter of 2017 compared to 0.22% for the third quarter of 2016. The spread on~~ total earning assets, net of the cost of deposits and borrowed funds, was 3.63% for the third quarter of 2017 compared to 3.22% for the third quarter of 2016. The increase resulted primarily from increases in interest rates and increases in the higher yielding loan components of earning assets. Total funding costs, including all deposits, long-term debt and ~~stockholders’~~stockholders' equity, decreased to 0.29% for the second quarter of 2021 compared to 0.45% for the second quarter of 2020.

Net interest income was $397.1 million for the six months ended June 30, 2021 compared to $438.2 million for the same period in 2020. The decrease was primarily due to a decrease in earning asset yields, partially offset by declining cost of funds.

Average earning assets increased $3.2 billion for the six months ended June 30, 2021, compared to the same period in 2020, and included a $3.2 billion increase in average total investment securities, reflecting the deployment of excess liquidity into higher-yielding investment securities and a $3.1 billion increase in average liquidity assets, partially offset by a $3.1 billion decrease in average total loans. The increases in average total investment securities and liquidity assets were the result of deliberate actions taken by management to enhance the strength of our balance sheet as described above. Average interest-bearing liabilities decreased $1.4 billion for the six months ended June 30, 2021, compared to the same period in 2020, primarily due to a $829.8 million decrease in average interest-bearing deposits and a $799.1 million decrease in average other borrowings, partially offset by a $278.6 million increase in average long-term debt. Average demand deposits for the six months ended June 30, 2021 increased to ~~0.56%~~$14.8 billion from $10.4 billion for the ~~third quarter of 2017~~same period in 2020.

Net interest margin for the six months ended June 30, 2021 was 2.10% compared to ~~.29%~~2.53% for the ~~third quarter~~same period of ~~2016.~~

~~Non-interest Income~~2020. The decrease was primarily due to the effect of declining interest rates on earning asset yields and a shift in earning asset composition, primarily the increases in lower-yielding investment securities and liquidity assets, partially offset by lower funding costs compared to the same period in 2020.

The ~~components~~yield on total loans held for investment decreased to 3.73% for the six months ended June 30, 2021, compared to 4.13% for the same period in 2020, and the yield on earning assets decreased to 2.39% for the six months ended June 30, 2021, compared to 3.22% for the same period in 2020. The average cost of ~~non-interest income were as follows (in thousands):~~total deposits decreased to 0.22% for the six months ended June 30, 2021 from 0.65% for the same period in 2020 and total funding costs, including all deposits, long-term debt and stockholders' equity, decreased to 0.29% for the six months ended June 30, 2021, compared to 0.67% for the same period in 2020.

Non-interest Income


										Three months ended June 30,				Six months ended June 30,
	Three months ended September 30,				Nine months ended September 30,
	2017		2016		2017		2016
(in thousands)									(in thousands)	2021		2020		2021		2020
Service charges on deposit accounts	$	3,211	$	2,880	$	9,323	$	7,401	Service charges on deposit accounts	$	4,634	$	2,459	$	9,350	$	5,752
Wealth management and trust fee income	1,627		1,113		4,386		3,024		Wealth management and trust fee income	3,143		2,348		5,998		4,815
Bank owned life insurance (BOLI) income	615		520		1,562		1,592

Brokered loan fees	6,152		7,581		17,639		18,090		Brokered loan fees	6,933		10,764		16,244		18,779
Servicing income	4,486		310		10,387		305		Servicing income	5,935		6,120		14,944		10,866
Swap fees	647		918		3,404		2,330		Swap fees	534		1,468		1,060		4,225
Net gain/(loss) on sale of loans held for sale									Net gain/(loss) on sale of loans held for sale	(3,070)		39,023		2,502		26,023
Other	2,265		3,394		8,181		9,203		Other	11,993		8,303		19,096		11,805
Total non-interest income	$	19,003	$	16,716	$	54,882	$	41,945	Total non-interest income	$	30,102	$	70,485	$	69,194	$	82,265

Non-interest income ~~increased $2.3~~decreased by $40.4 million during the three months ended ~~September~~June 30, ~~2017~~2021 compared to the same period in 2020. This decrease was primarily due to decreases in net gain/(loss) on sale of ~~2016.~~loans held for sale and brokered loan fees, partially offset by increases in service charges and other non-interest income. The decrease in net gain/(loss) on sale of loans held for sale and brokered loan fees was primarily due to the second quarter 2021 sale of our portfolio of MSRs and transition of the MCA program to a third-party.

Non-interest income decreased by $13.1 million during the six months ended June 30, 2021 compared to the same period in 2020. This ~~increase~~decrease was primarily due to a ~~$4.2 million~~decrease in net gain/(loss) on sale of loans held for sale, partially offset by an increase in ~~servicing income during~~other non-interest income. The decrease in net gain/(loss) on sale of loans held for sale was primarily due to the second quarter 2021 sale of our portfolio of MSRs and transition of the MCA program to a third-party.

Non-interest Expense


	Three months ended June 30,				Six months ended June 30,
(in thousands)	2021		2020		2021		2020
Salaries and employee benefits	$	86,830	$	100,791	$	174,352	$	177,984
Net occupancy expense	7,865		9,134		16,139		17,846
Marketing	1,900		7,988		3,597		16,510
Legal and professional	9,147		11,330		17,424		28,796
Communications and technology	14,352		42,760		30,321		56,551
FDIC insurance assessment	5,226		7,140		11,839		12,989
Servicing-related expenses	12,355		20,100		25,344		36,454

Merger-related expenses	—		10,486		—		17,756
Other	11,385		12,606		20,360		22,866
Total non-interest expense	$	149,060	$	222,335	$	299,376	$	387,752

Non-interest expense for the three months ended ~~September~~June 30, ~~2017~~2021 decreased $73.3 million compared to the same period ~~of 2016~~in 2020. The decrease was primarily ~~attributable~~due to ~~an increase~~decreases in ~~MSRs. Offsetting this increase was a $1.4 million decrease in brokered loan fees compared to~~salaries and employee benefits, communications and technology expense, servicing-related expenses and merger-related expenses.

Non-interest expense for the ~~three~~six months ended ~~September~~June 30, ~~2016 resulting from a decrease in total mortgage finance volumes.~~

~~Non-interest income increased $12.9~~2021 decreased $88.4 million ~~during the nine months ended September 30, 2017~~ compared to the same period ~~of 2016. This increase~~in 2020. The decrease was primarily due to a $10.1 million increase in servicing income during the nine months ended September 30, 2017 compared to the same period of 2016 primarily attributable to an increase in MSRs. Service charges increased $1.9 million during the nine months ended September 30, 2017 compared to the same period of 2016 as a result of the increase in deposit balances and improved pricing of treasury services. Wealth management and trust fee income increased $1.4 million during the nine months ended September 30, 2017 compared to the same period of 2016 due to an increase in assets under management. Swap fees increased $1.1 million during the nine months ended September 30, 2017 compared to the same period of 2016. Swap fees relate to customer swap transactions and are received from the institution that is our counterparty on the transaction. These fees fluctuate from quarter to quarter based on the volume and size of transactions closed during the quarter. These increases were offset by minor decreases ~~in brokered loan fees, BOLI income and other non-interest income compared to the same period of 2016.~~

While management expects continued growth in certain components of non-interest income, the future rate of growth could be affected by increased competition from nationwide and regional financial institutions among other factors. In order to achieve growth in non-interest income, management from time to time evaluates new products, new lines of business and the expansion of existing lines of business. Any new product introduction or new market entry could place additional demands on capital and managerial resources.

~~Non-interest Expense~~

~~The components of non-interest expense were as follows (in thousands):~~

Three months ended September 30, Nine months ended September 30,
2017 2016 2017 2016
Salaries and employee benefits $ 67,882
$ 56,722
$ 194,039
$ 162,904
Net occupancy expense 6,436
5,634
19,062
17,284
Marketing 7,242
4,292
18,349
12,686
Legal and professional 6,395
5,333
20,975
16,883
Communications and technology 6,002
6,620
24,414
19,228
FDIC insurance assessment 6,203
6,355
16,800
17,867
Servicing related expenses 3,897
620
8,329
1,305
Other(1)
10,773
9,223
30,770
27,717
Total non-interest expense $ 114,830
$ 94,799
$ 332,738
$ 275,874


~~(1)~~	Other expense includes such items as courier expenses, regulatory assessments other than FDIC insurance, due from bank charges and other general operating expenses, none of which account for 1% or more of total interest income and non-interest income.

Non-interest expense for the third quarter of 2017 increased $20.0 million, or 21%, to $114.8 million from $94.8 million in the third quarter of 2016. The increase is primarily due to increases of $11.2 million in salaries and employee benefits expense, $3.0 million in marketing expense, ~~and $1.1 million in~~ legal and professional expense, all of which were due to general business growth and continued build-out. Also contributing to the year-over-year increase in non-interest expense was a $3.3 million increase in servicing related expenses resulting from an increase in MSRs, which are being amortized.

Non-interest expense for the nine months ended September 30, 2017 increased $56.9 million, or 21%, to $332.7 million from $275.9 million for the nine months ended September 30, 2016. The increase is primarily attributable to increases of $31.1 million in salaries and employee benefits expense, $5.7 million in marketing expense, $4.1 million in legal and professional expense, and $1.8 million in net occupancy expense, all of which were due to general business growth and continued build-out. The $5.2 million increase in communications and technology expense, ~~primarily relates to the $5.3 million technology write-off taken in the second quarter of 2017, as well as general business growth~~servicing-related expenses and ~~continued build-out. The $7.0 million increase in servicing related expenses resulting from an increase in MSRs, which are being amortized.~~merger-related expenses.

Analysis of Financial Condition

Loans Held for Investment

~~Loans~~The following table summarizes our loans held for investment on a gross basis by portfolio segment:


	June 30, 2021		December 31, 2020
(in thousands)
Commercial	$	9,054,764	$	8,861,580
Energy	618,371		766,217
Mortgage finance	8,772,799		9,079,409

Real estate	5,564,623		5,794,624


Gross loans held for investment	$	24,010,557	$	24,501,830
Deferred income (net of direct origination costs)	(69,193)		(70,970)
Allowance for credit losses on loans	(221,511)		(254,615)
Total loans held for investment, net	$	23,719,853	$	24,176,245

Total gross loans held for investment were ~~as follows as~~$24.0 billion at June 30, 2021, a decline of ~~the dates indicated (in thousands):~~

~~Our business plan focuses~~$491.3 million from December 31, 2020 primarily ~~on lending~~due to ~~middle market businesses~~declines in energy, mortgage finance and ~~successful professionals and entrepreneurs, and as such, commercial,~~ real estate ~~and construction~~ loans, ~~have comprised a majority~~partially offset by an increase in commercial loans. The decline in the energy portfolio is consistent with our strategy of ~~our loan portfolio. Consumer loans generally have represented 1% or less of the portfolio.~~planned reductions in this portfolio as it has experienced higher historic losses. Mortgage finance loans relate to our mortgage warehouse lending

operations in which we ~~invest in~~purchase mortgage loan ownership interests that are typically sold within 10 to 20 days. Volumes fluctuate based on the level of market demand for the product and the number of days between purchase and sale of the loans, ~~as well as~~which can be affected by changes in overall market interest rates, and tend to peak at the end of each month. Despite the decline in the first half of 2021, balances in this portfolio remain elevated related to increases in volumes driven by continued lower long-term interest rates.

We originate a substantial majority of all loans held for ~~investment (excluding mortgage finance loans).~~investment. We also participate in syndicated loan relationships, both as a participant and as an agent. As of ~~September~~June 30, ~~2017,~~2021, we had ~~$2.6~~$2.0 billion in syndicated loans, ~~$797.4~~$550.4 million of which we administer as agent. All syndicated loans, whether we act as agent or participant, are underwritten to the same standards as all other loans we originate. As of ~~September~~June 30, ~~2017, $23.6~~2021, $12.8 million of our syndicated loans were on non-accrual.

Portfolio Geographic ~~Concentration~~and Industry Concentrations

~~When considering our mortgage finance loans and other national lines of business,~~Although more than 50% of our total loan exposure is outside of Texas and more than 50% of our deposits are sourced outside of ~~Texas. However, as~~Texas, our Texas concentration remains significant. As of ~~September~~June 30, ~~2017,~~2021, a majority of our loans held for investment, excluding ~~our~~ mortgage finance loans and other national lines of business, were to businesses with headquarters ~~and~~or operations in Texas. This geographic concentration subjects the loan portfolio to the general economic conditions within this ~~area. We also make loans to these customers that are secured by assets located outside of Texas.~~state. The risks created by this concentration have been considered by management in the determination of the appropriateness of the allowance for ~~loan~~credit losses.

~~Summary of Loan Loss Experience~~

The provision for credit losses, which includes a provision for losses on unfunded commitments, is a charge to earnings to maintain the allowance for loan losses at a level consistent with management’s assessment of the collectability of the loan portfolio in light of current economic conditions and market trends. We recorded a provision for credit losses of $20.0 million during the third quarter of 2017 compared to $22.0 million in the third quarter of 2016 and $13.0 million in the second quarter of 2017. The decrease in provision recorded during the third quarter of 2017 compared to the same period in 2016 was primarily related to improvements in the composition of our pass-rated and classified loan portfolios, including energy loans, offset by a $4.5 million provision related to the potential impact to our loan portfolio from Hurricanes Harvey and Irma and increased provision for loan growth.

The allowance for credit losses, which includes a liability for losses on unfunded commitments, totaled $192.7 million at September 30, 2017, $179.5 million at December 31, 2016 and $191.3 million at September 30, 2016. The combined allowance as a percentage of loans held for investment excluding mortgage finance loans decreased to 1.30% at September 30, 2017 from 1.38% and1.51% at December 31, 2016 and September 30, 2016, respectively, as a result of strong loan growth.

The allowance for credit losses results from consistent application of our loan loss reserve methodology. At September 30, 2017, we believe the allowance is sufficient to cover all inherent losses in the portfolio and has been derived from consistent application of our methodology. Should any of the factors considered by management in evaluating the appropriateness of the allowance for loan losses change, our estimate of inherent losses in the portfolio could also change, which would affect the level of future provisions for loan losses.

~~Activity in the allowance for loan losses is presented in the following table (in thousands, except percentage and multiple data):~~

Nine months ended
September 30, 2017 Year ended
December 31,
2016 Nine months ended
September 30, 2016
Allowance for loan losses:
Beginning balance $ 168,126
$ 141,111
$ 141,111
Loans charged-off:
Commercial 32,146
56,558
34,232
Construction 59
—
—
Real estate 290
528
528
Consumer 180
47
40
Leases —
—
—
Total charge-offs 32,675
57,133
34,800
Recoveries:
Commercial 3,574
9,364
7,829
Construction 104
34
34
Real estate 74
63
36
Consumer 56
21
16
Leases 9
77
71
Total recoveries 3,817
9,559
7,986
Net charge-offs 28,858
47,574
26,814
Provision for loan losses 43,661
74,589
66,139
Ending balance $ 182,929
$ 168,126
$ 180,436
Allowance for off-balance sheet credit losses:
Beginning balance $ 11,422
$ 9,011
$ 9,011
Provision for off-balance sheet credit losses (1,661 ) 2,411
1,861
Ending balance $ 9,761
$ 11,422
$ 10,872
Total allowance for credit losses $ 192,690
$ 179,548
$ 191,308
Total provision for credit losses $ 42,000
$ 77,000
$ 68,000
Allowance for loan losses to LHI 0.89 % 0.96 % 1.02 %
Allowance for loan losses to LHI excluding mortgage finance loans 1.23 % 1.29 % 1.42 %
Net charge-offs to average LHI(1)
0.22 % 0.29 % 0.22 %
Net charge-offs to average LHI excluding mortgage finance loans(1)
0.28 % 0.38 % 0.29 %
Total provision for credit losses to average LHI(1)
0.32 % 0.46 % 0.55 %
Total provision for credit losses to average LHI excluding mortgage finance loans(1)
0.41 % 0.62 % 0.74 %
Recoveries to total charge-offs 11.68 % 16.73 % 22.95 %
Allowance for off-balance sheet credit losses to off-balance sheet credit commitments 0.14 % 0.19 % 0.19 %
Combined allowance for credit losses to LHI 0.94 % 1.03 % 1.09 %
Combined allowance for credit losses to LHI excluding mortgage finance loans 1.30 % 1.38 % 1.51 %
Non-performing assets:
Non-accrual loans(2)
$ 118,205
$ 167,791
$ 169,113
OREO(3)
18,131
18,961
19,009
Total $ 136,336
$ 186,752
$ 188,122
Loans past due 90 days and still accruing(4)
8,892
10,729
9,706
Allowance for loan losses to non-accrual loans 1.5x
1.0x
1.1x


~~(1)~~	~~Interim period ratios are annualized.~~


~~(2)~~	As of September 30, 2017, December 31, 2016 and September 30, 2016, non-accrual loans included $12.0 million, $18.1 million and $19.7 million, respectively, in loans that met the criteria for restructured.


~~(3)~~	~~We recorded a $101,000 valuation allowance against the OREO balance at September 30, 2017, compared to none at December 31, 2016 and September 30, 2016.~~


~~(4)~~	At September 30, 2017, December 31, 2016 and September 30, 2016, loans past due 90 days and still accruing include premium finance loans of $8.4 million, $6.8 million and $7.7 million, respectively.

Non-performing Assets

Non-performing assets include non-accrual loans and leases and repossessed assets. The table below summarizes our ~~non-accrual loans~~non-performing assets by type and by type of property securing the ~~credit~~credit:



(in thousands)	June 30, 2021		December 31, 2020		June 30, 2020
Non-accrual loans(1)
Commercial

Assets of the borrowers	$	16,715	$	18,776	$	27,164
Inventory	8,497		3,547		13,325

Other	10,144		9,773		10,717
Total commercial	35,356		32,096		51,206




Energy
Oil and gas properties	32,866		51,724		103,874
Total energy	32,866		51,724		103,874
Real estate
Assets of the borrowers	14,098		14,496		14,883
Commercial property	2,639		13,569		1,096
Hotel/motel	—		4,619		—
Single family residences	1,677		218		218


Other	—		5,267		2,754
Total real estate	18,413		38,169		18,951




Total non-performing assets	$	86,635	$	121,989	$	174,031
Restructured loans - accruing	$	—	$	—	$	—
Loans held for investment past due 90 days and accruing(2)	7,671		12,541		21,079
Loans held for sale non-accrual(3)	—		6,966		—
Loans held for sale past due 90 days and accruing(4)	2,695		16,667		10,152

(1)As of June 30, 2021, December 31, 2020 and ~~OREO (in thousands):~~June 30, 2020, non-accrual loans included $24.4 million, $45.4 million and $23.7 million, respectively, in loans that met the criteria for restructured.

(2)At June 30, 2021, December 31, 2020 and June 30, 2020, loans past due 90 days and still accruing includes premium finance loans of $3.0 million, $6.4 million and $14.8 million, respectively.

September 30,
2017 December 31,
2016 September 30,
2016

Non-accrual loans:(1)
Commercial
     Oil and gas properties $ 80,142
$ 115,599
$ 143,372
     Assets of the borrowers 9,841
18,592
17,335
     Inventory 23,121
27,630
2,020
    Other 3,283
3,119
3,606
Total commercial 116,387
164,940
166,333
Construction
     Commercial buildings —
—
—
     Unimproved land —
—
—
     Other —
159
159
Total construction —
159
159
Real estate
     Commercial property 1,123
2,083
2,087
     Unimproved land and/or developed residential lots —
—
—
     Single family residences —
—
—
     Farm land —
326
—
     Other 695
—
334
Total real estate 1,818
2,409
2,421
Consumer —
200
200
Leases —
83
—
Total non-accrual loans 118,205
167,791
169,113
Repossessed assets:
OREO(2) 18,131
18,961
19,009
Other repossessed assets —
—
—
Total non-performing assets $ 136,336
$ 186,752
$ 188,122
(3)Includes one non-accrual loan previously reported in loans HFI that was transferred to loans HFS as of December 31, 2020 and subsequently sold at carrying value.

(4)Includes loans guaranteed by U.S. government agencies that were repurchased out of Ginnie Mae securities. Loans are recorded as loans held for sale and carried at fair value on the balance sheet. Interest on these past due loans accrues at the debenture rate guaranteed by the U.S. government. Also includes loans that, pursuant to Ginnie Mae servicing guidelines, we have the unilateral right, but not the obligation, to repurchase if defined delinquent loan criteria are met and therefore must record as loans held for sale on our balance sheet regardless of whether the repurchase option has been exercised.


~~(1)~~	As of September 30, 2017, December 31, 2016 and September 30, 2016, non-accrual loans included $12.0 million, $18.1 million and $19.7 million, respectively, in loans that met the criteria for restructured.


~~(2)~~	~~We recorded a $101,000 valuation allowance against the OREO balance at September 30, 2017, compared to none at December 31, 2016 and September 30, 2016.~~

Total non-performing assets at ~~September~~June 30, ~~2017~~2021 decreased ~~$51.8 million from September 30, 2016 and $50.4~~$35.4 million from December 31, ~~2016. We experienced a significant decrease in levels of non-performing assets during the nine months ended September 30, 2017~~2020 and decreased $87.4 million compared to ~~the same period in 2016, primarily related to improvements in our energy portfolio. Energy non-performing assets totaled $81.6 million at September~~June 30, ~~2017 compared to $121.5 million at~~2020. The decrease from December 31, ~~2016~~2020 was primarily due to declines in energy and ~~$129.3 million at September~~real estate non-accrual loans, and the decrease from June 30, ~~2016. Our provision for credit losses decreased as a result of these improvements, as well as improvements~~2020 was primarily due to declines in ~~the composition of our pass-rated~~commercial and classified loan portfolios. This resulted in a decrease in the reserve for loan losses as a percent of loans excluding mortgage finance loans for September 30, 2017 compared to December 31, 2016 and September 30, 2016.energy non-accrual loans.

Potential problem loans consist of loans that are performing in accordance with contractual terms, but for which we have concerns about the borrower’s ability to comply with repayment terms because of the borrower’s potential financial difficulties. We monitor these loans closely and review their performance on a regular basis. At ~~September~~June 30, ~~2017,~~2021, we had ~~$34.6~~$22.0 million in loans of this type, compared to ~~$19.3~~$193.2 million at December 31, ~~2016,~~2020 and $132.0 million at June 30, 2020. The decline in potential problem loans is consistent with the continued economic recovery from the impacts of the COVID-19 pandemic.

Summary of Credit Loss Experience

The provision for credit losses, which ~~were not included~~includes a provision for losses on unfunded commitments, is a charge to earnings to maintain the allowance for credit losses at a level consistent with management’s assessment of expected losses in ~~either~~the loan portfolio at the balance sheet date. We recorded a $25.0 million negative provision for credit losses for the six months ended June 30, 2021, compared to a provision of $196.0 million in the same period of 2020. The year-over-year decrease resulted primarily from decreases in charge-offs and non-accrual ~~or 90 days past~~loans, as well as improvement in the economic outlook as the economy continues to recover from the impacts of the COVID-19 pandemic. We recorded $8.8 million in net charge-offs during the six months ended June 30, 2021, compared to $131.8 million during the same period of 2020. Criticized loans totaled $891.6 million at June 30, 2021, compared to $918.4 million at December 31, 2020 and $1.0 billion at June 30, 2020.

The table below presents a summary of our loan loss experience:


	Six months ended June 30, 2021			Year ended December 31, 2020			Six months ended June 30, 2020
(in thousands except percentage and multiple data)
Allowance for credit losses on loans:
Beginning balance	$	254,615		$	195,047		$	195,047
Impact of CECL adoption	—			8,585			8,585
Loans charged-off:
Commercial	3,863			73,360			32,940
Energy	6,418			133,522			100,098

Real estate	1,192			180			—

Total charge-offs	11,473			207,062			133,038
Recoveries:
Commercial	1,358			1,277			770
Energy	1,324			6,999			423



Total recoveries	2,682			8,276			1,193
Net charge-offs	8,791			198,786			131,845
Provision for credit losses on loans	(24,313)			249,769			192,935
Ending balance	$	221,511		$	254,615		$	264,722
Allowance for off-balance sheet credit losses:
Beginning balance	$	17,434		8,640			$	8,640
Impact of CECL adoption	—			563			563
Provision for off-balance sheet credit losses	(687)			8,231			3,065
Ending balance	$	16,747		$	17,434		$	12,268
Total allowance for credit losses	$	238,258		$	272,049		$	276,990
Total provision for credit losses	$	(25,000)		$	258,000		$	196,000
Allowance for credit losses on loans to LHI	0.93		%	1.04		%	1.04		%
Net charge-offs to average LHI	0.08		%	0.80		%	1.07		%
Total provision for credit losses to average LHI	(0.22)		%	1.03		%	1.60		%
Recoveries to total charge-offs	23.38		%	4.00		%	0.90		%
Allowance for off-balance sheet credit losses to off-balance sheet credit commitments	0.20		%	0.20		%	0.15		%
Total allowance for credit losses to LHI	1.00		%	1.11		%	1.09		%
Allowance for credit losses on loans as a multiple of non-performing loans	2.6		x	2.1		x	1.5		x

The allowance for credit losses, including the allowance for losses on unfunded commitments reported on the consolidated balance sheets in other liabilities, totaled $238.3 million at June 30, 2021, $272.0 million at December 31, 2020 and $277.0 million at June 30, 2020. The total allowance for credit losses as a percentage of loans held for investment was 1.00% at June 30, 2021, compared to 1.11% at December 31, 2020 and 1.09% at June 30, 2020. The total allowance for credit losses as a percentage of loans held for investment, excluding mortgage finance, was 1.57% at June 30, 2021, compared to 1.77% at December 31, 2020 and 1.67% at June 30, 2020. The decrease in the total allowance as a percentage of loans held for investment at June 30, 2021, compared to June 30, 2020, is due ~~categories.~~primarily to a decrease in the allowance for credit losses, resulting from reserve releases during the first half of 2021 driven by a decrease in charge-offs and improvement in the economic outlook as the economy continues to recover from the impacts of the COVID-19 pandemic.

Loans Held for Sale

~~We launched our~~Through the MCA ~~business in the third quarter of 2015. In that business,~~program we commit to purchase residential mortgage loans from independent correspondent lenders and deliver those loans into the secondary market via whole loan sales to independent third parties or in securitization transactions to Ginnie Mae and ~~GSEs~~Government Sponsored Enterprises (“GSEs”) such as Fannie Mae and Freddie Mac. For additional information on our loans held for sale, ~~portfolio,~~ see Note 65 - Certain Transfers of Financial Assets in the accompanying notes to the consolidated financial statements included elsewhere in this report.

Liquidity and Capital Resources

In general terms, liquidity is a measurement of our ability to meet our cash needs. Our ~~objective~~objectives in managing our liquidity isare to maintain our ability to meet loan commitments, ~~purchase~~repurchase investment securities orand repay deposits and other liabilities in accordance with their terms, without an adverse impact on our current or future earnings. Our liquidity strategy is guided by policies, formulated and monitored by our senior management and our ~~Balance Sheet~~Asset and Liability Management Committee (“~~BSMC”~~ALCO”), which take into account the demonstrated marketability of our assets, the sources and stability of our funding and the level of unfunded commitments. We regularly evaluate all of our various funding sources with an emphasis on accessibility, stability, reliability and ~~cost effectiveness. For the year ended December 31, 2016 and for the nine months ended September 30, 2017 our~~cost-effectiveness. Our principal source of funding ~~has been our~~is customer deposits, supplemented by ~~our~~ short-term and long-term borrowings, primarily from ~~Federal~~federal funds purchased and Federal Home Loan Bank ~~("FHLB"~~(“FHLB”) borrowings, which are generally used to fund mortgage finance assets.

~~Liquidity assets were $2.4 billion at September 30, 2017,~~ We also rely on the availability of the mortgage secondary market provided by Ginnie Mae and ~~continue~~the GSEs to ~~be significant as a result~~support the liquidity of ~~deposit growth and increases in borrowing capacity related to~~ our mortgage finance ~~loans.~~assets.

Throughout 2020 we significantly increased our liquidity assets to ensure that we had the balance sheet strength to serve our clients during the COVID-19 pandemic. Through the first six months of 2021 these balances have remained elevated, although they are beginning to run off as we have purchased investment securities and proactively exited certain high-cost indexed deposit products. The following table summarizes the composition of liquidity ~~assets (in thousands):~~assets:


	September 30, 2017			December 31, 2016			September 30, 2016
(in thousands except percentage data)										(in thousands except percentage data)	June 30, 2021			December 31, 2020			June 30, 2020
Federal funds sold and securities purchased under resale agreements	$	25,000		$	25,000		$	30,000		Federal funds sold and securities purchased under resale agreements	$	—		$	—		$	50,000
Interest-bearing deposits	2,332,537			2,700,645			3,441,074			Interest-bearing deposits	6,768,650			9,032,807			9,490,044
Total liquidity assets	$	2,357,537		$	2,725,645		$	3,471,074		Total liquidity assets	$	6,768,650		$	9,032,807		$	9,540,044

Total liquidity assets as a percent of:										Total liquidity assets as a percent of:
Total loans held for investment, excluding mortgage finance loans	15.9		%	21.0		%	27.4		%
Total loans held for investment	11.5		%	15.6		%	19.7		%	Total loans held for investment	28.3		%	37.0		%	37.4		%
Total earning assets	10.0		%	12.9		%	16.1		%	Total earning assets	19.7		%	24.6		%	26.9		%
Total deposits	12.4		%	16.0		%	19.1		%	Total deposits	23.5		%	29.1		%	31.6		%

Our liquidity needs to support growth in loans held for investment have been fulfilled primarily through growth in our core customer deposits. Our goal is to obtain as much of our funding for loans held for investment and other earning assets as possible from deposits of these core customers. These deposits are generated principally through development of long-term customer relationships, ~~with customers,~~ with a significant focus on treasury management products. In addition to deposits from our core customers, we also have access to deposits through brokered customer relationships. For regulatory purposes, these relationship brokered deposits are categorized as brokered deposits; however, since these deposits arise from a customer relationship, which involves extensive treasury services, we consider these deposits to be core deposits for our reporting purposes.

We also have access to incremental deposits through brokered retail certificates of deposit, or CDs. These traditional brokered deposits are generally of short maturities ~~30 to 90 days,~~ and are used to fund temporary differences in the growth in ~~loans~~loan balances, including growth in loans held for sale or other specific categories of loans as compared to customer deposits. The following table summarizes our period-end and average ~~year-to-date~~ core customer deposits, relationship brokered deposits and traditional brokered ~~deposits (in millions):~~deposits:



(in thousands)	June 30, 2021			December 31, 2020			June 30, 2020
Deposits from core customers	$	26,309,504		$	27,581,532		$	25,636,902
Deposits from core customers as a percent of total deposits	91.2		%	89.0		%	84.9		%
Relationship brokered deposits	$	1,373,763		$	1,771,883		$	2,236,028
Relationship brokered deposits as a percent of average total deposits	4.8		%	5.7		%	7.4		%
Traditional brokered deposits	$	1,156,296		$	1,643,174		$	2,314,765
Traditional brokered deposits as a percent of total deposits	4.0		%	5.3		%	7.7		%
Average deposits from core customers(1)	$	29,545,933		$	26,537,612		$	24,640,460
Average deposits from core customers as a percent of average total deposits	90.2		%	86.0		%	84.3		%
Average relationship brokered deposits(1)	$	1,804,015		$	2,099,652		$	1,961,338
Average relationship brokered deposits as a percent of average total deposits	5.5		%	6.8		%	6.7		%
Average traditional brokered deposits(1)	$	1,393,231		$	2,235,359		$	2,623,324
Average traditional brokered deposits as a percent of average total deposits	4.3		%	7.2		%	9.0		%

September 30,
2017 December 31,
2016 September 30,
2016
Deposits from core customers $ 17,259.2
$ 15,400.5
$ 16,633.0
Deposits from core customers as a percent of total deposits 90.5 % 90.5 % 91.7 %
Relationship brokered deposits $ 1,822.1
$ 1,616.3
$ 1,512.2
Relationship brokered deposits as a percent of total deposits 9.5 % 9.5 % 8.3 %
Traditional brokered deposits $ —
$ —
$ —
Traditional brokered deposits as a percent of total deposits — % — % — %
Average deposits from core customers(1)
$ 16,239.7
$ 15,723.8
$ 15,277.0
Average deposits from core customers as a percent of total quarterly average deposits(1)
91.4 % 91.3 % 91.2 %
Average relationship brokered deposits(1)
$ 1,527.1
$ 1,496.1
$ 1,480.6
Average relationship brokered deposits as a percent of total quarterly average deposits(1)
8.6 % 8.7 % 8.8 %
Average traditional brokered deposits(1)
$ —
$ —
$ —
Average traditional brokered deposits as a percent of total quarterly average deposits(1)
— % — % — %
(1) Annual averages presented for December 31, 2020.


~~(1)~~	~~Annual averages presented for December 31, 2016.~~

We have access to sources of traditional brokered deposits that we estimate to be ~~$3.5~~$7.5 billion. Based on our internal guidelines, we have currently chosen to limit our use of these sources to a lesser amount. Customer deposits (total deposits, including relationship brokered deposits, minus brokered CDs) at September 30, 2017 increased by $2.1 billion from December 31, 2016 and increased $936.1 million from September 30, 2016.

We have short-term borrowing sources available to supplement deposits and meet our funding needs. Such borrowings are generally used to fund our mortgage finance ~~assets,~~loans, due to their liquidity, short duration and interest spreads available. These

borrowing sources include ~~Federal~~federal funds purchased from our downstream correspondent bank relationships (which consist of banks that are smaller than our ~~bank)~~Bank) and from our upstream correspondent bank relationships (which consist of banks that are larger than our ~~bank)~~Bank), customer repurchase agreements ~~treasury, tax and loan notes~~ and advances from the FHLB and the Federal Reserve. The following table summarizes our short-term ~~borrowings as of September 30, 2017 (in thousands):~~and other borrowings:



(in thousands)	June 30, 2021
Federal funds purchased	$	10,000
Repurchase agreements	4,481
FHLB borrowings	2,000,000
Line of credit	—
Total short-term borrowings	$	2,014,481
Maximum short-term borrowings outstanding at any month-end during 2021	$	2,907,202

Federal funds purchased $ 75,800
Repurchase agreements 7,696
FHLB borrowings 2,500,000
Line of credit —
Total short-term borrowings $ 2,583,496
Maximum short-term borrowings outstanding at any month-end during 2017 $ 3,162,224

The following table summarizes our other borrowing capacities ~~in excess~~net of balances ~~outstanding at September~~outstanding. As of June 30, ~~2017 (in thousands):~~

2021, all are scheduled to mature within one year.

FHLB borrowing capacity relating to loans $ 4,218,138
FHLB borrowing capacity relating to securities 1,424
Total FHLB borrowing capacity $ 4,219,562
Unused Federal funds lines available from commercial banks $ 1,164,000



(in thousands)	June 30, 2021
FHLB borrowing capacity relating to loans	$	6,680,417
FHLB borrowing capacity relating to securities	3,553,721
Total FHLB borrowing capacity(1)	$	10,234,138
Unused federal funds lines available from commercial banks	$	1,235,000
Unused Federal Reserve borrowings capacity	$	2,003,114
Unused revolving line of credit(2)	$	130,000

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

~~The following table summarizes our long-term borrowings as of September 30, 2017 (in thousands):~~

Subordinated notes $ 281,315
Trust preferred subordinated debentures 113,406
Total long-term borrowings $ 394,721

~~At September 30, 2017, we had a~~(2) Unsecured revolving, non-amortizing line of credit with ~~a maximum availability~~maturity date of ~~$130.0 million. This line of credit matures on~~ December ~~19, 2017. The loan proceeds~~14, 2021. 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. AsNo borrowings were made against this line of ~~September 30, 2017 and December 31, 2016, there were no borrowings outstanding.~~

~~Our equity capital, including $150 million in preferred stock, averaged $2.1 billion for~~credit during the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2021.

Periodically, based on market conditions and other factors, and subject to compliance with applicable laws and regulations and the terms of our existing indebtedness, we or the Bank may repay, repurchase, exchange or redeem outstanding indebtedness, or otherwise enter into transactions regarding our debt or capital structure. For example, we and the Bank periodically evaluate and may engage in liability management transactions, including repurchases or redemptions of outstanding subordinated notes, which may be funded by the issuance of, or exchanges of, newly issued unsecured borrowings, as ~~compared~~we seek to ~~$1.7 billion for the same period in 2016. We have not paid any cash dividends on~~actively manage our ~~common stock since we commenced operations~~debt maturity profile and ~~have no plans to do so~~interest cost.

For additional information regarding our borrowings and our capital and stockholders' equity, see Note 6 – Long-Term Debt and Note 8 – Regulatory Restrictions, respectively, in the ~~foreseeable future.~~accompanying notes to the consolidated financial statements included elsewhere in this report.

As of September 30, 2017, our capital ratios were above the levels required to be well capitalized. We believe that our earnings, periodic capital raising transactions and the addition of loan and deposit relationships will allow us to continue to grow organically.

Commitments and Contractual Obligations

The following table presents, significant fixed and determinable contractual payment obligations to third parties by payment date. Payments for borrowings do not include interest. Payments related to leases are based on actual payments specified in the underlying contracts. Asas of ~~September~~June 30, ~~2017, our~~2021, significant fixed and determinable contractual obligations to third parties ~~excluding interest, were as follows (in thousands):~~by payment date. Amounts in the table do not include accrued or accruing interest.


(in thousands)	Less than 1 Year		1-3 Years		3-5 Years		More than 5 Years		Total
Deposits without a stated maturity	$	27,123,020	$	—	$	—	$	—	$	27,123,020
Time deposits	1,113,324		599,274		3,940		5		1,716,543
Federal funds purchased and customer repurchase agreements	14,481		—		—		—		14,481
FHLB borrowings	2,000,000		—		—		—		2,000,000
Operating lease obligations	17,211		32,286		12,989		20,154		82,640
Long-term debt	—		—		443,288		484,098		927,386


Total contractual obligations	$	30,268,036	$	631,560	$	460,217	$	504,257	$	31,864,070

Off-Balance Sheet Arrangements

We enter into commitments to extend credit and standby letters of credit in the ordinary course of business, details of which are described in Note 1 – Operations and Summary of Significant Accounting Policies in our 2020 Form 10-K. For additional information, see Note 7 – Financial Instruments with Off-Balance Sheet Risk in the accompanying notes to the consolidated financial statements included elsewhere in this report.

Within One
Year

After One but
Within Three
Years

After Three but
Within Five
Years

After Five
Years
Total
Deposits without a stated maturity $ 18,548,721
$ —
$ —
$ —
$ 18,548,721
Time deposits 491,917
40,075
544
—
532,536
Federal funds purchased and customer repurchase agreements 83,496
—
—
—
83,496
FHLB borrowings 2,500,000
—
—
—
2,500,000
Operating lease obligations(1)
16,355
31,809
25,832
20,429
94,425
Subordinated notes —
—
—
281,315
281,315
Trust preferred subordinated debentures —
—
—
113,406
113,406
Total contractual obligations $ 21,640,489
$ 71,884
$ 26,376
$ 415,150
$ 22,153,899


~~(1)~~	~~Non-balance sheet item.~~

Critical Accounting Policies

SEC guidance requires disclosure of “critical accounting policies.” The SEC defines “critical accounting policies” as those that are most important to the presentation of a company’s financial condition and results, and require management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain.

We follow financial accounting and reporting policies that are in accordance with accounting principles generally accepted in the United ~~States. The more~~States (“GAAP”). Certain significant ~~of these~~ policies are summarized in Note 1 - Operations and Summary of Significant Accounting Policies in the ~~accompanying~~ notes to the consolidated financial statements included elsewhere in ~~the 2016~~this report and in our 2020 Form 10-K. Not all significant accounting policies require management to make difficult, subjective or complex judgments. However, the policy noted below could be deemed to meet the SEC’s definition of a critical accounting policy.

Allowance for ~~Loan~~Credit Losses

Management considers the policies related to the allowance for ~~loan~~credit losses as the most critical to the financial statement presentation. The total allowance for ~~loan~~credit losses includes activity related to allowances calculated in accordance with Accounting Standards Codification (“ASC”) ~~310,~~ ~~Receivables, and ASC 450,~~ ~~Contingencies~~326, Credit Losses. The allowance for ~~loan~~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 ~~loan~~credit losses ~~inherent~~expected to be recognized over the life of the loans in ~~the loan~~our portfolio. The allowance for ~~loan~~credit losses on loans is ~~comprised of specific reserves assigned~~a valuation account that is deducted from the loans' amortized cost basis to ~~certain classified loans and general reserves. Factors contributing~~present the net amount expected to be collected on the determination of specific reserves include the creditworthiness of the borrower, and more specifically, changes in the expected future receipt of principal and interest payments and/or in the value of pledged collateral. A reserve is recorded when the carrying amount of the loan exceeds the discounted estimated cash flows using the loan’s initial effective interest rate or the fair value of the collateral for certain collateral-dependent loans. For purposes of determining the ~~general~~ allowance for credit losses, the loan portfolio is segregated by product types in order to recognize differing risk profiles among categories, and then further segregated by credit grades. Loans that do not share risk characteristics are evaluated on an individual basis and are not included in the collective evaluation. Management estimates the allowance balance using relevant available information from internal and external sources relating to past events, current conditions and reasonable and supportable forecasts. Adjustments to historical loss information are made to incorporate our reasonable and supportable forecast of future losses at the portfolio segment level, as well as any necessary qualitative adjustments using a Portfolio Level Qualitative Factor (“PLQF”) and/or a Portfolio Segment Level Qualitative Factor (“SLQF”). The PLQF and SLQF are utilized to address factors that are not present in historical loss rates and are otherwise unaccounted for in the quantitative process. A reserve is recorded upon origination or purchase of a loan. See “Summary of ~~Loan~~Credit Loss Experience” above and Note 4 – Loans Held for Investment and Allowance for ~~Loan~~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 ~~loan~~credit losses.

Impact of Inflation and Changing Prices

The preparation of financial statements in conformity with GAAP requires management to measure the company’s financial position and operating results primarily in terms of historic dollars. Changes in the relative value of money due to inflation or recession are generally not considered. The primary effect of inflation on our operations is reflected in increased operating expenses. Management considers changes in interest rates to impact our financial condition and results of operations to a far greater degree than changes in prices due to inflation. Although interest rates are greatly influenced by changes in the inflation rate, they do not necessarily change at the same rate or in the same magnitude as the inflation rate. We manage our interest rate risk in several ways. Refer to “Interest Rate Risk Management” in Item 3 for further discussion. There can be no assurance that we will not be materially adversely affected by future changes in interest rates, as interest rates are highly sensitive to many factors that are beyond our control.


~~ITEM 3.~~	~~QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK~~

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

Market risk is a broad term for the risk of economic loss due to adverse changes in the fair value of a financial instrument. These changes may be the result of various factors, including interest rates, foreign exchange rates, commodity prices, or equity prices. Additionally, the financial instruments subject to market risk can be classified either as held for trading purposes or held for other than trading.

We are subject to market risk primarily through the effect of changes in interest rates on our portfolio of assets held for purposes other than trading. Additionally, we have some market risk relative to commodity prices through our energy lending activities. ~~Petroleum~~Declines and ~~natural gas commodity prices declined substantially beginning in 2014, and prices have continued to be suppressed through 2017. Such declines~~volatility in commodity prices ~~have and, if continued, could~~ negatively ~~impact~~impacted our energy clients' ability to perform on their loan ~~obligations. Management does not currently expect the current decline~~obligations in ~~commodity prices to~~recent years, and further uncertainty and volatility could have a ~~material adverse effect~~negative impact on our ~~financial position.~~customers and our loan portfolio in future periods. Foreign exchange rates, commodity prices ~~and/or~~(other than energy) and equity prices doare not expected to pose significant market risk to us.

The responsibility for managing market risk rests with the ~~BSMC,~~ALCO, which operates under policy guidelines established by our board of directors. The acceptable negative ~~acceptable~~ variation in net interest revenue due to a ~~200~~100 basis point increase or decrease in interest rates is generally limited by these guidelines to plus or minus 5%10-12%. These guidelines ~~also~~ establish maximum levels for short-term borrowings, short-term assets and public and brokered ~~deposits. They also establish~~deposits and minimum levels for ~~unpledged assets,~~liquidity, among other things. Oversight of our compliance with these guidelines is the ongoing responsibility of the ~~BSMC,~~ALCO, with exceptions reported to the Executive Risk ~~Management~~ Committee, and to our board of directors if ~~deemed~~ necessary, on a quarterly basis. Additionally, the Credit Policy Committee ~~("CPC"~~(“CPC”) specifically manages risk relative to commodity price market risks. The CPC establishes maximum portfolio concentration levels for energy loans as well as maximum advance rates for energy collateral.

Interest Rate Risk Management

Our interest rate sensitivity is illustrated in the following table. The table reflects rate-sensitive positions as of ~~September~~June 30, ~~2017,~~2021, and is not necessarily indicative of positions on other dates. 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~~interest rate-sensitive assets exceed interest rate sensitive liabilities, generally will result in the net interest margin increasing in a rising rate environment and decreasing in a falling rate environment. A negative gap (liability sensitive) will generally have the opposite results on the net interest margin. To reflect anticipated prepayments, certain asset and liability categories are shown in the table using estimated cash flows rather than contractual cash flows. The Company employs interest rate floors in certain variable rate loans to enhance the yield on those loans at times when market interest rates are extraordinarily low. The degree of asset sensitivity, spreads on loans and net interest margin may be reduced until rates increase by an amount sufficient to eliminate the effects of floors. The adverse effect of floors as market rates increase may also be offset by the positive gap, the extent to which rates on deposits and other funding sources lag increasing market rates for loans and changes in composition of funding.

Interest Rate Sensitivity Gap Analysis

~~September~~June 30, ~~2017~~2021

~~(In thousands)~~


(in thousands)	0-3 mo Balance		4-12 mo Balance		1-3 yr Balance		3+ yr Balance		Total Balance
Assets:
Interest-bearing deposits in other banks, federal funds sold and securities purchased under resale agreements	$	6,971,199	$	—	$	—	$	—	$	6,971,199
Investment securities(1)	53,241		1,920		47,821		3,695,293		3,798,275
Total variable loans	$	20,587,256	$	165,989	$	18,454	$	262,401	$	21,034,100
Total fixed loans	208,968		1,621,497		232,906		976,833		3,040,204
Total loans(2)	20,796,224		1,787,486		251,360		1,239,234		24,074,304
Total interest sensitive assets	$	27,820,664	$	1,789,406	$	299,181	$	4,934,527	$	34,843,778
Liabilities:
Interest-bearing customer deposits	$	12,894,982	$	—	$	—	$	—	$	12,894,982
CDs & IRAs	258,235		244,203		53,864		3,945		560,247
Traditional brokered deposits	169,765		441,121		545,410		—		1,156,296
Total interest-bearing deposits	13,322,982		685,324		599,274		3,945		14,611,525
Repurchase agreements, federal funds purchased, FHLB borrowings	2,014,481		—		—		—		2,014,481
Long-term debt	269,483		—		—		657,903		927,386


Total borrowings	2,283,964		—		—		657,903		2,941,867
Total interest sensitive liabilities	$	15,606,946	$	685,324	$	599,274	$	661,848	$	17,553,392
GAP	$	12,213,718	$	1,104,082	$	(300,093)	$	4,272,679	$	—
Cumulative GAP	$	12,213,718	$	13,317,800	$	13,017,707	$	17,290,386	$	17,290,386

Demand deposits									14,228,038
Stockholders’ equity									3,114,957
Total									$	17,342,995

(1)Investment securities based on fair market value.

(2)Total loans includes loans held for investments, stated at gross, and loans held for sale.

0-3 mo
Balance

4-12 mo
Balance

1-3 yr
Balance

3+ yr
Balance

Total
Balance
Assets:
Interest-bearing deposits, federal funds sold and securities purchased under resale agreements $ 2,357,537
$ —
—
$ —
$ 2,357,537
Securities(1)
7,397
2,725
1,158
12,944
24,224
Total variable loans 18,252,896
80,080
13,745
—
18,346,721
Total fixed loans 496,354
1,439,840
704,826
534,427
3,175,447
Total loans(2)
18,749,250
1,519,920
718,571
534,427
21,522,168
Total interest sensitive assets $ 21,114,184
$ 1,522,645
$ 719,729
$ 547,371
$ 23,903,929
Liabilities:
Interest-bearing customer deposits $ 10,285,519
$ —
$ —
$ —
$ 10,285,519
CDs & IRAs 178,361
313,556
40,075
544
532,536
Traditional brokered deposits —
—
—
—
—
Total interest-bearing deposits 10,463,880
313,556
40,075
544
10,818,055
Repurchase agreements, Federal funds
purchased, FHLB borrowings, line
of credit
2,583,496
—
—
—
2,583,496
Subordinated notes —
—
—
281,315
281,315
Trust preferred subordinated debentures —
—
—
113,406
113,406
Total borrowings 2,583,496
—
—
394,721
2,978,217
Total interest sensitive liabilities $ 13,047,376
$ 313,556
$ 40,075
$ 395,265
$ 13,796,272
Gap $ 8,066,808
$ 1,209,089
$ 679,654
$ 152,106
$ —
Cumulative Gap 8,066,808
9,275,897
9,955,551
10,107,657
10,107,657

Demand deposits $ 8,263,202
Stockholders’ equity 2,158,363
Total $ 10,421,565


~~(1)~~	~~Securities based on fair market value.~~


~~(2)~~	~~Loans are stated at gross.~~

~~The table above sets forth the balances as of September 30, 2017 for interest-bearing assets, interest-bearing liabilities and the total of non-interest-bearing deposits and stockholders’ equity.~~ While a gap interest table is useful in analyzing interest rate sensitivity, an interest rate sensitivity simulation provides a better illustration of the sensitivity of earnings to changes in interest rates. Earnings are also affected by the effects of changing interest rates on the value of funding derived from demand deposits and stockholders’ equity. We perform a sensitivity analysis to identify interest rate risk exposure on net interest income. We quantify and measure interest rate risk exposure using a model to dynamically simulate the effect of changes in net interest income relative to changes in interest rates ~~and loan and deposit account balances~~ over the next twelve months based on three interest rate scenarios. These are a ~~“most likely”~~static rate scenario and two “shock test” scenarios.

~~The “most likely” rate scenario is~~These scenarios are based on ~~the consensus forecast of future~~ interest rates as of the last day of a reporting period published by independent ~~sources. These forecasts~~sources and incorporate ~~future spot rates and~~ relevant spreads of instruments that are actively traded in the open market. The Federal Reserve’s ~~Federal~~federal funds target affects short-term ~~borrowing rates;~~borrowing; the prime lending rate and LIBOR are the basis for most of our variable-rate loan pricing. The 10-year ~~mortgage~~treasury rate is also monitored because of its effect on prepayment speeds for mortgage-backed ~~securities. We believe these~~securities and MSRs. These are our primary interest rate exposures. We are currently not ~~currently~~ using derivatives to manage our interest rate ~~exposure.~~exposure, except for MSRs, although we may do so in the future if that appears advisable.

~~The two~~For modeling purposes, the “shock test” scenarios as of June 30, 2021 and 2020 assume aimmediate, sustained ~~parallel~~ 100 and 200 basis point ~~increase~~increases in interest rates. As short-term rates ~~have remained~~declined during 2020 and remain low through ~~2016 and~~ the first ~~nine~~six months of ~~2017,~~2021, we do not believe that analysis of an assumed decrease in interest rates would provide meaningful results. We will continue to evaluate these scenarios as interest rates change, until short-term rates rise above 3.0%, at which point we will resume evaluations of shock scenarios in which interest rates decrease.

Our interest rate risk exposure model incorporates assumptions regarding the level of interest rate ~~or balance changes~~ on indeterminable maturity deposits (demand deposits, interest-bearing transaction accounts and savings accounts) for a given level of market rate ~~changes.~~change. In the current environment of decreasing 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 ~~planned growth and new business activities~~these changes is factored into the simulation model. This modeling indicated interest rate sensitivity as ~~follows (in thousands):~~follows:

Anticipated Impact Over the Next Twelve Months as Compared to Most Likely Scenario Anticipated Impact Over the Next Twelve Months as Compared to Most Likely Scenario
100 bp Increase 200 bp Increase 100 bp Increase 200 bp Increase
September 30, 2017 September 30, 2016
Change in net interest income $ 114,593
$ 231,113
$ 117,094
$ 241,366


	Anticipated Impact Over the Next Twelve Months as Compared to Most Likely Scenario
	June 30, 2021				June 30, 2020
(in thousands)	100 bps Increase		200 bps Increase		100 bps Increase		200 bps Increase
Change in net interest income	$	24,267	$	79,342	$	70,160	$	152,756

The simulations used to manage market risk are based on numerous assumptions regarding the effect of changes in interest rates on the timing and extent of repricing characteristics, future cash flows and customer behavior. These assumptions are inherently uncertain and, as a result, the model cannot precisely estimate net interest income or precisely predict the impact of higher or lower interest rates on net interest income. Actual results ~~may~~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.

Our business relies upon a large volume of loans, derivative contracts and other financial instruments with attributes that are either directly or indirectly dependent on LIBOR to establish their interest rate and/or value. In 2017, the U.K. Financial Conduct Authority announced that it would no longer compel banks to submit rates for the calculation of LIBOR after 2021. The administrator of LIBOR has proposed to extend publication of the most commonly used U.S. Dollar LIBOR settings to June 30, 2023 and to cease publishing other LIBOR settings on December 31, 2021. The U.S. federal banking agencies issued guidance strongly encouraging banking organizations to cease using U.S. dollar LIBOR as a reference rate in new contracts as soon as practicable and in any event by December 31, 2021. At this time, it is not possible to predict what rate or rates may become accepted alternatives to LIBOR or what the effect of any such changes in views or alternatives may have on the financial markets for LIBOR-linked financial instruments. The full impact of alternatives to LIBOR on the valuations, pricing and operation of our financial instruments is not yet known; however, the primary instruments that may be impacted include loans, securities, borrowings and derivatives indexed to LIBOR that mature after December 31, 2021. We have established a working group, consisting of key stakeholders from throughout the company, to monitor developments relating to LIBOR uncertainty and changes and to guide the Bank's response. This team is currently working to ensure that our technology systems are prepared for the transition, our loan documents that reference LIBOR-based rates have been appropriately amended to reference other methods of interest rate determinations and internal and external stakeholders are apprised of the transition.


~~ITEM 4.~~	~~CONTROLS AND PROCEDURES~~

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

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

Changes in Internal Control over Financial Reporting

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

PART ~~II—~~II - OTHER INFORMATION


~~ITEM 1.~~	~~LEGAL PROCEEDINGS~~

~~We are~~ITEM 1. LEGAL PROCEEDINGS

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


~~ITEM 1A.~~	~~RISK FACTORS~~

ITEM 1A. RISK FACTORS

There have been no material changes in the risk factors previously disclosed in the ~~2016~~December 31, 2020 Form 10-K.

ITEM 6. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

(a) Exhibits


~~ITEM 6.~~	~~EXHIBITS~~



~~(a)~~			~~Exhibits~~
			~~31.1~~

4			First Supplemental Indenture dated May 6, 2021, between the Company and the Trustee, which is incorporated by reference and filed as Exhibit 4.1 to our Current Report on Form 8-K dated May 6, 2021
31.1			Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Exchange ~~Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith.~~Act*
31.2			~~31.2~~	Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the Exchange ~~Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith.~~Act*
32.1			~~32.1~~	Section 1350 Certification of Chief Executive ~~Officer pursuant to Rule 13a-14(b) of the Exchange Act and 18 U.S.C.~~ Officer**
32.2			Section 1350 ~~as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, furnished herewith.~~
	~~32.2~~	Certification of Chief Financial ~~Officer pursuant to Rule 13a-14(b) of the Exchange Act and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, furnished herewith.~~Officer**
101.INS			~~101~~XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCH			~~The following materials from Texas Capital Bancshares, Inc.’s Quarterly Report on Form 10-Q for~~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 ~~quarter ended September 30, 2017, formatted in~~Inline XBRL (eXtensible Business Reporting Language): (i) Consolidated Statements of Income, (ii) Consolidated Balance Sheets, (iii) Consolidated Statements of Cash Flows, and (iv) Notes to Consolidated Financial Statementsdocument)

* Filed herewith

** Furnished herewith

SIGNATURES

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

TEXAS CAPITAL BANCSHARES, INC.

Date: ~~October 19, 2017~~

July 22, 2021



/s/ Julie L. Anderson
Julie L. Anderson
Chief Financial Officer
(Duly authorized officer and principal financial officer)

~~EXHIBIT INDEX~~




~~Exhibit Number~~
~~31.1~~	~~Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith.~~
~~31.2~~	~~Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith.~~
~~32.1~~	Certification of Chief Executive Officer pursuant to Rule 13a-14(b) of the Exchange Act and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, furnished herewith.
~~32.2~~	Certification of Chief Financial Officer pursuant to Rule 13a-14(b) of the Exchange Act and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, furnished herewith.
~~101~~	The following materials from Texas Capital Bancshares, Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2017, formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Statements of Income, (ii) Consolidated Balance Sheets, (iii) Consolidated Statements of Cash Flows, and (iv) Notes to Consolidated Financial Statements



	Three months ended September 30,				Nine months ended September 30,
	2017		2016		2017		2016
Numerator:
Net income	$	58,684	$	42,725	$	152,321	$	106,733
Preferred stock dividends	2,438		2,438		7,313		7,313
Net income available to common stockholders	56,246		40,287		$	145,008	99,420
Denominator:
Denominator for basic earnings per share— weighted average shares	49,607,028		45,980,517		49,573,456		45,931,357
Effect of employee stock-based awards(1)	214,468		118,885		235,011		119,021
Effect of warrants to purchase common stock	429,370		410,281		431,551		382,578
Denominator for dilutive earnings per share—adjusted weighted average shares and assumed conversions	50,250,866		46,509,683		50,240,018		46,432,956
Basic earnings per common share	$	1.13	$	0.88	$	2.93	$	2.16
Diluted earnings per common share	$	1.12	$	0.87	$	2.89	$	2.14



	September 30, 2017
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
Available-for-sale securities:
Residential mortgage-backed securities	$	11,402	$	756	$	—		$	12,158
Equity securities(1)	12,161		266		(361		)	12,066
	$	23,563	$	1,022	$	(361	)	$	24,224

	December 31, 2016
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
Available-for-sale securities:
Residential mortgage-backed securities	$	14,680	$	972	$	—		$	15,652
Municipals	275		—		—			275
Equity securities(1)	9,280		27		(360		)	8,947
	$	24,235	$	999	$	(360	)	$	24,874



September 30, 2017
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Commercial
Business loans	$	23,561	$	24,983	$	—	$	23,513	$	—
Energy	32,378		37,221		—		39,196		—
Construction
Market risk	—		—		—		—		—
Real estate
Market risk	—		—		—		—		—
Commercial	1,700		1,700		—		2,388		—
Secured by 1-4 family	—		—		—		—		—
Consumer	—		—		—		—		—
Leases	—		—		—		—		—
Total impaired loans with no allowance recorded	$	57,639	$	63,904	$	—	$	65,097	$	—
With an allowance recorded:
Commercial
Business loans	$	12,267	$	12,267	$	3,226	$	15,689	$	—
Energy	49,220		62,259		21,184		53,839		6
Construction
Market risk	—		—		—		35		—
Real estate
Market risk	299		299		6		548		—
Commercial	—		—		—		—		—
Secured by 1-4 family	118		118		20		649		—
Consumer	—		—		—		44		—
Leases	—		—		—		18		—
Total impaired loans with an allowance recorded	$	61,904	$	74,943	$	24,436	$	70,822	$	6
Combined:
Commercial
Business loans	$	35,828	$	37,250	$	3,226	$	39,202	$	—
Energy	81,598		99,480		21,184		93,035		6
Construction
Market risk	—		—		—		35		—
Real estate
Market risk	299		299		6		548		—
Commercial	1,700		1,700		—		2,388		—
Secured by 1-4 family	118		118		20		649		—
Consumer	—		—		—		44		—
Leases	—		—		—		18		—
Total impaired loans	$	119,543	$	138,847	$	24,436	$	135,919	$	6



	30-59 Days Past Due		60-89 Days Past Due		Greater Than 90 Days and Accruing(1)		Total Past Due		Non-accrual		Current		Total
Commercial
Business loans	$	25,301	$	18,704	$	8,892	$	52,897	$	34,789	$	7,635,061	$	7,722,747
Energy	9,950		4,484		—		14,434		81,598		992,046		1,088,078
Mortgage finance loans	—		—		—		—		—		5,642,285		5,642,285
Construction
Market risk	663		—		—		663		—		2,074,537		2,075,200
Secured by 1-4 family	—		—		—		—		—		24,155		24,155
Real estate
Market risk	1,301		—		—		1,301		—		2,639,169		2,640,470
Commercial	1,839		—		—		1,839		1,700		782,185		785,724
Secured by 1-4 family	2,798		—		—		2,798		118		254,454		257,370
Consumer	—		—		—		—		—		70,436		70,436
Leases	11,701		—		—		11,701		—		248,019		259,720
Total loans held for investment	$	53,553	$	23,188	$	8,892	$	85,633	$	118,205	$	20,362,347	$	20,566,185



September 30, 2017
	Number of Restructured Loans	Balance at Restructure		Balance at Period-End
Energy loans	1	$	1,070	$	—
Commercial business loans	1	$	599	$	721
Total new restructured loans in 2017	2	$	1,669	$	721

September 30, 2016
	Number of Restructured Loans	Balance at Restructure		Balance at Period-End
Energy loans	2	$	14,235	$	13,289
Total new restructured loans in 2016	2	$	14,235	$	13,289



	September 30, 2017			December 31, 2016
Outstanding balance	$	957,560		$	980,414
Fair value	955,983			968,929
Fair value over/(under) outstanding balance	$	(1,577	)	$	(11,485	)



	September 30, 2017		December 31, 2016
Commitments to extend credit	$	6,539,498	$	5,704,381
Standby letters of credit	203,070		171,266



	Actual				Minimum Capital Required - Basel III Phase-In Schedule				Minimum capital Required - Basel III Fully Phased-In				Required to be Considered Well Capitalized
	Capital Amount		Ratio		Capital Amount		Ratio		Capital Amount		Ratio		Capital Amount	Ratio
As of September 30, 2017:
CET1
Company	$	1,989,547	8.35	%	$	1,369,699	5.75	%	$	1,667,460	7.00	%	N/A	N/A
Bank	1,930,836		8.11	%	1,369,659		5.75	%	1,667,411		7.00	%	1,548,311	6.50	%
Total capital (to risk-weighted assets)
Company	2,722,408		11.43	%	2,203,429		9.25	%	2,501,189		10.50	%	N/A	N/A
Bank	2,505,209		10.52	%	2,203,365		9.25	%	2,501,117		10.50	%	2,382,016	10.00	%
Tier 1 capital (to risk-weighted assets)
Company	2,248,403		9.44	%	1,727,012		7.25	%	2,024,772		8.50	%	N/A	N/A
Bank	2,089,692		8.77	%	1,726,962		7.25	%	2,024,714		8.50	%	1,905,613	8.00	%
Tier 1 capital (to average assets)(1)
Company	2,248,403		9.57	%	939,319		4.00	%	939,319		4.00	%	N/A	N/A
Bank	2,089,692		8.90	%	939,139		4.00	%	939,139		4.00	%	1,173,924	5.00	%
As of December 31, 2016:
CET1
Company	$	1,841,219	8.97	%	$	1,052,205	5.13	%	$	1,437,159	7.00	%	N/A	N/A
Bank	1,735,496		8.45	%	1,051,989		5.13	%	1,436,863		7.00	%	1,334,244	6.50	%
Total capital (to risk-weighted assets)
Company	2,561,663		12.48	%	1,770,766		8.63	%	2,155,715		10.50	%	N/A	N/A
Bank	2,297,528		11.19	%	1,770,421		8.63	%	2,155,295		10.50	%	2,052,683	10.00	%
Tier 1 capital (to risk-weighted assets)
Company	2,101,071		10.23	%	1,360,154		6.63	%	1,745,103		8.50	%	N/A	N/A
Bank	1,895,348		9.23	%	1,359,888		6.63	%	1,744,762		8.50	%	1,642,147	8.00	%
Tier 1 capital (to average assets)(1)
Company	2,101,071		9.34	%	900,268		4.00	%	900,268		4.00	%	N/A	N/A
Bank	1,895,348		8.42	%	900,070		4.00	%	900,070		4.00	%	1,125,087	5.00	%



	September 30, 2017 Weighted Average Interest Rate				December 31, 2016 Weighted Average Interest Rate
	Received		Paid		Received		Paid
Non-hedging interest rate swaps	3.46	%	4.43	%	3.17	%	4.58	%



	Three months ended September 30, 2017/2016								Nine months ended September 30, 2017/2016
	Net		Change Due To(1)						Net			Change Due To(1)
	Change		Volume			Yield/Rate			Change			Volume			Yield/Rate
Interest income:
Securities(2)	$	104	$	517		$	(413	)	$	105		$	888		$	(783	)
Loans held for sale	6,220		4,931			1,289			21,546			18,737			2,809
Loans held for investment, mortgage finance loans	5,639		1,489			4,150			(868		)	(10,625		)	9,757
Loans held for investment(2)	41,432		20,089			21,343			89,325			46,895			42,430
Federal funds sold	187		(202		)	389			397			(404		)	801
Deposits in other banks	3,464		(1,040		)	4,504			8,820			(994		)	9,814
Total	57,046		25,784			31,262			119,325			54,497			64,828
Interest expense:
Transaction deposits	2,399		(134		)	2,533			4,355			(274		)	4,629
Savings deposits	10,924		1,453			9,471			21,139			2,741			18,398
Time deposits	161		(9		)	170			23			(174		)	197
Borrowed funds	3,866		248			3,618			6,998			265			6,733
Long-term debt	178		5			173			439			—			439
Total	17,528		1,563			15,965			32,954			2,558			30,396
Net interest income	$	39,518	$	24,221		$	15,297		$	86,371		$	51,939		$	34,432



	Nine months ended September 30, 2017			Year ended December 31, 2016			Nine months ended September 30, 2016
Allowance for loan losses:
Beginning balance	$	168,126		$	141,111		$	141,111
Loans charged-off:
Commercial	32,146			56,558			34,232
Construction	59			—			—
Real estate	290			528			528
Consumer	180			47			40
Leases	—			—			—
Total charge-offs	32,675			57,133			34,800
Recoveries:
Commercial	3,574			9,364			7,829
Construction	104			34			34
Real estate	74			63			36
Consumer	56			21			16
Leases	9			77			71
Total recoveries	3,817			9,559			7,986
Net charge-offs	28,858			47,574			26,814
Provision for loan losses	43,661			74,589			66,139
Ending balance	$	182,929		$	168,126		$	180,436
Allowance for off-balance sheet credit losses:
Beginning balance	$	11,422		$	9,011		$	9,011
Provision for off-balance sheet credit losses	(1,661		)	2,411			1,861
Ending balance	$	9,761		$	11,422		$	10,872
Total allowance for credit losses	$	192,690		$	179,548		$	191,308
Total provision for credit losses	$	42,000		$	77,000		$	68,000
Allowance for loan losses to LHI	0.89		%	0.96		%	1.02		%
Allowance for loan losses to LHI excluding mortgage finance loans	1.23		%	1.29		%	1.42		%
Net charge-offs to average LHI(1)	0.22		%	0.29		%	0.22		%
Net charge-offs to average LHI excluding mortgage finance loans(1)	0.28		%	0.38		%	0.29		%
Total provision for credit losses to average LHI(1)	0.32		%	0.46		%	0.55		%
Total provision for credit losses to average LHI excluding mortgage finance loans(1)	0.41		%	0.62		%	0.74		%
Recoveries to total charge-offs	11.68		%	16.73		%	22.95		%
Allowance for off-balance sheet credit losses to off-balance sheet credit commitments	0.14		%	0.19		%	0.19		%
Combined allowance for credit losses to LHI	0.94		%	1.03		%	1.09		%
Combined allowance for credit losses to LHI excluding mortgage finance loans	1.30		%	1.38		%	1.51		%
Non-performing assets:
Non-accrual loans(2)	$	118,205		$	167,791		$	169,113
OREO(3)	18,131			18,961			19,009
Total	$	136,336		$	186,752		$	188,122
Loans past due 90 days and still accruing(4)	8,892			10,729			9,706
Allowance for loan losses to non-accrual loans	1.5x			1.0x			1.1x




Federal funds purchased	$	75,800
Repurchase agreements	7,696
FHLB borrowings	2,500,000
Line of credit	—
Total short-term borrowings	$	2,583,496
Maximum short-term borrowings outstanding at any month-end during 2017	$	3,162,224




FHLB borrowing capacity relating to loans	$	4,218,138
FHLB borrowing capacity relating to securities	1,424
Total FHLB borrowing capacity	$	4,219,562
Unused Federal funds lines available from commercial banks	$	1,164,000




Subordinated notes	$	281,315
Trust preferred subordinated debentures	113,406
Total long-term borrowings	$	394,721



	Within One Year		After One but Within Three Years		After Three but Within Five Years		After Five Years		Total
Deposits without a stated maturity	$	18,548,721	$	—	$	—	$	—	$	18,548,721
Time deposits	491,917		40,075		544		—		532,536
Federal funds purchased and customer repurchase agreements	83,496		—		—		—		83,496
FHLB borrowings	2,500,000		—		—		—		2,500,000
Operating lease obligations(1)	16,355		31,809		25,832		20,429		94,425
Subordinated notes	—		—		—		281,315		281,315
Trust preferred subordinated debentures	—		—		—		113,406		113,406
Total contractual obligations	$	21,640,489	$	71,884	$	26,376	$	415,150	$	22,153,899



	Anticipated Impact Over the Next Twelve Months as Compared to Most Likely Scenario				Anticipated Impact Over the Next Twelve Months as Compared to Most Likely Scenario
	100 bp Increase		200 bp Increase		100 bp Increase		200 bp Increase
	September 30, 2017				September 30, 2016
Change in net interest income	$	114,593	$	231,113	$	117,094	$	241,366