株探米国株
英語
エドガーで原本を確認する
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2024

☐ 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: 001-36682
VERITEX HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
Texas   27-0973566
(State or other jurisdiction of   (I.R.S. employer
incorporation or organization)   identification no.)
     
8214 Westchester Drive, Suite 800    
Dallas, Texas   75225
(Address of principal executive offices)   (Zip code)
(972) 349-6200
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol Name of each exchange on which registered
Common Stock, par value $0.01 VBTX Nasdaq Global Market

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

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer ☒   Accelerated filer ☐
     
Non-accelerated filer ☐   Smaller reporting company  ☐
Emerging growth company  ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of May 3, 2024, there were 54,525,408 outstanding shares of the registrant’s common stock, par value $0.01 per share.




VERITEX HOLDINGS, INC. AND SUBSIDIARIES
Page































2



Glossary of Acronyms, Abbreviations, and Terms
The acronyms, abbreviations, and terms listed below are used in various sections of this Form 10-Q, including “Part I, Item 1. Financial Statements” and “Part I, Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations."

ACL Allowance for Credit Loss Green Green Bank
AFS Available-For-Sale HTM Held-To-Maturity
AML Anti-Money Laundering IRA Inflation Reduction Act of 2022
AMLA Anti-Money Laundering Act of 2020 LHFS Loans Held for Sale
AOCI Accumulated Other Comprehensive Income LHI Loans Held for Investment
APIC Additional Paid-In Capital LIBOR London Interbank Offered Rate
ASC Accounting Standards Codification Lower Lower Holding Company
ASU Accounting Standard Update M&A Mergers and acquisitions
BOLI Bank-Owned Life Insurance MBS Mortgage-backed Securities
Board Board of Directors of Veritex Holdings, Inc. MW Mortgage Warehouse
BTFP Bank Term Funding Program NAC North Avenue Capital, LLC
CBLR Community Bank Leverage Ratio NOOCRE Non-owner Occupied CRE
CD Certificates of Deposit NPV Net Present Value
CECL Current Expected Credit Losses OBS Off-Balance Sheet
CET1 Common Equity Tier 1 OOCRE Owner Occupied CRE
CMO Collateralized Mortgage Obligation OREO Other Real Estate Owned
CRA Community Reinvestment Act PCA Prompt Corrective Action
CRE Commercial Real Estate PCD Purchased Credit Deteriorated
DCF Discounted Cash Flow PSU Performance-based Restricted stock units
DFW Dallas-Fort Worth RBC Risk-Based Capital
DIF Deposit Insurance Fund RSU Restricted stock units
EPS Earnings Per Share RWA Risk-Weighted Assets
Exchange Act Securities Exchange Act of 1934, as amended Sarbanes-Oxley Act Sarbanes-Oxley Act of 2002
FASB Financial Accounting Standards Board SBA U. S. Small Business Administration
FDIC Federal Deposit Insurance Corporation SEC Securities and Exchange Commission
Federal Reserve The Federal Reserve System SOFR Secured Overnight Financing Rate
FHLB Federal Home Loan Bank TDB Texas Department of Banking
FRB Federal Reserve Bank of Dallas Thrive Thrive Mortgage, LLC
GAAP Generally Accepted Accounting Principles in the United States of America USDA United States Department of Agriculture
3



PART I. FINANCIAL INFORMATION 

Item 1. Financial Statements
4

VERITEX HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
as of March 31, 2024 and December 31, 2023
(Dollars in thousands, except par value and share information) 
March 31, December 31,
2024 2023
(Unaudited)
ASSETS
Cash and due from banks $ 41,884  $ 58,914 
Interest bearing deposits in other banks 698,885  570,149 
Total cash and cash equivalents 740,769  629,063 
Debt securities AFS, at fair value 1,166,268  1,076,639 
Debt securities HTM (fair value of $155,741 and $160,021, at March 31, 2024 and December 31, 2023, respectively)
 178,662  180,403 
Equity securities 21,676  21,521 
Investment in unconsolidated subsidiaries 1,018  1,018 
FHLB Stock and FRB Stock 54,094  53,699 
Total investments 1,421,718  1,333,280 
LHFS 64,762  79,072 
LHI, MW 449,531  377,796 
LHI, excluding MW 9,249,551  9,206,544 
Less: ACL (112,032) (109,816)
Total LHI, net 9,587,050  9,474,524 
BOLI 85,359  84,833 
Premises and equipment, net 105,299  105,727 
OREO 18,445  — 
Intangible assets, net of accumulated amortization 38,679  41,753 
Goodwill 404,452  404,452 
Other assets 241,863  241,633 
Total assets $ 12,708,396  $ 12,394,337 
LIABILITIES AND STOCKHOLDERS’ EQUITY    
Deposits:    
Noninterest-bearing deposits $ 2,349,211  $ 2,218,036 
Interest-bearing transaction and savings deposits 4,220,114  4,348,385 
Certificates and other time deposits 3,486,805  3,191,737 
Correspondent money market deposits 597,690  580,037 
Total deposits 10,653,820  10,338,195 
Accounts payable and other liabilities 186,027  195,036 
Advances from FHLB 100,000  100,000 
Subordinated debentures and subordinated notes 230,034  229,783 
Total liabilities 11,169,881  10,863,014 
Stockholders’ equity:    
Common stock, $0.01 par value:
Authorized shares - 75,000,000
Issued shares - 61,134,055 and 60,976,462 at March 31, 2024 and December 31, 2023, respectively
 611  610 
APIC 1,319,144  1,317,516 
Retained earnings 457,499  444,242 
 AOCI (71,157) (63,463)
Treasury stock, 6,638,094 and 6,638,094 shares, at cost, at March 31, 2024 and December 31, 2023, respectively
 (167,582) (167,582)
Total stockholders’ equity 1,538,515  1,531,323 
Total liabilities and stockholders’ equity $ 12,708,396  $ 12,394,337 

See accompanying Notes to Consolidated Financial Statements.
5

VERITEX HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Statements of Income (Unaudited)
For the Three Months Ended March 31, 2024 and 2023
(Dollars in thousands, except per share amounts)
Three Months Ended
March 31,
2024 2023
INTEREST AND DIVIDEND INCOME
Interest and fees on loans $ 161,942  $ 151,707 
Debt securities 13,695  10,988 
Deposits in financial institutions and Federal Funds sold 8,050  5,534 
Equity securities and other investments 900  1,408 
Total interest and dividend income 184,587  169,637 
INTEREST EXPENSE
Transaction and savings deposits 46,784  29,857 
Certificates and other time deposits 40,492  20,967 
Advances from FHLB 1,391  12,358 
Subordinated debentures and subordinated notes 3,114  3,066 
Total interest expense 91,781  66,248 
NET INTEREST INCOME 92,806  103,389 
Provision for credit losses 7,500  9,385 
(Benefit) provision for credit losses on unfunded commitments (1,541) 1,497 
Net interest income after provision (benefit) for credit losses 86,847  92,507 
NONINTEREST INCOME
Service charges and fees on deposit accounts 4,896  5,017 
Loan fees 2,510  2,064 
Loss on sales of debt securities (6,304) (5,321)
Government guaranteed loan income, net 2,614  9,688 
Equity method investment loss —  (1,521)
Customer swap income 408  217 
Other 2,538  3,387 
Total noninterest income 6,662  13,531 
NONINTEREST EXPENSE
Salaries and employee benefits 33,365  31,865 
Occupancy and equipment 4,677  4,973 
Professional and regulatory fees 6,053  4,389 
Data processing and software expense 4,856  4,720 
Marketing 1,546  1,779 
Amortization of intangibles 2,438  2,495 
Telephone and communications 261  478 
Other 8,920  5,916 
Total noninterest expense 62,116  56,615 
Income before income tax expense 31,393  49,423 
Income tax expense 7,237  11,012 
NET INCOME $ 24,156  $ 38,411 
Basic EPS $ 0.44  $ 0.71 
Diluted EPS $ 0.44  $ 0.70 
See accompanying Notes to Consolidated Financial Statements.
6

VERITEX HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Statements of Comprehensive Income (Loss) (Unaudited)
For the Three Months Ended March 31, 2024 and 2023
(Dollars in thousands)
Three Months Ended March 31,
2024 2023
NET INCOME $ 24,156  $ 38,411 
OTHER COMPREHENSIVE INCOME
Net unrealized (losses) gains on debt securities AFS:
Change in net unrealized (losses) gains on debt securities AFS during the period, net (10,421) 2,547 
Amortization from transfer of debt securities from AFS to HTM 2,925  3,622 
Reclassification adjustment for net losses included in net income 6,304  5,321 
Net unrealized (losses) gains on debt securities AFS (1,192) 11,490 
Net unrealized (losses) gains on derivative instruments designated as cash flow hedges (8,495) 7,078 
Other comprehensive (loss) income, before tax (9,687) 18,568 
Income tax (benefit) expense (1,993) 3,673 
Other comprehensive (loss) income, net of tax (7,694) 14,895 
COMPREHENSIVE INCOME $ 16,462  $ 53,306 

See accompanying Notes to Consolidated Financial Statements.


7

VERITEX HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Statements of Changes in Stockholders’ Equity (Unaudited) 
For the Three Months Ended March 31, 2024 and 2023
(Dollars in thousands, except share data)
Three Months Ended March 31, 2024
  Common Stock Treasury Stock APIC Retained
Earnings		 AOCI Total 
  Shares Amount Shares Amount
Balance at December 31, 2023 54,338,368  $ 610  6,638,094  $ (167,582) $ 1,317,516  $ 444,242  $ (63,463) $ 1,531,323 
RSU vested, net of 69,034 shares withheld to cover taxes
 157,593  1  —  —  (1,261) —  —  (1,260)
Stock based compensation —  —  —  —  2,889  —  2,889 
Net income —  —  —  —  —  24,156  —  24,156 
Dividends paid —  —  —  —  —  (10,899) —  (10,899)
Other comprehensive loss —  —  —  —  —  —  (7,694) (7,694)
Balance at March 31, 2024 54,495,961  $ 611  6,638,094  $ (167,582) $ 1,319,144  $ 457,499  $ (71,157) $ 1,538,515 


Three Months Ended March 31, 2023
  Common Stock Treasury Stock APIC Retained
Earnings		 AOCI  
  Shares Amount Shares Amount Total
Balance at December 31, 2022 54,029,955  $ 607  6,638,094  $ (167,582) $ 1,306,852  $ 379,299  $ (69,403) $ 1,449,773 
RSUs vested, net of 71,465 shares withheld to cover taxes
 161,081  2  —  —  (1,928) —  —  (1,926)
Exercise of employee stock options, net of 121 and 9,729 shares withheld to cover taxes and exercise, respectively
 37,997  —  —  —  534  —  —  534 
Stock based compensation —  —  —  —  2,887  —  —  2,887 
Net income —  —  —  —  —  38,411  —  38,411 
Dividends paid —  —  —  —  —  (10,837) —  (10,837)
Other comprehensive loss —  —  —  —  —  —  14,895  14,895 
Balance at March 31, 2023 54,229,033  $ 609  6,638,094  $ (167,582) $ 1,308,345  $ 406,873  $ (54,508) $ 1,493,737 

See accompanying Notes to Consolidated Financial Statements.


8

VERITEX HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Unaudited)
For the Three Months Ended March 31, 2024 and 2023
(Dollars in thousands)

  For the Three Months Ended March 31,
  2024 2023
Cash flows from operating activities:
Net income $ 24,156  $ 38,411 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of fixed assets and intangibles 5,127  4,764 
Net (accretion) amortization of time deposit premium, debt discount and debt issuance costs (843) 240 
Provision for credit losses and unfunded commitments 5,959  10,882 
Accretion of loan discount (422) (1,014)
Stock-based compensation expense 2,889  2,887 
Excess tax expense from stock compensation 384  112 
Net amortization of premiums on debt securities 1,191  885 
Unrealized loss (gain) on equity securities recognized in earnings 105  (126)
Change in cash surrender value and mortality rates of BOLI (526) (466)
Loss on sales of debt securities 6,304  5,321 
Change in fair value of government guaranteed loans using fair value option 49  (2,239)
Gain on sales of mortgage LHFS (10) (6)
Gain on sales of government guaranteed loans (3,211) (7,449)
Servicing asset recoveries, net (222) (424)
Originations of LHFS (7,842) (25,136)
Proceeds from sales of LHFS 24,148  5,520 
Equity method investment loss —  1,521 
Decrease (increase) in other assets 4,845  (3,119)
(Decrease) increase in accounts payable and other liabilities (17,812) 3,975 
Net cash provided by operating activities 44,269  34,539 
Cash flows from investing activities:    
Purchases of AFS debt securities (229,936) (149,982)
Proceeds from sales of AFS debt securities 113,794  109,793 
Proceeds from maturities, calls and pay downs of AFS debt securities 18,201  175,289 
Maturity, calls and paydowns of HTM debt securities 1,366  800 
Purchases of other investments (655) (15,045)
Net loans originated (153,534) (134,513)
Proceeds from sale of government guaranteed loans 14,409  (52,868)
Net (disposals) additions to premises and equipment (768) 18 
Net cash used in investing activities (237,123) (66,508)
Cash flows from financing activities:    
Net increase (decrease) in deposits 316,719  (88,484)
Net increase in advances from FHLB —  505,000 
Payments to tax authorities for stock-based compensation (1,260) (1,926)
Proceeds from exercise of employee stock options —  534 
Dividends paid (10,899) (10,837)
Net cash provided by financing activities 304,560  404,287 
Net increase in cash and cash equivalents 111,706  372,318 
Cash and cash equivalents at beginning of period 629,063  436,077 
Cash and cash equivalents at end of period $ 740,769  $ 808,395 
See accompanying Notes to Consolidated Financial Statements.
9

VERITEX HOLDINGS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Dollars in thousands, except for per share amounts) 

1. Operations and Summary of Significant Accounting Policies
Organization and Nature of Business
In this report, the words “Veritex,” “the Company,” “we,” “us,” and “our” refer to the combined entities of Veritex Holdings, Inc. and its subsidiaries, including Veritex Community Bank. The word “Holdco” refers to Veritex Holdings, Inc. The word “the Bank” refers to Veritex Community Bank.
Veritex is a Texas state banking organization, with corporate offices in Dallas, Texas, and currently operates 19 branches located in the Dallas-Fort Worth metroplex and 11 branches in the Houston metropolitan area. As of this filing, one branch in the Dallas-Fort Worth metroplex was opened after first quarter end 2024. The Bank provides a full range of banking services, including commercial and retail lending and the acceptance of checking and savings deposits, to individual and corporate customers. The TDB and the Board of Governors of the Federal Reserve are the primary regulators of the Company and the Bank, and both regulatory agencies perform periodic examinations to ensure regulatory compliance.
Basis of Presentation
The accompanying unaudited consolidated financial statements include the accounts of Veritex Holdings, Inc. and its subsidiaries, including the Bank.

The accompanying unaudited consolidated financial statements have been prepared in accordance with GAAP, but do not include all of the information and footnotes required for complete financial statements. Intercompany transactions and balances are eliminated in consolidation. In management’s opinion, these unaudited consolidated financial statements include all adjustments of a normal recurring nature necessary for a fair statement of the Company’s consolidated balance sheets at March 31, 2024 and December 31, 2023, consolidated statements of income, consolidated statements of comprehensive income (loss) and consolidated changes in stockholders’ equity for the three months ended March 31, 2024 and 2023 and consolidated statements of cash flows for the three months ended March 31, 2024 and 2023.

Accounting measurements at interim dates inherently involve greater reliance on estimates than at year end and the results for the interim periods shown herein are not necessarily indicative of results to be expected for the full year due in part to global economic and financial market conditions, interest rates, access to sources of liquidity, market competition and interruptions of business processes. These unaudited consolidated financial statements have been prepared in accordance with GAAP for interim financial information and the instructions to Quarterly Reports on Form 10-Q adopted by the SEC. These unaudited consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto for the year ended December 31, 2023 included in the Company’s Annual Report on Form 10-K, as filed with the SEC on February 28, 2024.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. These estimates and assumptions may also affect disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.

10

EPS
EPS is based upon the weighted average shares outstanding. The table below sets forth the reconciliation between weighted average shares used for calculating basic and diluted EPS for the three months ended March 31, 2024 and 2023:
Three Months Ended March 31,
2024 2023
Numerator:
Net income $ 24,156  $ 38,411 
Denominator:
Weighted average shares outstanding for basic EPS 54,444  54,149 
Dilutive effect of employee stock-based awards 398  457 
Adjusted weighted average shares outstanding 54,842  54,606 
EPS:
Basic $ 0.44  $ 0.71 
Diluted $ 0.44  $ 0.70 
Antidilutive shares 1,127  834 
For the three months ended March 31, 2024, there were 1,127 antidilutive shares excluded from the diluted EPS weighted average shares outstanding, 514 relating to RSUs and 613 relating to stock options.

For the three months ended March 31, 2023, there were 834 antidilutive shares excluded from the diluted EPS weighted average shares outstanding, 440 related to RSUs and 214 related to stock options.

Cost Method Accounting

The Company follows ASC 325-20, Cost Method Investments, to account for its ownership interest in noncontrolled entities. Under ASC 325-20, equity securities that do not have readily determinable fair values (i.e., non-marketable equity securities) and are not required to be accounted for under the equity method are typically carried at cost (i.e., cost method investments). Investments of this nature are initially recorded at cost. Income is recorded for dividends received that are distributed from net accumulated earnings of the noncontrolled entity subsequent to the date of investment. Dividends received in excess of earnings subsequent to the date of investment are considered a return of investment and are recorded as reductions in the cost of the investment. Investments are written down only when there is clear evidence that a decline in value that is other than temporary has occurred.

Recent Accounting Pronouncements

ASU 2024-01, “Compensation — Stock Compensation (Topic 718): Scope Application of Profits Interest and Similar Awards” (“ASU 2024-01”) clarifies how an entity determines whether a profits interest or similar award is within the scope of Topic 718 or is not a share-based payment arrangement and therefore within the scope of other guidance. ASU 2024-01 provides an illustrative example with multiple fact patterns and also amends certain language in the “Scope” and “Scope Exceptions” sections of Topic 718 to improve its clarity and operability without changing the guidance. Entities can apply the amendments either retrospectively to all prior periods presented in the financial statements or prospectively to profits interest and similar awards granted or modified on or after the date of adoption. If prospective application is elected, an entity must disclose the nature of and reason for the change in accounting principle. ASU 2024-01 is effective January 1, 2025, including interim periods, and is not expected to have a significant impact on our financial statements.

ASU 2024-02 “Codification Improvements” (“ASU 2024-02”) amends the Codification to remove references to various concepts statements and impacts a variety of topics in the Codification. The amendments apply to all reporting entities within the scope of the affected accounting guidance, but in most instances the references removed are extraneous and not required to understand or apply the guidance. Generally, the amendments in ASU 2024-02 are not intended to result in significant accounting changes for most entities. ASU 2024-02 is effective January 1, 2025 and is not expected to have a significant impact on our financial statements.

11


2. Supplemental Statement of Cash Flows
Other supplemental cash flow information is presented below:

  Three Months Ended March 31,
  2024 2023
(in thousands)
Supplemental Disclosures of Cash Flow Information:    
Cash paid for interest $ 98,354  $ 54,189 
Cash paid for income taxes —  — 

3. Securities
Equity Securities With a Readily Determinable Fair Value
The Company held equity securities with a fair value of $9,792 and $9,897 at March 31, 2024 and December 31, 2023, respectively. The Company did not realize a loss on equity securities with a readily determinable fair value during the three months ended March 31, 2024 or 2023. The gross unrealized loss recognized on equity securities with readily determinable fair values recorded in other noninterest income in the Company’s consolidated statements of income were as follows:
Three Months Ended March 31,
2024 2023
Unrealized (loss) gain recognized on equity securities with a readily determinable fair value $ (105) $ 126 
Equity Securities Without a Readily Determinable Fair Value
The Company held equity securities without a readily determinable fair value and measured at aggregate cost of $38,194 and $11,624 as of March 31, 2024 and December 31, 2023, respectively.
Securities Purchased Under Agreements to Resell
We held no securities purchased under agreements to resell and we recognized no interest income on securities purchased under agreements to resell during the three months ended March 31, 2024 or 2023. Securities purchased under agreements to resell typically mature 30 days from the settlement date, qualify as a secured borrowing and are measured at amortized cost.
Debt Securities
Debt securities have been classified in the consolidated balance sheets according to management’s intent. The amortized cost, related gross unrealized gains and losses, ACL and the fair value of AFS and HTM debt securities are as follows:
12

  March 31, 2024
  Amortized Cost Gross Unrealized Gains Gross Unrealized Losses ACL Fair Value
AFS
Corporate bonds $ 262,526  $ 1,198  $ 26,431  $ —  $ 237,293 
Municipal securities 14,272  —  3,357  —  10,915 
MBS 199,632  3,361  14,686  —  188,307 
CMO 574,622  3,520  47,263  —  530,879 
Asset-backed securities 122,078  732  2,549  —  120,261 
Collateralized loan obligations 78,672  14  73  —  78,613 
  $ 1,251,802  $ 8,825  $ 94,359  $ —  $ 1,166,268 
Amortized Cost Gross Unrealized Gains Gross Unrealized Losses ACL Fair Value
HTM
MBS $ 33,154  $ —  $ 6,719  $ —  $ 26,435 
CMO 33,586  —  4,927  —  28,659 
Municipal securities 111,922  7  11,282  —  100,647 
$ 178,662  $ 7  $ 22,928  $ —  $ 155,741 

  December 31, 2023
  Amortized Cost Gross Unrealized Gains Gross Unrealized Losses ACL Fair Value
AFS
Corporate bonds $ 244,652  $ 1,034  $ 29,566  $ —  $ 216,120 
Municipal securities 46,631  108  3,258  —  43,481 
MBS 194,486  4,430  13,465  —  185,451 
CMO 563,421  4,634  46,999  —  521,056 
Asset-backed securities 47,738  1,045  2,130  —  46,653 
Collateralized loan obligations 64,250  —  372  —  63,878 
  $ 1,161,178  $ 11,251  $ 95,790  $ —  $ 1,076,639 
Amortized Cost Gross Unrealized Gains Gross Unrealized Losses ACL Fair Value
HTM
MBS $ 33,716  $ —  $ 6,037  $ —  $ 27,679 
CMO 34,483  —  4,567  —  29,916 
Municipal securities 112,204  86  9,864  —  102,426 
$ 180,403  $ 86  $ 20,468  $ —  $ 160,021 
MBS are commercial MBS, secured by commercial properties, and residential MBS, generally secured by single-family residential properties. All MBS included in the table above were issued by U.S. government agencies or corporations.
The Company elected to transfer 25 AFS debt securities with an aggregate fair value of $117,001 to a classification of HTM debt securities on January 1, 2022. In accordance with FASB ASC 320-10-35-10, the transfer from AFS to HTM was recorded at the fair value of the AFS debt securities at the time of transfer. The net unrealized holding gain retained in AOCI for securities transferred from AFS to HTM was $2,925 and $3,122 at March 31, 2024 and December 31, 2023, respectively.
13

The following tables disclose the Company’s debt securities in an unrealized loss position, aggregated by investment category and length of time that individual debt securities have been in a continuous loss position:
  March 31, 2024
  Less Than 12 Months 12 Months or More Totals
  Fair
Value		 Unrealized
Loss		 Fair
Value		 Unrealized
Loss		 Fair
Value		 Unrealized
Loss
AFS
Corporate bonds $ 53,376  $ 5,297  $ 164,604  $ 21,134  $ 217,980  $ 26,431 
Municipal securities 10,915  3,357  —  —  10,915  3,357 
MBS —  —  87,805  14,686  87,805  14,686 
CMO 61,680  1,066  339,830  46,197  401,510  47,263 
Asset-backed securities 64,037  1,999  6,250  550  70,287  2,549 
Collateralized loan obligations —  —  33,177  73  33,177  73 
  $ 190,008  $ 11,719  $ 631,666  $ 82,640  $ 821,674  $ 94,359 
HTM
MBS $ —  $ —  $ 26,435  $ 6,719  $ 26,435  $ 6,719 
CMO —  —  28,659  4,927  28,659  4,927 
Municipal securities 100,109  11,275  —  —  100,109  11,275 
  $ 100,109  $ 11,275  $ 55,094  $ 11,646  $ 155,203  $ 22,921 
  December 31, 2023
  Less Than 12 Months 12 Months or More Totals
  Fair
Value		 Unrealized Loss Fair
Value		 Unrealized Loss Fair
Value		 Unrealized Loss
AFS
Corporate bonds $ 34,989  $ 5,970  $ 162,148  $ 23,596  $ 197,137  $ 29,566 
Municipal securities 6,792  45  22,052  3,213  28,844  3,258 
MBS —  —  104,486  13,465  104,486  13,465 
CMO —  —  419,044  46,999  419,044  46,999 
Asset-backed securities 9,011  1,559  8,847  571  17,858  2,130 
Collateralized loan obligations —  —  63,878  372  63,878  372 
  $ 50,792  $ 7,574  $ 780,455  $ 88,216  $ 831,247  $ 95,790 
HTM
MBS $ —  $ —  $ 27,679  $ 6,037  $ 27,679  $ 6,037 
CMO —  —  29,916  4,567  29,916  4,567 
Municipal securities 7,845  270  79,713  9,594  87,558  9,864 
$ 7,845  $ 270  $ 137,308  $ 20,198  $ 145,153  $ 20,468 

Management evaluates AFS debt securities in unrealized loss positions to determine whether the impairment is due to credit-related factors or noncredit-related factors. Consideration is given to (1) the extent to which the fair value is less than cost, (2) the financial condition and near-term prospects of the issuer, and (3) the intent and ability of the Company to retain its investment in the security for a period of time sufficient to allow for any anticipated recovery in fair value.
The number of AFS debt securities in an unrealized loss position totaled 133 and 142 at March 31, 2024 and December 31, 2023, respectively. Management does not have the intent to sell any of these debt securities and believes that it is more likely than not that the Company will not have to sell any such debt securities before a recovery of cost. The fair value is expected to recover as the debt securities approach their maturity date or repricing date or if market yields for such investments decline.
14

Accordingly, as of March 31, 2024, management believes that the unrealized losses detailed in the previous table are due to noncredit-related factors, including changes in interest rates and other market conditions, and therefore no losses have been recognized in the Company’s consolidated statements of income.
The following table presents the activity in the ACL for AFS debt securities:
 Three Months ended March 31,
2024 2023
ACL:
   Beginning balance $ —  $ — 
   Credit loss expense —  885 
ACL ending balance $ —  $ 885 

    The amortized costs and estimated fair values of AFS and HTM debt securities, by contractual maturity, as of the dates indicated, are shown in the table below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. MBS, CMOs, asset-backed securities, and collateralized loan obligations typically are issued with stated principal amounts, and the securities are backed by pools of mortgage loans and other loans that have varying maturities. The terms of MBS, CMOs, asset-backed securities, and collateralized loan obligations thus approximates the terms of the underlying mortgages and loans and can vary significantly due to prepayments. Therefore, these securities are not included in the maturity categories below.
March 31, 2024
AFS HTM
Amortized Cost Fair Value Amortized Cost Fair Value
Due in one year or less $ 2,010  $ 1,977  $ 3,977  $ 3,963 
Due from one year to five years 45,060  45,423  447  443 
Due from five years to ten years 199,462  177,121  20,060  19,570 
Due after ten years 30,266  23,687  87,438  76,671 
276,798  248,208  111,922  100,647 
MBS and CMO 774,254  719,186  66,740  55,094 
Asset-backed securities 122,078  120,261  —  — 
Collateralized loan obligations 78,672  78,613  —  — 
$ 1,251,802  $ 1,166,268  $ 178,662  $ 155,741 
December 31, 2023
AFS HTM
Amortized Cost Fair Value Amortized Cost Fair Value
Due in one year or less $ 2,018  $ 1,906  $ —  $ — 
Due from one year to five years 46,645  46,682  4,445  4,448 
Due from five years to ten years 188,526  163,397  12,806  12,628 
Due after ten years 54,094  47,616  94,953  85,350 
291,283  259,601  112,204  102,426 
MBS and CMO 757,907  706,507  68,199  57,595 
Asset-backed securities 47,738  46,653  —  — 
Collateralized loan obligations 64,250  63,878  —  — 
$ 1,161,178  $ 1,076,639  $ 180,403  $ 160,021 
15

Proceeds from sales of debt securities AFS and gross gains and losses for the three months ended March 31, 2024 and 2023 were as follows:
Three Months Ended March 31,
2024 2023
Proceeds from sales $ 113,794  $ 109,793 
Gross realized losses 6,304  5,321 
As of March 31, 2024 and December 31, 2023, there were no holdings of securities of any one issuer, other than the U.S. government and its agencies, in an amount greater than 10% of stockholders' equity. There was a blanket floating lien on all debt securities held by the Company to secure FHLB advances as of March 31, 2024 and December 31, 2023.
16

4. LHI and ACL
LHI in the accompanying consolidated balance sheets are summarized as follows:
  March 31, 2024 December 31, 2023
LHI, carried at amortized cost:
Real estate:          
Construction and land $ 1,568,257  $ 1,734,254 
Farmland 30,979  31,114 
1 - 4 family residential 969,401  937,119 
Multi-family residential 751,607  605,817 
OOCRE 788,376  794,088 
NOOCRE 2,352,993  2,350,725 
Commercial
 2,785,987  2,752,063 
MW 449,531  377,796 
Consumer 8,882  10,149 
$ 9,706,013  $ 9,593,125 
Deferred loan fees, net (6,931) (8,785)
ACL (112,032) (109,816)
Total LHI, net $ 9,587,050  $ 9,474,524 
Included in the total LHI, net, as of March 31, 2024 and December 31, 2023 was an accretable discount related to purchased performing and PCD loans acquired in the approximate amounts of $5,084 and $5,334, respectively. The discount is being accreted into income on a level-yield basis over the life of the loans. In addition, included in the net loan portfolio as of March 31, 2024 and December 31, 2023 is a discount on retained loans from sale of originated SBA and USDA loans of $8,512 and $7,629, respectively.
During the year ended December 31, 2022, the Company purchased $223,924 in pooled residential real estate loans at a net discount, with a remaining balance of $160,695 as of March 31, 2024. The remaining net purchase discount of $3,005 and $3,231 related to these 1-4 family residential loans purchased is included in the total LHI, net, as of March 31, 2024 and December 31, 2023, respectively. No additional pooled residential real estate loans have been repurchased since 2022.
ACL
The Company’s estimate of the ACL reflects losses expected over the remaining contractual life of the assets. The activity in the ACL related to LHI is as follows:
17

  Three Months Ended March 31, 2024
  Construction and Land Farmland Residential Multifamily OOCRE NOOCRE Commercial MW Consumer Total
Balance at beginning of the period $ 21,032  $ 101  $ 9,539  $ 4,882  $ 10,252  $ 27,729  $ 35,886  $ 260  $ 135  $ 109,816 
Credit loss expense non-PCD loans (1,251) 6  1,978  1,457  47  11,653  (2,136) 144  42  11,940 
Credit (benefit) loss expense PCD loans —  —  (2) —  (377) (3,952) (109) —  —  (4,440)
Charge-offs —  —  —  —  (120) (4,293) (946) —  (71) (5,430)
Recoveries —  —  1  —  —  —  96  —  49  146 
Ending Balance $ 19,781  $ 107  $ 11,516  $ 6,339  $ 9,802  $ 31,137  $ 32,791  $ 404  $ 155  $ 112,032 
  Three Months Ended March 31, 2023
  Construction and Land Farmland Residential Multifamily OOCRE NOOCRE Commercial Consumer Total
Balance at beginning of the period $ 13,120  $ 127  $ 9,533  $ 2,607  $ 8,707  $ 26,704  $ 30,142  $ 112  $ 91,052 
Credit loss (benefit) expense non-PCD loans 4,240  41  12  877  238  (499) 2,995  363  8,267 
Credit (benefit) loss expense PCD loans (46) —  (5) —  (16) 33  267  —  233 
Charge-offs —  —  —  —  (116) —  (1,051) (62) (1,229)
Recoveries —  —  1  —  —  —  364  6  371 
Ending Balance $ 17,314  $ 168  $ 9,541  $ 3,484  $ 8,813  $ 26,238  $ 32,717  $ 419  $ 98,694 
The majority of the Company's loan portfolio consists of loans to businesses and individuals in the Dallas-Fort Worth metroplex and the Houston metropolitan area. This geographic concentration subjects the loan portfolio to the general economic conditions within these areas. The risks created by this concentration have been considered by management in the determination of the adequacy of the ACL.
A loan is considered collateral-dependent when the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral. The following table presents the amortized cost basis of collateral dependent loans, which are individually evaluated to determine expected credit losses, and the related ACL allocated to these loans:
March 31, 2024 December 31, 2023
 
Real Property(1)
 ACL Allocation
Real Property(1)
 ACL Allocation
         
Construction and land $ 159  $ 7  $ —  $ — 
1 - 4 family residential 530  44  —  — 
OOCRE 9,357  —  3,059  47 
NOOCRE 9,344  —  21,169  — 
Commercial 18,379  2,906  20,711  3,339 
Total $ 37,769  $ 2,957  $ 44,939  $ 3,386 
(1) Loans reported exclude PCD loans that transitioned upon adoption of ASC 326 and accounted for on a pooled basis.

18

Nonaccrual and Past Due Loans
Loans are considered past due if the required principal and interest payments have not been received as of the date such payments were due in accordance with the terms of the loan agreement. Loans are placed on nonaccrual status when, in management’s opinion, the borrower may be unable to meet payment obligations as they become due, as well as when required by regulatory provisions. Loans may be placed on nonaccrual status regardless of whether or not such loans are considered past due. When interest accrual is discontinued, all unpaid accrued interest is reversed. Interest income is subsequently recognized only to the extent cash payments are received in excess of principal due. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.
Nonaccrual loans aggregated by class of loans, as of March 31, 2024 and December 31, 2023, were as follows:
  March 31, 2024 December 31, 2023
Nonaccrual Nonaccrual With No ACL Nonaccrual Nonaccrual With No ACL
         
Construction and land $ 6,737  $ 6,619  $ 6,793  $ 6,793 
1 - 4 family residential 3,263  3,058  1,965  1,965 
OOCRE 15,126  15,126  9,719  9,493 
NOOCRE 22,366  11,866  33,479  33,479 
Commercial 37,627  10,086  40,868  10,610 
Consumer 21  21  24  24 
Total $ 85,140  $ 46,776  $ 92,848  $ 62,364 
    There were $9,419 and $13,715 of PCD loans that are not accounted for on a pooled basis included in nonaccrual loans at March 31, 2024 and December 31, 2023, respectively.
    During the three months ended March 31, 2024 and 2023, interest income not recognized on nonaccrual loans was $781 and 772, respectively.
An age analysis of past due loans, aggregated by class of loans and including past due nonaccrual loans, as of March 31, 2024 and December 31, 2023, is as follows:
  March 31, 2024
  30 to 59 Days 60 to 89 Days 90 Days or Greater Total Past Due Total Current Total
Loans		 Total 90 Days Past Due and Still Accruing
Real estate:                                   
    Construction and land $ 13,150  $ 59  $ 6,678  $ 19,887  $ 1,548,370  $ 1,568,257  $ — 
    Farmland —  —  —  —  30,979  30,979  — 
    1 - 4 family residential 2,352  459  2,159  4,970  964,431  969,401  — 
    Multi-family residential —  —  —  —  751,607  751,607  — 
    OOCRE 1,826  —  15,346  17,172  771,204  788,376  220 
    NOOCRE 10,605  2,847  12,658  26,110  2,326,883  2,352,993  — 
Commercial 427  3,075  9,963  13,465  2,772,522  2,785,987  — 
MW —  —  —  —  449,531  449,531  — 
Consumer 11  —  —  11  8,871  8,882  — 
Total $ 28,371  $ 6,440  $ 46,804  $ 81,615  $ 9,624,398  $ 9,706,013  $ 220 


19

  December 31, 2023
  30 to 59 Days 60 to 89 Days 90 Days or Greater Total Past Due Total Current Total
Loans
Total 90 Days Past Due and Still Accruing(2)
Real estate:                                   
Construction and land $ 29,379  $ —  $ 6,793  $ 36,172  $ 1,698,082  $ 1,734,254  $ — 
Farmland —  —  —  —  31,114  31,114  — 
1 - 4 family residential 4,359  2,535  3,691  10,585  926,534  937,119  1,726 
Multi-family residential 15,095  —  —  15,095  590,722  605,817  — 
OOCRE 916  114  10,185  11,215  782,873  794,088  466 
NOOCRE 3,182  642  20,547  24,371  2,326,354  2,350,725  783 
Commercial 3,485  1,394  9,122  14,001  2,738,062  2,752,063  — 
MW —  —  —  —  377,796  377,796  — 
Consumer 76  —  —  76  10,073  10,149  — 
Total $ 56,492  $ 4,685  $ 50,338  $ 111,515  $ 9,481,610  $ 9,593,125  $ 2,975 

Loans 90 days past due and still accruing interest are considered well-secured and in the process of collection as of the reporting date with plans in place for the borrowers to bring the notes fully current. The Company believes that it will collect all principal and interest due on each of the loans 90 days past due and still accruing.
Modifications to Borrowers Experiencing Financial Difficulty
The Company adopted ASU 2022-02, Financial Instruments - Credit Losses (Topic 326) Troubled Debt Restructurings and Vintage Disclosures, effective January 1, 2023. The amendments in ASU 2022-02 eliminated the recognition and measure of troubled debt restructurings and enhanced disclosures for loan modifications to borrowers experiencing financial difficulty.
An assessment of whether a borrower is experiencing financial difficulty is made on the date of a modification. Because the effect of most modifications made to borrowers experiencing financial difficulty is already included in the ACL (due to the measurement methodologies used to estimate the allowance), a change to the ACL is generally not recorded upon modification.
The following table shows the amortized cost basis at the end of the reporting period of the loans modified to borrowers experiencing financial difficulty, disaggregated by class of financing receivable and type of concession granted during the three months ended March 31, 2024:
Loan Modifications Made to Borrowers Experiencing Financial Difficulty
Interest Rate Reduction Financial Impact
  Amortized Cost Basis % of Loan Class
NOOCRE $ 28,441  1.2  % Interest rate reduced longer than 3 months
Term Extension
Amortized Cost Basis % of Loan Class Financial Impact
Construction and land $ 2,000  0.1  % Principal and interest payments deferred longer than three months

20

Combination - Interest Rate Reduction and Term Extension
Amortized Cost Basis % of Loan Class Financial Impact
NOOCRE $ 45,762  1.9  % Principal payments deferred and interest rate reduced longer than three months
Commercial 6,336  0.2  % Principal payments deferred and interest rate reduced longer than three months
$ 52,098 
No modifications to borrowers in financial difficulty had a payment default during the period and were modified in the 12 months before default to borrowers experiencing financial difficulty.
The Company closely monitors the performance of the loans that are modified to borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts. The following table depicts the performance of loans that have been modified in the last 12 months:
Payment Status
  Current 30-59 Days Past Due 60-89 Days Past Due 90+ Days Past Due
Construction and land $ —  $ 2,000  $ —  $ — 
NOOCRE 84,190  9,343  —  — 
Commercial 27,764  —  —  2,108 
Total $ 111,954  $ 11,343  $ —  $ 2,108 
The Company has not committed to lend additional amounts to customers with outstanding loans classified as Troubled Loan Modifications as of March 31, 2024 or December 31, 2023.
Credit Quality Indicators
    From a credit risk standpoint, the Company classifies its loans in one of the following categories: (i) pass, (ii) special mention, (iii) substandard or (iv) doubtful. Loans classified as loss are charged-off. Loans not rated special mention, substandard, doubtful or loss are classified as pass loans.
    The classifications of loans reflect a judgment about the risks of default and loss associated with the loan. The Company reviews the ratings on criticized credits monthly. Ratings are adjusted to reflect the degree of risk and loss that is felt to be inherent in each credit as of each monthly reporting period. All classified credits are evaluated for impairment. If impairment is determined to exist, a specific reserve is established. The Company’s methodology is structured so that specific reserves are increased in accordance with deterioration in credit quality (and a corresponding increase in risk and loss) or decreased in accordance with improvement in credit quality (and a corresponding decrease in risk and loss).
    Credits rated special mention show clear signs of financial weaknesses or deterioration in credit worthiness, however, such concerns are generally not so pronounced that the Company expects to experience significant loss within the short-term. Such credits typically maintain the ability to perform within standard credit terms and credit exposure is not as prominent as credits with a lower rating.
    Credits rated substandard are those in which the normal repayment of principal and interest may be, or has been, jeopardized by reason of adverse trends or developments of a financial, managerial, economic or political nature, or important weaknesses which exist in collateral. A protracted workout on these credits is a distinct possibility. Prompt corrective action is therefore required to strengthen the Company’s position, and/or to reduce exposure and to assure that adequate remedial measures are taken by the borrower. Credit exposure becomes more likely in such credits and a serious evaluation of the secondary support to the credit is performed.
    Credits rated doubtful are those in which full collection of principal appears highly questionable, and in which some degree of loss is anticipated, even though the ultimate amount of loss may not yet be certain and/or other factors exist which could affect collection of debt. Based upon available information, positive action by the Company is required to avert or minimize loss. Credits rated doubtful are generally also placed on non-accrual.
21

    Credits classified as PCD are those that, at acquisition date, have experienced a more-than-insignificant deterioration in credit quality since origination. All loans considered to be purchased-credit impaired loans prior to January 1, 2020 were converted to PCD loans upon adoption of ASC 326. The Company elected to maintain pools of loans that were previously accounted for under ASC 310-30 and will continue to account for these pools as a unit of account. Loans are only removed from the existing pools if they are foreclosed, written off, paid off, or sold.
The Company considers the guidance in ASC 310-20 when determining whether a modification, extension or renewal of a loan constitutes a current period origination. Generally, current period renewals of credit are re-underwritten at the point of renewal and considered current period originations for purposes of the table below. Based on the most recent analysis performed, the risk category of loans by class of loans based on year or origination is as follows:
 
Term Loans Amortized Cost Basis by Origination Year1
  2024 2023 2022 2021 2020 Prior Revolving Loans Amortized Cost Basis Revolving Loans Converted to Term Total
As of March 31, 2024
Construction and land:
Pass $ 32,907  $ 100,050  $ 788,951  $ 372,550  $ 34,954  $ 6,324  $ 205,423  $ —  $ 1,541,159 
Special mention —  12,112  2,000  4,968  —  —  1,281  —  20,361 
Substandard —  —  6,706  —  31  —  —  —  6,737 
Total construction and land $ 32,907  $ 112,162  $ 797,657  $ 377,518  $ 34,985  $ 6,324  $ 206,704  $ —  $ 1,568,257 
Construction and land gross charge-offs $ —  $ —  $ —  $ —  $ —  $ —  $ —  $ —  $ — 
Farmland:
Pass $ 132  $ 2,517  $ 4,372  $ —  $ 17,863  $ 4,927  $ 1,168  $ —  $ 30,979 
Total farmland $ 132  $ 2,517  $ 4,372  $ —  $ 17,863  $ 4,927  $ 1,168  $ —  $ 30,979 
Farmland gross charge-offs $ —  $ —  $ —  $ —  $ —  $ —  $ —  $ —  $ — 
1 - 4 family residential:
Pass $ 18,518  $ 77,907  $ 139,311  $ 209,626  $ 82,714  $ 288,540  $ 114,455  $ 17,236  $ 948,307 
Special mention —  3,722  —  —  —  1,227  —  —  4,949 
Substandard —  —  861  852  50  12,739  529  —  15,031 
PCD —  —  —  —  —  1,114  —  —  1,114 
Total 1 - 4 family residential $ 18,518  $ 81,629  $ 140,172  $ 210,478  $ 82,764  $ 303,620  $ 114,984  $ 17,236  $ 969,401 
1-4 family residential gross charge-offs $ —  $ —  $ —  $ —  $ —  $ —  $ —  $ —  $ — 
Multi-family residential:
Pass $ —  $ 11,788  $ 104,244  $ 338,897  $ 264,985  $ 21,038  $ 10,655  $ —  $ 751,607 
Total multi-family residential $ —  $ 11,788  $ 104,244  $ 338,897  $ 264,985  $ 21,038  $ 10,655  $ —  $ 751,607 
Multi-family residential gross charge-offs $ —  $ —  $ —  $ —  $ —  $ —  $ —  $ —  $ — 
OOCRE:
Pass $ 14,365  $ 141,955  $ 176,643  $ 100,173  $ 89,496  $ 201,542  $ 4,623  $ —  $ 728,797 
Special mention —  5,446  468  4,030  1,405  15,926  210  —  27,485 
Substandard —  —  9,357  2,963  2,945  6,261  —  —  21,526 
PCD —  —  —  —  —  10,568  —  —  10,568 
Total OOCRE $ 14,365  $ 147,401  $ 186,468  $ 107,166  $ 93,846  $ 234,297  $ 4,833  $ —  $ 788,376 
OOCRE gross charge-offs $ —  $ —  $ —  $ —  $ —  $ 120  $ —  $ —  $ 120 
NOOCRE:
Pass $ 17,713  $ 50,026  $ 667,589  $ 546,455  $ 239,974  $ 497,749  $ 33,047  $ 571  $ 2,053,124 
Special mention —  —  57,088  27,217  28,614  135,930  —  —  248,849 
Substandard —  —  3,858  3,241  303  33,834  —  —  41,236 
PCD —  —  —  —  —  9,784  —  —  9,784 
Total NOOCRE $ 17,713  $ 50,026  $ 728,535  $ 576,913  $ 268,891  $ 677,297  $ 33,047  $ 571  $ 2,352,993 
22

NOOCRE gross charge-offs $ —  $ —  $ —  $ —  $ —  $ 4,293  $ —  $ —  $ 4,293 
Commercial:
Pass $ 80,714  $ 271,814  $ 336,946  $ 74,917  $ 39,435  $ 83,231  $ 1,772,806  $ 1,151  $ 2,661,014 
Special mention —  2,544  13,057  12,221  75  6,008  14,184  25  48,114 
Substandard —  695  16,431  9,990  1,009  15,593  32,721  —  76,439 
PCD —  —  —  —  —  420  —  —  420 
Total commercial $ 80,714  $ 275,053  $ 366,434  $ 97,128  $ 40,519  $ 105,252  $ 1,819,711  $ 1,176  $ 2,785,987 
Commercial gross charge-offs $ —  $ —  $ 43  $ —  $ —  $ 903  $ —  $ —  $ 946 
MW:
Pass $ 144  $ 1,592  $ —  $ —  $ —  $ —  $ 447,795  $ —  $ 449,531 
Total MW $ 144  $ 1,592  $ —  $ —  $ —  $ —  $ 447,795  $ —  $ 449,531 
MW gross charge-offs $ —  $ —  $ —  $ —  $ —  $ —  $ —  $ —  $ — 
Consumer:
Pass $ 604  $ 3,141  $ 866  $ 251  $ 552  $ 1,678  $ 1,628  $ —  $ 8,720 
Special mention —  —  —  —  —  82  —  —  82 
Substandard —  —  2  —  —  67  —  —  69 
PCD —  —  —  —  —  11  —  —  11 
Total consumer $ 604  $ 3,141  $ 868  $ 251  $ 552  $ 1,838  $ 1,628  $ —  $ 8,882 
Consumer gross charge-offs $ —  $ —  $ —  $ —  $ —  $ 71  $ —  $ —  $ 71 
Total Pass $ 165,097  $ 660,790  $ 2,218,922  $ 1,642,869  $ 769,973  $ 1,105,029  $ 2,591,600  $ 18,958  $ 9,173,238 
Total Special Mention —  23,824  72,613  48,436  30,094  159,173  15,675  25  349,840 
Total Substandard —  695  37,215  17,046  4,338  68,494  33,250  —  161,038 
Total PCD —  —  —  —  —  21,897  —  —  21,897 
Total $ 165,097  $ 685,309  $ 2,328,750  $ 1,708,351  $ 804,405  $ 1,354,593  $ 2,640,525  $ 18,983  $ 9,706,013 
Current period gross charge-offs $ —  $ —  $ 43  $ —  $ —  $ 5,387  $ —  $ —  $ 5,430 
1 Term loans amortized cost basis by origination year excludes $6,931 of deferred loan fees, net.

 
Term Loans Amortized Cost Basis by Origination Year1
  2023 2022 2021 2020 2019 Prior Revolving Loans Amortized Cost Basis Revolving Loans Converted to Term Total
As of December 31,
Construction and land:
Pass $ 116,333  $ 740,244  $ 538,946  $ 109,017  $ 3,089  $ 3,661  $ 181,940  $ —  $ 1,693,230 
Special mention 593  13,782  4,980  3,439  —  8,760  2,677  —  34,231 
Substandard —  6,547  —  246  —  —  —  —  6,793 
Total construction and land $ 116,926  $ 760,573  $ 543,926  $ 112,702  $ 3,089  $ 12,421  $ 184,617  $ —  $ 1,734,254 
Construction and land gross charge-offs $ —  $ —  $ —  $ —  $ —  $ —  $ —  $ —  $ — 
Farmland:
Pass $ 2,531  $ 4,398  $ —  $ 17,999  $ 15  $ 4,944  $ 1,227  $ —  $ 31,114 
Total farmland $ 2,531  $ 4,398  $ —  $ 17,999  $ 15  $ 4,944  $ 1,227  $ —  $ 31,114 
Farmland gross charge-offs $ —  $ —  $ —  $ —  $ —  $ —  $ —  $ —  $ — 
1 - 4 family residential:
Pass $ 73,289  $ 140,824  $ 193,914  $ 79,767  $ 38,589  $ 270,193  $ 114,275  $ 17,255  $ 928,106 
Special mention 3,732  531  —  —  —  238  —  —  4,501 
Substandard —  144  902  —  106  1,701  529  —  3,382 
PCD —  —  —  —  —  1,130  —  —  1,130 
23

Total 1 - 4 family residential $ 77,021  $ 141,499  $ 194,816  $ 79,767  $ 38,695  $ 273,262  $ 114,804  $ 17,255  $ 937,119 
1-4 Family gross charge-offs $ —  $ —  $ —  $ —  $ 21  $ —  $ —  $ —  $ 21 
Multi-family residential:
Pass $ 9,441  $ 82,040  $ 257,714  $ 196,575  $ 8,054  $ 14,570  $ 10,627  $ —  $ 579,021 
Special mention —  —  —  —  —  11,701  —  —  11,701 
Substandard —  —  —  —  —  15,095  —  —  15,095 
Total multi-family residential $ 9,441  $ 82,040  $ 257,714  $ 196,575  $ 8,054  $ 41,366  $ 10,627  $ —  $ 605,817 
Multifamily gross charge-offs $ —  $ —  $ —  $ —  $ 192  $ —  $ —  $ —  $ 192 
OOCRE:
Pass $ 129,463  $ 178,777  $ 113,207  $ 90,219  $ 39,876  $ 166,270  $ 4,618  $ —  $ 722,430 
Special mention 5,481  —  2,479  1,019  1,961  14,775  210  —  25,925 
Substandard —  9,357  2,131  3,644  736  11,695  —  —  27,563 
PCD —  —  —  —  —  18,170  —  —  18,170 
Total OOCRE $ 134,944  $ 188,134  $ 117,817  $ 94,882  $ 42,573  $ 210,910  $ 4,828  $ —  $ 794,088 
OOCRE gross charge-offs $ —  $ —  $ —  $ 369  $ 5  $ 481  $ —  $ —  $ 855 
NOOCRE:
Pass $ 33,525  $ 724,110  $ 500,354  $ 247,385  $ 148,046  $ 381,559  $ 30,524  $ 577  $ 2,066,080 
Special mention —  5,950  25,985  26,175  68,616  55,805  —  —  182,531 
Substandard —  3,858  2,774  364  2,620  78,414  —  —  88,030 
PCD —  —  —  —  —  14,084  —  —  14,084 
Total NOOCRE $ 33,525  $ 733,918  $ 529,113  $ 273,924  $ 219,282  $ 529,862  $ 30,524  $ 577  $ 2,350,725 
NOOCRE gross charge-offs $ —  $ —  $ —  $ —  $ —  $ 13,649  $ —  $ —  $ 13,649 
Commercial:
Pass $ 314,939  $ 384,713  $ 86,757  $ 38,554  $ 43,535  $ 45,812  $ 1,725,663  $ 1,044  $ 2,641,017 
Special mention 4,584  13,583  12,794  541  —  10,144  9,392  35  51,073 
Substandard 640  16,974  3,978  545  3,767  15,843  15,244  74  57,065 
PCD —  —  —  —  —  2,908  —  —  2,908 
Total commercial $ 320,163  $ 415,270  $ 103,529  $ 39,640  $ 47,302  $ 74,707  $ 1,750,299  $ 1,153  $ 2,752,063 
Commercial gross charge-offs $ —  $ 2,158  $ —  $ 2,572  $ 1,083  $ 4,600  $ —  $ —  $ 10,413 
MW:
Pass $ 1,905  $ —  $ —  $ —  $ —  $ —  $ 375,891  $ —  $ 377,796 
Total MW $ 1,905  $ —  $ —  $ —  $ —  $ —  $ 375,891  $ —  $ 377,796 
MW gross charge-offs $ —  $ —  $ —  $ —  $ —  $ —  $ —  $ —  $ — 
Consumer:
Pass $ 4,552  $ 1,045  $ 276  $ 604  $ 89  $ 1,678  $ 1,728  $ —  $ 9,972 
Special mention —  —  —  —  —  85  —  —  85 
Substandard —  —  4  —  12  63  —  —  79 
PCD —  —  —  —  —  13  —  —  13 
Total consumer $ 4,552  $ 1,045  $ 280  $ 604  $ 101  $ 1,839  $ 1,728  $ —  $ 10,149 
Consumer gross charge-offs $ —  $ 29  $ 2  $ —  $ —  $ 205  $ —  $ —  $ 236 
Total Pass $ 685,978  $ 2,256,151  $ 1,691,168  $ 780,120  $ 281,293  $ 888,687  $ 2,446,493  $ 18,876  $ 9,048,766 
Total Special Mention 14,390  33,846  46,238  31,174  70,577  101,508  12,279  35  310,047 
24

Total Substandard 640  36,880  9,789  4,799  7,241  122,811  15,773  74  198,007 
Total PCD —  —  —  —  —  36,305  —  —  36,305 
Total $ 701,008  $ 2,326,877  $ 1,747,195  $ 816,093  $ 359,111  $ 1,149,311  $ 2,474,545  $ 18,985  $ 9,593,125 
Current year gross charge-offs $ —  $ 2,187  $ 2  $ 2,941  $ 1,301  $ 18,935  $ —  $ —  $ 25,366 
1 Term loans amortized cost basis by origination year excludes $8,785 of deferred loan fees, net.
Servicing Assets
The Company was servicing loans of approximately $586,583 and $571,611 as of March 31, 2024 and 2023, respectively. A summary of the changes in the related servicing assets are as follows:
  Three Months Ended March 31,
  2024 2023
Balance at beginning of period $ 13,258  $ 14,880 
Increase from loan sales 635  959 
Servicing asset impairment, net recoveries 222  424 
Amortization charged as a reduction to income (1,493) (1,015)
Balance at end of period $ 12,622  $ 15,248 
Fair value of servicing assets is estimated by discounting estimated future cash flows from the servicing assets using discount rates that approximate current market rates over the expected lives of the loans being serviced. A valuation allowance is recorded when the fair value is below the carrying amount of the asset. As of March 31, 2024 and 2023 there was a valuation allowance of $1,310 and $2,027, respectively.
The Company may also receive a portion of subsequent interest collections on loans sold that exceed the contractual servicing fees. In that case, the Company records an interest-only strip based on its relative fair market value and the other components of the loans. There was no interest-only strip receivable recorded at March 31, 2024 and December 31, 2023.
The following table reflects principal sold and related gain for SBA and USDA LHI. The gain on sale of these loans is recorded in government guaranteed loan income, net in the Company’s consolidated statements of income.
Three Months Ended March 31,
2024 2023
SBA LHI principal sold $ 13,233  $ 6,340 
Gain on sale of SBA LHI 1,176  148 
USDA LHI principal sold —  44,002 
Gain on sale of USDA LHI —  6,984 
LHFS
The following table reflects LHFS.
March 31, 2024 December 31, 2023
SBA/USDA construction and land $ 41,456  $ 41,492 
1 - 4 family residential 772  788 
SBA OOCRE 3,976  16,758 
NOOCRE 10,500  10,500 
SBA commercial 8,058  9,534 
Total LHFS $ 64,762  $ 79,072 

25

5. Fair Value
The following table summarizes assets measured at fair value on a recurring basis as of March 31, 2024 and December 31, 2023, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value:
March 31, 2024
  Level 1
Inputs		 Level 2
Inputs		 Level 3
Inputs		 Total
Fair Value
Financial Assets:
AFS debt securities $ —  $ 1,166,268  $ —  $ 1,166,268 
Equity securities with a readily determinable fair value 9,792  —  —  9,792 
LHFS(1)
 —  53,490  —  53,490 
Interest rate swap designated as hedging instruments —  14,370  —  14,370 
Correspondent interest rate swaps not designated as hedging instruments —  36,357  —  36,357 
Customer interest rate swaps not designated as hedging instruments —  941  —  941 
Correspondent interest rate caps and collars not designated as hedging instruments —  1,367  —  1,367 
Financial Liabilities:
Interest rate swap designated as hedging instruments $ —  $ 50,431  $ —  $ 50,431 
Correspondent interest rate swaps not designated as hedging instruments —  1,068  —  1,068 
Customer interest rate swaps not designated as hedging instruments —  35,755  —  35,755 
Customer interest rate caps and collars not designated as hedging instruments —  1,367  —  1,367 
1Represents LHFS elected to be carried at fair value upon origination or acquisition.
  December 31, 2023
  Level 1
Inputs		 Level 2
Inputs		 Level 3
Inputs		 Total
Fair Value
Financial Assets:
 AFS debt securities $ —  $ 1,076,639  $ —  $ 1,076,639 
Equity securities with a readily determinable fair value 9,897  —  —  9,897 
LHFS(1)
 —  67,784  —  67,784 
Interest rate swap designated as hedging instruments —  18,814  —  18,814 
Correspondent interest rate swaps not designated as hedging instruments —  28,007  —  28,007 
Customer interest rate swaps not designated as hedging instruments —  2,118  —  2,118 
Correspondent interest rate caps and collars not designated as hedging instruments —  1,344  —  1,344 
Financial Liabilities:
Interest rate swap designated as hedging instruments $ —  $ 47,121  $ —  $ 47,121 
Correspondent interest rate swaps not designated as hedging instruments —  2,322  —  2,322 
Customer interest rate swaps not designated as hedging instruments —  27,288  —  27,288 
Customer interest rate caps and collars not designated as hedging instruments —  1,344  —  1,344 
(1) Represents LHFS elected to be carried at fair value upon origination or acquisition.
There were no transfers between Level 2 and Level 3 during the three months ended March 31, 2024 and December 31, 2023.
26

The following table summarizes assets measured at fair value on a non-recurring basis as of March 31, 2024 and December 31, 2023, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value:
  Fair Value
Measurements Using		  
  Level 1
Inputs		 Level 2
Inputs		 Level 3
Inputs		 Total
Fair Value
As of March 31, 2024                    
  Assets:        
Collateral dependent loans with an ACL $ —  $ —  $ 13,160  $ 13,160 
Servicing assets with a valuation allowance —  —  4,728  4,728 
OREO —  —  18,445  18,445 
As of December 31, 2023
  Assets:
Collateral dependent loans with an ACL $ —  $ —  $ 14,274  $ 14,274 
Servicing assets with a valuation allowance —  —  6,682  6,682 
At March 31, 2024, collateral dependent loans with an allowance had a recorded investment of $16,117, with $2,957 specific ACL allocated. At December 31, 2023, collateral dependent loans with an allowance had a carrying value of $17,660, with $3,386 of specific ACL allocated.
At March 31, 2024, servicing assets of $6,038 had a valuation allowance totaling $1,310. At December 31, 2023, servicing assets of $8,214 had a valuation allowance totaling $1,532.
OREO primarily consists of five properties recorded with a fair value of approximately $18,445 at March 31, 2024. There were no OREO properties recorded as of December 31, 2023.
There were no liabilities measured at fair value on a non-recurring basis as of March 31, 2024 or December 31, 2023.
Fair Value of Financial Instruments
    The Company’s methods of determining fair value of financial instruments in this Note are consistent with its methodologies disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023. Please refer to Note 17 in the Company’s Annual Report on Form 10-K for information on these methods.
The estimated fair values and carrying values of all financial instruments not measured at fair value on a recurring basis under current authoritative guidance as of March 31, 2024 and December 31, 2023 were as follows:
27

Fair Value
Carrying
Amount		 Level 1 Level 2 Level 3
March 31, 2024
Financial assets:
Cash and cash equivalents $ 740,769  $ —  $ 740,769  $ — 
HTM debt securities 178,662  —  155,741  — 
LHFS(1)
 11,272  —  11,272  — 
LHI(2)
 9,573,890  —  —  9,409,404 
Accrued interest receivable 51,476  —  51,476  — 
BOLI 85,359  —  85,359  — 
Servicing asset 7,894  —  7,894  — 
Equity securities without a readily determinable fair value 38,194  N/A N/A N/A
FHLB and FRB stock 54,094  N/A N/A N/A
Financial liabilities:
Noninterest-bearing deposits $ 2,349,211  $ —  $ 2,349,211  $ — 
Interest-bearing deposits 8,304,609  —  8,147,449  — 
Advances from FHLB 100,000  —  100,056  — 
Accrued interest payable 33,200  —  33,200  — 
Subordinated debentures and subordinated notes 230,034  —  230,034  — 
December 31, 2023
Financial assets:
Cash and cash equivalents $ 629,063  $ —  $ 629,063  $ — 
HTM debt securities 180,403  —  160,021  — 
LHFS(1)
 11,288  —  11,288  — 
LHI(2)
 9,577,180  —  —  9,322,744 
Accrued interest receivable 53,313  —  53,313  — 
BOLI 84,833  —  84,833  — 
Servicing asset 6,576  —  6,576  — 
Equity securities without a readily determinable fair value 11,624  N/A N/A N/A
FHLB and FRB stock 53,699  N/A N/A N/A
Financial liabilities:
Noninterest-bearing deposits $ 2,218,036  $ —  $ 2,218,036  $ — 
Interest-bearing deposits 8,120,159  —  8,096,209  — 
Advances from FHLB 100,000  —  100,051  — 
Accrued interest payable 41,948  —  41,948  — 
Subordinated debentures and subordinated notes 229,783  —  229,783  — 
(1) LHFS primarily represent commercial loans moved to held for sale or mortgage LHFS that are carried at lower of cost or market.
(2) LHI includes MW and is carried at amortized cost.
6. Derivative Financial Instruments
The Company primarily uses derivatives to manage exposure to market risk, including interest rate risk and credit risk and to assist customers with their risk management objectives. Management will designate certain derivatives as hedging instruments in a qualifying hedge accounting relationship. The Company’s remaining derivatives consist of derivatives held for customer accommodation or other purposes.
The fair value of derivative positions outstanding is included in other assets and accounts payable and other liabilities on the accompanying consolidated balance sheets and in the net change in each of these financial statement line items in the accompanying consolidated statements of cash flows.
28

For derivatives not designated as hedging instruments, swap fee income and gains and losses due to changes in fair value are included in other noninterest income and the operating section of the consolidated statement of cash flows. For derivatives designated as hedging instruments, the entire change in the fair value related to the derivative instrument is recognized as a component of other comprehensive income and subsequently reclassified into interest income or interest expense when the forecasted transaction affects income. The notional amounts and estimated fair values as of March 31, 2024 and December 31, 2023 are as shown in the table below.

  March 31, 2024 December 31, 2023
Estimated Fair Value Estimated Fair Value
  Notional
Amount		 Asset Derivative Liability Derivative Notional
Amount		 Asset Derivative Liability Derivative
Derivatives designated as hedging instruments (cash flow hedges):
Interest rate swap on money market deposit account payments $ 250,000  $ 11,047  $ —  $ 250,000  $ 12,208  $ — 
Interest rate swaps on fixed rate advances/brokered CDs 200,000  —  1,286  200,000  —  4,296 
Interest rate swaps on customer loan interest payments 375,000  —  45,237  375,000  —  40,055 
Interest rate collars on customer loan interest payments 450,000  1,151  3,908  450,000  2,304  2,770 
Interest rate floor on customer loan interest payments 200,000  2,172  —  200,000  4,302  — 
Total derivatives designated as hedging instruments $ 1,475,000  $ 14,370  $ 50,431  $ 1,475,000  $ 18,814  $ 47,121 
Derivatives not designated as hedging instruments:            
Financial institution counterparty:
            
Interest rate swaps $ 907,171  $ 36,357  $ 1,068  $ 893,702  $ 28,007  $ 2,322 
Interest rate caps and corridors 319,974  1,367  —  285,370  1,344  — 
Commercial customer counterparty:
Interest rate swaps 907,171  941  35,755  893,702  2,118  27,288 
Interest rate caps and corridors 319,974  —  1,367  285,370  —  1,344 
Total derivatives not designated as hedging instruments $ 2,454,290  $ 38,665  $ 38,190  $ 2,358,144  $ 31,469  $ 30,954 
Offsetting derivative assets/liabilities
 —  (33,531) (33,531) —  (29,463) (29,463)
Total derivatives $ 3,929,290  $ 19,504  $ 55,090  $ 3,833,144  $ 20,820  $ 48,612 

29

Pre-tax (loss) gain included in the consolidated statements of income and related to derivative instruments for the three months ended March 31, 2024 and 2023 were as follows.
  For the Three Months Ended
March 31, 2024		 For the Three Months Ended
March 31, 2023
  (Loss) gain recognized in other comprehensive income on derivative Gain (loss) reclassified from accumulated other comprehensive income into income Location of (loss) gain reclassified from accumulated other comprehensive income into income (Loss) gain recognized in other comprehensive income on derivative Gain (loss) reclassified from accumulated other comprehensive income into income Location of (loss) gain reclassified from accumulated other comprehensive income into income
Derivatives designated as hedging instruments (cash flow hedges):
Interest rate swap on borrowing advances $ (1,094) $ 1,094  Interest Expense $ (1,082) $ 1,082  Interest Expense
Interest rate swap on money market deposit account payments 1,849  3,439  Interest Expense (3,977) 2,568  Interest Expense
Interest rate swaps, collars and floors on customer loan interest payments (9,250) (5,369) Interest Income 12,136  (3,807) Interest Income
Total $ (8,495) $ (836) $ 7,077  $ (157)
Net gain recognized in other noninterest income Net gain recognized in other noninterest income
Derivatives not designated as hedging instruments:
Interest rate swaps, caps and collars $ 449  $ 212 
Cash Flow Hedges
We enter into cash flow hedge relationships to mitigate exposure to the variability of future cash flows or other forecasted transactions. The Company uses interest rate swaps, floors, caps and collars to manage overall cash flow changes related to interest rate risk exposure on benchmark interest rate loans. To qualify for hedge accounting, a formal assessment is prepared to determine whether the hedging relationship, both at inception and on an ongoing basis, is expected to be highly effective in achieving offsetting cash flows attributable to the hedged risk during the term of the cash flow hedge. At inception a statistical regression analysis is prepared to determine hedge effectiveness. At each reporting period thereafter, a statistical regression or qualitative analysis is performed. If it is determined that hedge effectiveness has not been or will not continue to be highly effective, then hedge accounting ceases and any gain or loss in AOCI is recognized in earnings immediately. The cash flow hedges are recorded at fair value in other assets and other liabilities on the consolidated balance sheets with changes in fair value recorded in AOCI, net of tax. Amounts recorded to AOCI are reclassified into earnings in the same period in which the hedged asset or liability affects earnings and are presented in the same income statement line item as the earnings effect of the hedged asset or liability.    

30

Interest Rate Swap, Floor, Cap and Collar Agreements Not Designated as Hedging Derivatives
    In order to accommodate the borrowing needs of certain commercial customers, the Company has entered into interest rate swap or cap agreements with those customers. These interest rate derivative contracts effectively allow the Company’s customers to convert a variable rate loan into a fixed rate loan. In order to offset the exposure and manage interest rate risk, at the time an agreement was entered into with a customer, the Company entered into an interest rate swap or cap with a correspondent bank counterparty with offsetting terms. These derivative instruments are not designated as accounting hedges and changes in the net fair value are recognized in noninterest income or expense. Because the Company acts as an intermediary for its customers, changes in the fair value of the underlying derivative contracts substantially offset each other and do not have a material impact on the Company’s results of operations. The fair value amounts are included in other assets and other liabilities.
The following is a summary of the interest rate swaps, caps and collars outstanding as of March 31, 2024 and December 31, 2023.
  March 31, 2024
  Notional Amount Fixed Rate Floating Rate Maturity Fair Value
Non-hedging derivative instruments:          
Customer interest rate derivative:          
Interest rate swaps - receive fixed/pay floating
 $ 907,171 
2.4% - 7.4%
LIBOR 1 month + 3.0%
SOFR CME 1 month + 0.0% - 3.8%
SOFR-NYFD 30 day avg + 2.5% - 3.0%
Wtd. Avg.
3.9 years
 $ (34,815)
Interest rate caps and corridors $ 319,974 
3.50% - 7.50%
SOFR CME 1 month + 0.0% - 3%
SOFR + 0.0%
Wtd. Avg.
0.5 years
 $ (1,367)
Correspondent interest rate derivative:          
Interest rate swaps - pay fixed/receive floating
 $ 907,171 
2.41% - 7.37%
LIBOR 1 month + 3.0%
SOFR CME 1 month + 0.0% - 3.8%
SOFR-NYFD 30 day avg + 2.5% - 3.0%
Wtd. Avg.
3.9 years
 $ 35,288 
Interest rate caps and corridors $ 319,974 
3.50% - 7.50%
SOFR CME 1 month + 0.0% - 3.0%
SOFR + 0.0%
Wtd. Avg.
0.5 years
 $ 1,367 
December 31, 2023
Notional Amount Fixed Rate Floating Rate Maturity Fair Value
Non-hedging derivative instruments:
Customer interest rate derivative:
Interest rate swaps - receive fixed/pay floating
 $ 893,702 
2.4% - 7.4%
LIBOR 1 month + 3.0%
SOFR CME 1 month + 0.0% - 3.8%
SOFR-NYFD 30 day avg + 2.5% - 3.0%
Wtd. Avg.
4.1 years
 $ (25,170)
Interest rate caps and corridors $ 285,370 
3.5% - 7.5%
SOFR CME 1 month 0.0% + 3.0%
SOFR + 0.0%
Wtd. Avg.
0.8 years
 $ (1,344)
Correspondent interest rate derivative:
Interest rate swaps - pay fixed/receive floating
 $ 893,702 
2.4% - 7.4%
LIBOR 1 month + 3.0%
SOFR CME 1 month + 0.0% - 3.8%
SOFR-NYFD 30 day avg + 2.5% - 3.0%
Wtd. Avg.
4.1 years
 $ 25,685 
Interest rate caps and corridors $ 285,370 
3.5% - 7.5%
SOFR CME 1 month + 0.0% - 3%
SOFR + 0.0%
Wtd. Avg.
0.8 years
 $ 1,344 

31

7. OBS Loan Commitments
The Company is party to financial instruments with OBS risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit, MW commitments and standby and commercial letters of credit. Those instruments involve, to varying degrees, elements of credit risk in excess of the amount recognized in the consolidated balance sheets.
The Company’s exposure to credit loss in the event of nonperformance by the other party to a financial instrument for commitments to extend credit, MW commitments and standby and commercial letters of credit is represented by the contractual amount of those instruments. The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments.
The following table sets forth the approximate amounts of these financial instruments as of March 31, 2024 and December 31, 2023:
  March 31, December 31,
  2024 2023
Commitments to extend credit $ 2,834,310  $ 3,083,501 
MW commitments 794,470  803,704 
Standby and commercial letters of credit 113,405  111,590 
Total $ 3,742,185  $ 3,998,795 
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. Management evaluates each customer’s creditworthiness on a case-by-case basis and substantially all of the Company’s commitments to extend credit are contingent upon customers maintaining specific credit standards at the time of future loan funding. The amount of collateral obtained, if deemed necessary upon extension of credit, is based on management’s credit evaluation of the borrower.
MW commitments are unconditionally cancellable and represent the unused capacity on MW facilities the Company has approved. The Company reserves the right to refuse to buy any mortgage loans offered for sale by a customer, for any reason, at the Company’s sole and absolute discretion.
Standby and commercial letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. Standby and commercial letters of credit generally have fixed expiration dates or other termination clauses and may require payment of a fee. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. The Company’s policy for obtaining collateral and the nature of such collateral is substantially the same as that involved in making commitments to extend credit.
The table below presents the activity in the allowance for unfunded commitment credit losses related to those financial instruments discussed above. This ACL on unfunded commitments is recorded in accounts payable and other liabilities on the consolidated balance sheets:
  Three Months Ended March 31,
  2024 2023
Beginning balance for ACL on unfunded commitments $ 8,045  $ 10,086 
(Benefit) provision for credit losses on unfunded commitments (1,541) 1,497 
Ending balance of ACL on unfunded commitments $ 6,504  $ 11,583 

32

8. Stock-Based Awards
2010 Stock Option and Equity Incentive Plan (“2010 Incentive Plan”)
    The Company recognized no stock compensation expense related to the 2010 Incentive Plan for the three months ended March 31, 2024 and 2023.
A summary of option activity under the 2010 Incentive Plan for the three months ended March 31, 2024 and 2023, and changes during the periods then ended, is presented below:
2010 Incentive Plan
  Non-Performance Based Stock Options
  Shares
Underlying
Options		 Weighted
Exercise
Price		 Weighted
Average
Contractual
Term		 Aggregate Intrinsic Value
Outstanding at January 1, 2023 1,000  $ 10.43  1.07 years
Exercised (1,000) 10.43 
Outstanding and exercisable at March 31, 2023 —  $ —  —  $ — 
A summary of the fair value of the Company’s stock options exercised under the 2010 Incentive Plan for the three months ended March 31, 2024 and 2023 is presented below:
Fair Value of Options Exercised as of March 31,
  2024 2023
Nonperformance-based stock options exercised $ —  $ 16 
2022 Equity Plan, Veritex (Green) 2014 Plan and Green 2010 Plan
Grants of RSU
    During the three months ending March 31, 2024, the Company granted non-performance-based RSUs and PSUs under the 2022 Amended and Restated Omnibus Incentive Plan (the “2022 Equity Plan”) and the Veritex (Green) 2014 Omnibus Equity Incentive Plan (the “Veritex (Green) 2014 Plan”). The majority of the RSUs granted to employees during the three months ending March 31, 2024 have an annual graded vesting over a three year period from the grant date.
    The PSUs granted in February 2024 are subject to a service, performance and market conditions. The performance and market condition determine the number of awards to vest. The service period is from February 1, 2024 to January 31, 2027, the performance conditions performance period is from January 1, 2024 to December 31, 2026 and the market condition performance period is from February 1, 2024 to January 31, 2027. A Monte Carlo simulation was used to estimate the fair value of PSUs on the grant date.
Stock Compensation Expense
Stock compensation expense for options, RSUs and PSUs granted under the 2022 Equity Plan and the Veritex (Green) 2014 Plan were as follows:
Three Months Ended March 31,
  2024 2023
2022 Equity Plan $ 2,459  $ 2,465 
Veritex (Green) 2014 Plan 430  422 


33

2022 Equity Plan
A summary of the status of the Company’s stock options under the 2022 Equity Plan as of March 31, 2024 and 2023, and changes during the three months then ended, is as follows:
  2022 Equity Plan
  Non-performance Based Stock Options
  Shares
Underlying
Options		 Weighted
Exercise
Price		 Weighted
Average
Contractual
Term		 Aggregate Intrinsic Value
Outstanding at January 1, 2023 657,494  $ 24.47 
Forfeited (1,666) 17.38 
Cancelled (3,804) 29.13 
Exercised (3,951) 21.38 
Outstanding at March 31, 2023 648,073  $ 24.48  5.24 years
Options exercisable at March 31, 2023 610,073  $ 24.74  5.13 years
Outstanding at January 1, 2024 602,573  $ 24.40 
Outstanding at March 31, 2024 602,573  $ 24.40  4.59 years $ 215,379 
Options exercisable at March 31, 2024 602,573  $ 24.40  4.59 years $ 215,379 

There was no unrecognized compensation expense related to options awarded under the 2022 Equity Plan as of March 31, 2024 and December 31, 2023. As of March 31, 2023, there $122 of total unrecognized compensation expense related to options awarded under the 2022 Equity Plan.

A summary of the status of the Company’s RSUs under the 2022 Equity Plan as of March 31, 2024 and 2023, and changes during the three months then ended, is as follows:
  2022 Equity Plan
Non-performance-Based
  RSUs
  Units Weighted
Average
Grant Date
Fair Value
Outstanding at January 1, 2023 955,104  $ 28.38 
Granted 224,165  27.90 
Vested into shares (162,952) 30.23 
Forfeited (16,394) 31.77 
Outstanding at March 31, 2023 999,923  $ 27.87 
Outstanding at January 1, 2024 948,513  $ 27.52 
Granted 190,018  21.94 
Vested into shares (159,113) 29.87 
Forfeited (4,700) 30.73 
Outstanding at March 31, 2024 974,718  $ 26.03 

34

A summary of the status of the Company’s PSUs under the 2022 Equity Plan as of March 31, 2024 and 2023, and changes during the three months then ended, is as follows:

  2022 Equity Plan
Performance-Based
  PSUs
  Units Weighted
Average
Grant Date
Fair Value
Outstanding at January 1, 2023 126,707  $ 31.19 
Granted 53,310  27.55 
Vested into shares (41,781) 26.42 
Outstanding at March 31, 2023 129,768  $ 30.28 
Outstanding at January 1, 2024 129,786  $ 30.28 
Granted 113,144  18.84 
Vested into shares (56,729) 25.94 
Outstanding at March 31, 2024 186,201  $ 25.01 
As of March 31, 2024, December 31, 2023 and March 31, 2023, there was $18,421, $14,692 and $15,278 of total unrecognized compensation related to RSUs and PSUs awarded under the 2022 Equity Plan, respectively. The unrecognized compensation expense at March 31, 2024 is expected to be recognized over the remaining weighted average requisite service period of 2.60 years.
    A summary of the fair value of the Company’s stock options exercised, RSUs and PSUs vested under the 2022 Equity Plan during the three months ended March 31, 2024 and 2023 is presented below:
Fair Value of Options Exercised or RSUs Vested in the Three Months Ended March 31,
  2024 2023
Non-performance-based stock options exercised $ —  $ 31 
RSUs vested 3,057  3,044 
PSUs vested 1,133  1,070 
35

Veritex (Green) 2014 Plan
A summary of the status of the Company’s stock options under the Veritex (Green) 2014 Plan as of March 31, 2024 and 2023, and changes during the three months then ended, is as follows:
  Veritex (Green) 2014 Plan
  Non-performance Based Stock Options
  Shares
Underlying
Options		 Weighted
Exercise
Price		 Weighted
Average
Contractual
Term		 Aggregate Intrinsic Value
Outstanding at January 1, 2023 155,212  $ 19.83 
Cancelled (505) 21.38 
Exercised (13,266) 21.38 
Outstanding at March 31, 2023 141,441  $ 21.86  4.87 years
Options exercisable at March 31, 2023 141,441  $ 21.86  4.87 years
Outstanding at January 1, 2024 124,499  $ 22.00 
Outstanding at March 31, 2024 124,499  $ 22.00  3.46 years $ 391,054 
Options exercisable at March 31, 2024 124,499  $ 22.00  3.46 years $ 391,054 
Weighted average fair value of options granted during the period $ — 
As of March 31, 2024, December 31, 2023 and March 31, 2023 there was no unrecognized compensation expense related to options awarded under the Veritex (Green) 2014 Plan.

36


A summary of the status of the Company’s RSUs under the Veritex (Green) 2014 Plan as of March 31, 2024 and 2023 and changes during the three months then ended, is as follows:

Veritex (Green) 2014 Plan
Non-performance-Based
RSUs
Units Weighted
Average
Grant Date
Fair Value
Outstanding at January 1, 2023 86,233  $ 21.09 
Vested into shares (19,282) 29.66 
Forfeited (2,232) 29.13 
Outstanding at March 31, 2023 64,719  $ 18.26 
Outstanding at January 1, 2024 64,719  $ 18.26 
Vested into shares (3,308) 32.20 
Outstanding at March 31, 2024 61,411  $ 17.51 

A summary of the status of the Company’s PSUs under the Veritex (Green) 2014 Plan as of March 31, 2024 and 2023 and changes during the three months then ended, is as follows:
  Veritex (Green) 2014 Plan
Performance-Based
  PSUs
  Units Weighted
Average
Grant Date
Fair Value
Outstanding at January 1, 2023 19,173  $ 30.74 
Vested into shares (8,531) 25.94 
Outstanding at March 31, 2023 10,642  $ 31.93 
Outstanding at January 1, 2024 10,642  $ 31.93 
Granted 1,246  18.84 
Vested into shares (7,477) 25.94 
Outstanding at March 31, 2024 4,411  $ 40.38 
As of March 31, 2024, December 31, 2023 and March 31, 2023, there was $1,383, $1,781, and $3,260, respectively, of total unrecognized compensation related to outstanding RSUs and PSUs awarded under the Veritex (Green) 2014 Plan to be recognized over a remaining weighted average requisite service period of 1.12 years.
37

    A summary of the fair value of the Company’s stock options exercised, RSUs and PSUs vested under the Veritex (Green) 2014 Plan during the three months ended March 31, 2024 and 2023 presented below:
Fair Value of Options Exercised or RSUs Vested in the Three Months Ended March 31,
  2024 2023
Non-performance-based stock options exercised $ —  $ 18 
RSUs vested 326  1,990 
PSU vested 149  227 
Green 2010 Plan
In addition to the Veritex (Green) 2014 Plan discussed earlier in this Note, the Company assumed the Green Bancorp Inc. 2010 Stock Option Plan (“Green 2010 Plan”).
A summary of the status of the Company’s stock options under the Green 2010 Plan as of March 31, 2024 and 2023, and changes during the three months then ended, is as follows:
  Green 2010 Plan
  Non-performance Based Stock Options
  Shares
Underlying
Options		 Weighted
Exercise
Price		 Weighted
Average
Contractual
Term		 Aggregate Intrinsic Value
Outstanding at January 1, 2023 43,162  $ 13.11 
Exercised (29,630) 13.22 
Outstanding at March 31, 2023 13,532  $ 12.86  3.94 years
Outstanding at January 1, 2024 10,784  $ 12.65 
Outstanding at March 31, 2024 10,784  $ 12.65  3.82 years $ 85 
A summary of the fair value of the Company’s stock options exercised under the Green 2010 Plan during the three months ended March 31, 2024 and 2023 presented below:
Fair Value of Options Exercised as of March 31,
  2024 2023
Nonperformance-based stock options exercised $ —  $ 365 
9. Income Taxes
    Income tax expense for the three months ended March 31, 2024 and 2023 was as follows:
Three Months Ended March 31,
  2024 2023
Income tax expense for the period $ 7,237  $ 11,012 
Effective tax rate 23.1  % 22.3  %
For the three months ended March 31, 2024, the Company had an effective tax rate of 23.1%. The Company had a net discrete tax expense of $384 thousand associated with the recognition of an excess tax expense realized on share-based payment awards during the three months ended March 31, 2024. Excluding this discrete tax item, the Company had an effective tax rate of 21.8% for the three months ended March 31, 2024.
At December 31, 2023, we determined it was more likely than not that a portion of our deferred tax assets would not be realized in their entirety. Thus, the Company recorded a $4,249 valuation allowance in continuing operations relating to the impairment on our investment in Thrive as of March 31, 2024.
38

The deferred tax asset is not realizable due to the capital loss that will not be recognized. The position was upheld as of March 31, 2024. There was no valuation allowance in the comparable period in 2023.
For the three months ended March 31, 2023, the Company had an effective tax rate of 22.3%. The Company had a net discrete tax expense of $112 thousand associated with the recognition of an excess tax expense realized on share-based payment awards during the three months ended March 31, 2023. Excluding this discrete tax item, the Company had an effective tax rate of 22.1% for the three months ended March 31, 2023.
10. Legal Contingencies
Litigation
The Company may from time to time be involved in legal actions arising from normal business activities. In the opinion of management, there are no claims for which it is reasonably possible that an adverse outcome would have a material effect on the Company's financial position, liquidity or results of operations. The Company is not aware of any material unasserted claims.
11. Capital Requirements and Restrictions on Retained Earnings
Under applicable U.S. banking laws, there are legal restrictions limiting the amount of dividends the Company can declare. Approval of the regulatory authorities is required if, among other things, the effect of the dividends declared would cause regulatory capital of the Company to fall below specified minimum levels.
The Company on a consolidated basis and the Bank are subject to various regulatory capital requirements administered by federal banking agencies. Failure to meet minimum capital requirements triggers certain mandatory actions and may lead to additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s financial statements. Under capital adequacy guidelines and the regulatory framework for PCA, the Bank must meet specific capital guidelines that involve quantitative measures of the Bank’s assets, liabilities, and certain OBS items as calculated under regulatory accounting practices. The Bank’s capital amounts and PCA classification are also subject to qualitative judgments by the regulators about components of capital, risk weightings of assets, and other factors. In addition, an institution may be downgraded to, or deemed to be in, a capital category that is lower than indicated by its capital ratios, if it is determined to be in an unsafe or unsound condition or if it receives an unsatisfactory examination rating with respect to certain matters.

As a result of our no longer using the CBLR framework, we are subject to various quantitative measures established by regulation to ensure capital adequacy. These generally applicable capital requirements require a banking organization that does not operate under the CBLR framework to maintain minimum amounts and ratios (set forth in the table below) of total capital, Tier 1 capital, and CET1 capital to RWA, and of Tier 1 capital to average assets. The capital rules implementing Basel III also include a “capital conservation buffer” of 2.5% on top of each of the minimum RBC ratios, and a banking organization with any RBC ratio that meets or exceeds the minimum requirement but does not meet the capital conservation buffer will face constraints on dividends, equity repurchases and discretionary bonus payments based on the amount of the shortfall. Additionally, to be categorized as “well capitalized,” a bank that does not operate under the CBLR framework is required to maintain minimum total risk-based CET1, Tier 1, and total capital ratios and Tier 1 leverage ratios as set forth in the table below.

As of March 31, 2024 and December 31, 2023, the Company’s and the Bank’s capital ratios exceeded those levels necessary to be categorized as “well capitalized”. There are no conditions or events since March 31, 2024 that management believes have changed the Company’s category.

In the first quarter of 2020, U.S. federal regulatory authorities issued an interim final rule that provides banking organizations that adopt CECL during the 2020 calendar year with the option to delay for two years the estimated impact of CECL on regulatory capital relative to regulatory capital determined under the prior incurred loss methodology, followed by a three-year transition period to phase out the aggregate amount of the capital benefit provided during the initial two-year delay (i.e., a five-year transition in total). In connection with our adoption of CECL on January 1, 2020, the Company elected to utilize the five-year CECL transition. As a result, the effects of CECL on the Company’s and the Bank’s regulatory capital was delayed through the year 2021, with the effects phased-in over a three-year period from January 1, 2022 through December 31, 2024.

39



A comparison of the Company’s and Bank’s actual capital amounts and ratios to required capital amounts and ratios is presented in the following table:
  Actual   For Capital 
Adequacy Purposes		   To Be Well
Capitalized Under
PCA Provisions
  Amount Ratio   Amount   Ratio   Amount   Ratio
As of March 31, 2024
Total capital (to RWA)
Company $ 1,520,656  13.33  % $ 912,622  8.0  % n/a n/a
Bank 1,475,046  12.98  909,119  8.0  $ 1,136,399  10.0 
Tier 1 capital (to RWA)
Company 1,212,512  10.63  684,391  6.0  n/a n/a
Bank 1,365,973  12.02  681,850  6.0  909,133  8.0 
CET1 (to RWA)
Company 1,182,567  10.37  513,168  4.5  n/a n/a
Bank 1,365,973  12.02  511,388  4.5  738,671  6.5 
Tier 1 capital (to average assets)
Company 1,212,512  10.12  479,254  4.0  n/a n/a
Bank 1,365,973  11.41  478,869  4.0  598,586  5.0 
As of December 31, 2023
Total capital (to RWA)
Company $ 1,500,703  13.18  % $ 910,897  8.0  % n/a n/a
Bank 1,467,960  12.90  910,363  8.0  $ 1,137,953  10.0  %
Tier 1 capital (to RWA)
Company 1,202,252  10.56  683,098  6.0  n/a n/a
Bank 1,368,384  12.03  682,486  6.0  909,981  8.0 
CET1 (to RWA)
Company 1,172,362  10.29  512,695  4.5  n/a n/a
Bank 1,368,384  12.03  511,864  4.5  739,360  6.5 
Tier 1 capital (to average assets)
Company 1,202,252  10.03  479,462  4.0  n/a n/a
Bank 1,368,384  11.43  478,875  4.0  598,593  5.0 
    
Dividend Restrictions

Dividends paid by the Bank are subject to certain restrictions imposed by regulatory agencies. Capital requirements further limit the amount of dividends that may be paid by the Bank. Dividends of $27,500 were paid by the Bank to the Holdco during the three months ending March 31, 2024. There were no dividends paid by the Bank to the Holdco during the three months ended March 31, 2023.

Dividends of $10,899, or $0.20 per issued and outstanding share of the the Company’s common stock and $10,837, or $0.20, per outstanding share of the Company’s common stock were paid by the Company during the three months ended March 31, 2024 and 2023, respectively.

The Bank is subject to limitations on dividend payouts if, among other things, it does not have a capital conservation buffer of 2.5% or more. The Bank had a capital conservation buffer of 4.98% as of March 31, 2024.

40

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and notes thereto appearing in Item 1 of Part I of this Quarterly Report on Form 10-Q (this “Report”) as well as with our consolidated financial statements and notes thereto appearing in our Annual Report on Form 10-K for the year ended December 31, 2023. Except where the content otherwise requires or when otherwise indicated, the terms “Veritex,” the “Company,” “we,” “us,” “our,” and “our business” refer to the combined entities of Veritex Holdings, Inc. and its subsidiaries, including Veritex Community Bank.

This discussion and analysis contains forward-looking statements that are subject to certain risks and uncertainties and are based on certain assumptions that we believe are reasonable but may prove to be inaccurate. Certain risks, uncertainties and other factors, including those set forth under “Special Cautionary Notice Regarding Forward-Looking Statements,” may cause actual results to differ materially from the projected results discussed in the forward-looking statements appearing in this discussion and analysis. We assume no obligation to update any of these forward-looking statements. For additional information concerning forward-looking statements, please read “Special Cautionary Notice Regarding Forward-Looking Statements” below.

Overview

    We are a Texas state banking organization with corporate offices in Dallas, Texas. Through our wholly owned subsidiary, Veritex Community Bank, a Texas state-chartered bank, we provide relationship-driven commercial banking products and services tailored to meet the needs of small to medium-sized businesses and professionals. Beginning at our operational inception in 2010, we initially targeted customers and focused our acquisitions primarily in the Dallas metropolitan area, which we consider to be Dallas and the adjacent communities in North Dallas. Our current primary markets now includes the broader Dallas-Fort Worth metroplex and the Houston metropolitan area. As we continue to grow, we may expand to other metropolitan banking markets in Texas.

    Our business is conducted through one reportable segment, community banking, which generates the majority of our revenues from interest income on loans, customer service and loan fees, gains on sale of government guaranteed loans and mortgage loans and interest income from securities. We incur interest expense on deposits and other borrowed funds and noninterest expense, such as salaries, employee benefits and occupancy expenses. We analyze our ability to maximize income generated from interest earning assets and expense of our liabilities through net interest margin. Net interest margin is a ratio calculated as net interest income divided by average interest-earning assets. Net interest income is the difference between interest income on interest-earning assets, such as loans and securities, and interest expense on interest-bearing liabilities, such as deposits and borrowings, which are used to fund those assets.

    Changes in the market interest rates and interest rates we earn on interest-earning assets or pay on interest-bearing liabilities, as well as the volume and types of interest-earning assets, and interest-bearing and noninterest-bearing liabilities, are usually the largest drivers of periodic changes in net interest spread, net interest margin and net interest income. Fluctuations in market interest rates are driven by many factors, including governmental monetary policies, inflation, deflation, macroeconomic developments, changes in unemployment, the money supply, political and international conditions and conditions in domestic and foreign financial markets. Periodic changes in the volume and types of loans in our loan portfolio are affected by, among other factors, economic and competitive conditions in Texas and, specifically, in the Dallas-Fort Worth metroplex and Houston metropolitan area, as well as developments affecting the real estate, technology, financial services, insurance, transportation, manufacturing and energy sectors within our target markets and throughout the state of Texas.


41

Results of Operations for the Three Months Ended March 31, 2024 and March 31, 2023

General

    Net income for the three months ended March 31, 2024 was $24.2 million, a decrease of $14.2 million, or 37.1%, from net income of $38.4 million for the three months ended March 31, 2023.
    Basic EPS for the three months ended March 31, 2024 was $0.44, a decrease of $0.27 from $0.71 for the three months ended March 31, 2023. Diluted EPS for the three months ended March 31, 2024 was $0.44, a decrease of $0.26 from $0.70 for the three months ended March 31, 2023.
Net Interest Income

For the three months ended March 31, 2024, net interest income before provisions for credit losses totaled $92.8 million and net interest margin and net interest spread were 3.24% and 1.97%, respectively. For the three months ended March 31, 2023, net interest income before provision for credit losses totaled $103.4 million and net interest margin and net interest spread were 3.69% and 2.74%, respectively. Net interest margin decreased 45 bps from the three months ended March 31, 2023, primarily due to an increase in the average rate paid on interest-bearing liabilities, offset by an increase in the average yields earned on interest-earning assets. The decrease in net interest income of $10.6 million was primarily attributable to an increase of $19.5 million in interest expense on certificates and other time deposits and a $16.9 million increase in interest expense on transaction. The decrease was partially offset by a $11.0 million decrease in interest expense on advances from FHLB, an increase in interest income on loans of $10.2 million due to an increase in loan yields and higher average balances, during the three months ended March 31, 2024, compared to the three months ended March 31, 2023. The $36.5 million increase in interest expense on deposit accounts was due to an increase in average funding costs of total deposits and borrowings. As a result, the average cost of interest-bearing deposits increased 137 bps to 4.43% for the three months ended March 31, 2024 from 3.06% for the three months ended March 31, 2023. The average costs of total deposits, including noninterest-bearing deposits, for the three months ended March 31, 2024 increased 118 basis points to 3.42% compared to 2.24% for the three months ended March 31, 2023.

For the three months ended March 31, 2024, interest expense totaled $91.8 million and the average rate paid on interest-bearing liabilities was 4.47%. For the three months ended March 31, 2023, interest expense totaled $66.2 million and the average rate paid on interest-bearing liabilities was 3.32%. The increase of $25.6 million in interest expense was primarily due increases in the average rates paid on interest-bearing demand and savings deposits, certificates and other time deposits driven by the impact of rising interest rates year over year.


42

    The following table presents, for the periods indicated, an analysis of net interest income by each major category of interest-earning assets and interest–bearing liabilities, the average amounts outstanding and the interest earned or paid on such amounts. The table also sets forth the average rate earned on interest-earning assets, the average rate paid on interest-bearing liabilities, and the net interest margin on average total interest-earning assets for the same periods. Interest earned on loans that are classified as non-accrual is not recognized in income; however, the balances are reflected in average outstanding balances for the period. For the three months ended March 31, 2024 and March 31, 2023, interest income not recognized on non-accrual loans was $781 thousand and $772 thousand, respectively. Any non-accrual loans have been included in the table as loans carrying a zero yield.

For the Three Months Ended March 31,
2024 2023
Interest Interest
Average Earned/ Average Average Earned/ Average
Outstanding Interest Yield/ Outstanding Interest Yield/
Balance Paid Rate Balance Paid Rate
(Dollars in thousands)
Assets                                                                  
Interest-earning assets:
Loans(1)
 $ 9,283,815  $ 157,585  6.83  % $ 9,141,137  $ 146,801  6.51  %
LHI, MW 279,557  4,357  6.27  360,172  4,906  5.52 
Debt securities 1,294,994  13,695  4.25  1,252,457  10,988  3.56 
Interest-bearing deposits in other banks 584,593  8,050  5.54  478,345  5,534  4.69 
Equity securities and other investments 85,232  900  4.25  124,985  1,408  4.57 
Total interest-earning assets 11,528,191  184,587  6.44  11,357,096  169,637  6.06 
ACL (112,229)     (92,664)    
Noninterest-earning assets 920,080      949,881     
Total assets $ 12,336,042      $ 12,214,313     
Liabilities and Stockholders’ Equity
Interest-bearing liabilities:
Interest-bearing demand and savings deposits $ 4,639,445  $ 46,784  4.06  % $ 4,150,995  $ 29,857  2.92  %
Certificates and other time deposits 3,283,735  40,492  4.96  2,588,728  20,967  3.28 
Advances from FHLB 100,989  1,391  5.54  1,122,683  12,358  4.46 
Subordinated debentures and subordinated notes 229,881  3,114  5.45  231,251  3,066  5.38 
Total interest-bearing liabilities 8,254,050  91,781  4.47  8,093,657  66,248  3.32 
Noninterest-bearing liabilities:            
Noninterest-bearing deposits 2,355,315      2,470,700     
Other liabilities 192,809      173,380     
Total liabilities 10,802,174      10,737,737     
Stockholders’ equity 1,533,868      1,476,576     
Total liabilities and stockholders’ equity $ 12,336,042      $ 12,214,313     
Net interest rate spread(2)
   1.97  %   2.74  %
Net interest income   $ 92,806    $ 103,389 
Net interest margin(3)
   3.24  %   3.69  %
(1) Includes average outstanding balances of LHFS of $53,866 and $19,679 for the three months ended March 31, 2024 and March 31, 2023, respectively, and average balances of LHI, excluding MW.
(2) Net interest rate spread is equal to the average yield on interest-earning assets minus the average rate on interest-bearing liabilities.
(3) Net interest margin is equal to net interest income divided by average interest-earning assets.
43


The following table presents the changes in interest income and interest expense for the periods indicated for each major component of interest-earning assets and interest-bearing liabilities and distinguishes between the changes attributable to changes in volume and interest rates. For purposes of this table, changes attributable to both rate and volume that cannot be segregated have been allocated to rate.
  For the Three Months Ended
March 31, 2024 vs March 31, 2023
  Increase (Decrease)  
  Due to Change in  
  Volume Rate Total
  (In thousands)
Interest-earning assets:
Loans $ 2,310  $ 8,474  $ 10,784 
LHI, MW (1,106) 557  (549)
Debt securities 376  2,331  2,707 
Interest-bearing deposits in other banks 1,239  1,277  2,516 
Equity securities and other investments (452) (56) (508)
Total increase in interest income 2,367  12,583  14,950 
Interest-bearing liabilities:
Interest-bearing demand and savings deposits 3,543  13,384  16,927 
Certificates and other time deposits 5,676  13,849  19,525 
Advances from FHLB (11,340) 373  (10,967)
Subordinated debentures and subordinated notes (18) 66  48 
Total increase in interest expense (2,139) 27,672  25,533 
Increase in net interest income $ 4,506  $ (15,089) $ (10,583)
Provision for Credit Losses
Our provision for credit losses is a charge to income in order to bring our ACL to a level deemed appropriate by management. For a description of the factors taken into account by management in determining the ACL see “—Financial Condition—ACL on LHI” The provision for credit loan losses was $7.5 million for the three months ended March 31, 2024, compared to a $9.4 million provision for credit loan losses for the three months ended March 31, 2023, a decrease of $1.9 million. The decrease in the recorded provision for credit losses for the three months ended March 31, 2024 was primarily attributable to changes in the Texas economic forecast.

For the three months ended March 31, 2024, we also recorded a $1.5 million benefit for unfunded commitments compared to a $1.5 million provision for unfunded commitments for three months ended March 31, 2023. The change from a provision to a benefit for unfunded commitments was attributable to a decrease in unfunded commitment balances.

44

Noninterest Income
The following table presents, for the periods indicated, the major categories of noninterest income:
  For the   
  Three Months Ended  
  March 31, Increase
  2024 2023 (Decrease)
  (In thousands)
Noninterest income:
Service charges and fees on deposit accounts $ 4,896  $ 5,017  $ (121)
Loan fees 2,510  2,064  446 
Loss on sales of debt securities (6,304) (5,321) (983)
Government guaranteed loan income, net 2,614  9,688  (7,074)
Equity method investment loss —  (1,521) 1,521 
Customer swap income 408  217  191 
Other 2,538  3,387  (849)
Total noninterest income $ 6,662  $ 13,531  $ (6,869)

Noninterest income for the three months ended March 31, 2024 decreased $6.9 million, or 50.8%, to $6.7 million compared to noninterest income of $13.5 million for the three months ended March 31, 2023. The primary drivers of the decrease were as follows:
Loss on sales of debt securities. The increase in the loss on sale of debt securities during the three months ended March 31, 2024, compared to the three months ended March 31, 2023, was due to a $6.3 million loss on sales of debt securities due to as a result of a strategic restructuring in which we sold $120.1 million of lower-yielding AFS debt securities, at amortized cost, with a 3.11% average yield compared to a $5.3 million loss on sales of debt securities due to the Company selling $116.2 million of debt securities in March 2023.
Government guaranteed loan income, net. Government guaranteed loan income, net, includes income related to the sales of SBA and USDA loans. The decrease in government. guaranteed loan income, net, of $7.1 million during the three months ended March 31, 2024 was primarily due to a $5.7 million decrease in the gain on USDA loans and a decrease of $2.8 million in government guaranteed LHFS loan valuation, compared to the three months ended March 31, 2023. The decrease was partially offset by an increase of $1.4 million in the gain on SBA loans.
Equity method investment loss. Equity method investment loss is comprised of losses and gains primarily related to our Thrive Investment. The change in equity method investment loss is related to the Company divesting of our equity method investment in Thrive related to Thrive’s entry into a definitive agreement in December 2023 to be acquired by Lower, which acquisition closed in March of 2024. Our subsequent investment in Lower is accounted for under cost method accounting.
Other. Other includes other noninterest income from fees. Other noninterest income was $2.5 million for the three months ended March 31, 2024, an decrease of $849 thousand, or 25.1% as compared to the three months ended March 31, 2023. The decrease was primarily driven by a decrease in the valuation adjustment and amortization of our servicing asset of $681 thousand compared to the three months ended March 31, 2023.

45

Noninterest Expense

The following table presents, for the periods indicated, the major categories of noninterest expense:
For the
  Three Months Ended
  March 31, Increase
  2024 2023 (Decrease)
  (In thousands)
Noninterest expense
Salaries and employee benefits $ 33,365  $ 31,865  $ 1,500 
Occupancy and equipment 4,677  4,973  (296)
Professional and regulatory fees 6,053  4,389  1,664 
Data processing and software expense 4,856  4,720  136 
Marketing 1,546  1,779  (233)
Amortization of intangibles 2,438  2,495  (57)
Telephone and communications 261  478  (217)
Other 8,920  5,916  3,004 
Total noninterest expense $ 62,116  $ 56,615  $ 5,501 
 
Noninterest expense for the three months ended March 31, 2024 increased $5.5 million, or 9.7%, to $62.1 million compared to noninterest expense of $56.6 million for the three months ended March 31, 2023. The most significant components of the increase were as follows:
 
Salaries and employee benefits. Salaries and employee benefits include payroll expense, the cost of incentive compensation, benefit plans, health insurance and payroll taxes. These expenses are impacted by the amount of direct loan origination costs, which are required to be deferred in accordance with ASC 310-20. Salaries and employee benefits were $33.4 million for the three months ended March 31, 2024, an increase of $1.5 million, or 4.7%, compared to the three months ended March 31, 2023. The increase was primarily attributable to a $1.8 million increase in officer salaries, offset by an increase of $1.2 million in contra origination costs, a decrease of $1.0 million in bonuses and a decrease of $709 thousand in severance costs. The remaining changes were nominal amongst individual other noninterest expense accounts.

Professional and regulatory fees. The category includes legal, professional, audit, regulatory, and FDIC assessment fees. The increase of $1.7 million, or 37.9%, was primarily attributable to an increase of $963 thousand of FDIC assessment fees that increased when the Company crossed $10 billion in total assets and an increase of $536 thousand professional services.

Other noninterest expense. This category includes loan operations and collections, supplies and printing, automatic teller and online expenses and other miscellaneous expenses. Other noninterest expense was $8.9 million for the three months ended March 31, 2024, compared to $5.9 million for the same period in 2023, an increase of $3.0 million, or 50.8%. This increase was primarily due to an increase of $2.7 million in earned credit rebates during the three months ended March 31, 2024 as compared to the same period in 2023. The remaining changes were nominal amongst individual other noninterest expense accounts

Income Tax Expense
 
Income tax expense is a function of our pre-tax income, tax-exempt income and other nondeductible expenses. Deferred tax assets and liabilities reflect current statutory income tax rates in effect for the period in which the deferred tax assets and liabilities are expected to be realized or settled. As changes in tax laws or statutory tax rates are enacted, deferred tax assets and liabilities are adjusted through the provision of income taxes. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. As of December 31, 2023, a $4.2 million valuation allowance was established relating to an impairment on our investment in Thrive. The position was upheld as of March 31, 2024. As of March 31, 2023, the Company did not believe a valuation allowance was necessary.
 
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For the three months ended March 31, 2024, income tax expense totaled $7.2 million, a decrease of $3.8 million, compared to an income tax expense of $11.0 million for the three months ended March 31, 2023. For the three months ended March 31, 2024, we had an effective tax rate of 23.1% which includes a discrete tax expense of $384 thousand associated with the recognition of an excess tax expense realized on share-based payment awards. Excluding this discrete tax item, the Company had an effective tax rate of 21.8%. For the three months ended March 31, 2023, the Company had an effective tax rate of 22.3%.


47

Financial Condition
 
Our total assets increased $314.1 million, or 2.5%, from $12.39 billion as of December 31, 2023 to $12.71 billion as of March 31, 2024. Our asset growth was due to the continued execution of our strategy to establish deep relationships in the Dallas-Fort Worth metroplex and the Houston metropolitan area. We believe these relationships will continue to bring in new customer accounts and grow balances from existing loan and deposit customers.
 
Loan Portfolio
 
Our primary source of income is interest on loans to individuals, professionals, small to medium-sized businesses and commercial companies primarily located in the Dallas-Fort Worth metroplex and Houston metropolitan area. Our loan portfolio consists primarily of commercial loans and real estate loans secured by CRE properties located in our primary market areas. Our loan portfolio represents the highest yielding component of our interest-earning asset base.
 
As of March 31, 2024, total LHI, excluding ACL, was $9.71 billion, an increase of $112.9 million, or 1.2%, compared to $9.59 billion as of December 31, 2023. The increase was the result of the continued execution and success of our loan growth strategy. In addition to these amounts, $64.8 million and $79.1 million in loans were classified as LHFS as of March 31, 2024 and December 31, 2023, respectively.
 
Total LHI as a percentage of deposits were 91.1% and 92.8% as of March 31, 2024 and December 31, 2023, respectively. Total LHI, excluding MW loans, as a percentage of deposits were 86.9% and 89.1% as of March 31, 2024 and December 31, 2023, respectively. Total LHI as a percentage of assets were 76.4% and 77.4% as of March 31, 2024 and December 31, 2023, respectively.

The following table summarizes our loan portfolio by type of loan as of the dates indicated:

  As of March 31, As of December 31,
  2024 2023 Increase (Decrease)
  Amount % of Total Amount % of Total Amount % Change Quarter over Quarter
  (Dollars in thousands)
Commercial $ 2,785,987  28.8  % $ 2,752,063  28.7  % $ 33,924  1.2  %
MW 449,531  4.6  377,796  3.9  71,735  19.0 
Real estate:    
OOCRE 788,376  8.1  794,088  8.3  (5,712) (0.7)
NOOCRE 2,352,993  24.2  2,350,725  24.5  2,268  0.1 
Construction and land 1,568,257  16.2  1,734,254  18.1  (165,997) (9.6)
Farmland 30,979  0.3  31,114  0.3  (135) (0.4)
1-4 family residential 969,401  10.0  937,119  9.8  32,282  3.4 
Multifamily 751,607  7.7  605,817  6.3  145,790  24.1 
Consumer 8,882  0.1  10,149  0.1  (1,267) (12.5)
Total LHI, carried at amortized cost(1)
 $ 9,706,013  100.0  % $ 9,593,125  100.0  % $ 112,888  1.2  %
Total LHFS $ 64,762  $ 79,072 
(1) Total LHI, carried at amortized cost, excludes $6.9 million and $8.8 million of deferred loan fees, net, as of March 31, 2024 and December 31, 2023, respectively.




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CRE Portfolio Composition
The majority of our CRE loan portfolio consists of multifamily residential, NOOCRE and construction and land loans. The table below details the composition of the multifamily residential, NOOCRE and construction and land loan portfolio's by borrower type and geographic location.
As of March 31,
2024
Property Type DFW Houston
Secondary Texas(1)
 Out of State Total % of Total Loans
Industrial $ 440,988  $ 257,198  $ 166,967  $ 252,100  $ 1,117,253  11.5  %
Multifamily 425,041  481,602  173,180  137,544  1,217,367  12.5 
Office 336,002  135,784  23,748  32,652  528,186  5.4 
Retails 188,223  194,289  137,745  180,340  700,597  7.2 
Hotel 169,792  22,610  112,436  138,819  443,657  4.6 
SFR 249,310  34,421  81,248  8,833  373,812  3.9 
Other 69,333  86,650  53,393  82,609  291,985  3.0 
Total CRE $ 1,878,689  $ 1,212,554  $ 748,717  $ 832,897  $ 4,672,857  48.1  %
As of December 31,
2023
Property Type DFW Houston
Secondary Texas(1)
 Out of State Total % of Total Loans
Industrial $ 409,899  $ 263,880  $ 151,780  $ 265,138  $ 1,090,697  11.4  %
Multifamily 395,344  506,761  165,340  125,890  1,193,335  12.4 
Office 361,612  137,486  31,914  32,627  563,639  5.9 
Retails 192,770  188,582  138,176  179,536  699,064  7.3 
Hotel 166,356  22,764  110,795  141,054  440,969  4.6 
SFR 250,151  29,556  89,582  8,201  377,490  3.9 
Other 81,981  108,512  53,438  81,671  325,602  3.4 
Total CRE $ 1,858,113  $ 1,257,541  $ 741,025  $ 834,117  $ 4,690,796  48.9  %
(1)Includes loans made to markets in the state of Texas outside of DFW and Houston.









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Out of State Concentration
The majority of the Company's loan portfolio consists of loans to businesses and individuals in the Dallas-Fort Worth metroplex and the Houston metropolitan area. The following table provides details on our out of state portfolio concentration:
As of March 31, As of December 31,
2024 2023
Out of State Loan Portfolio Amount Percent of Total Loans Amount Percent of Total Loans
(Dollars in thousands)
Commercial Real Estate $ 785,201  8.1  % $ 784,523  8.2  %
Lender Finance 536,568  5.5  536,568  5.6 
Commercial 371,075  3.8  355,626  3.7 
MW 224,903  2.3  141,329  1.5 
Mortgage Servicing Rights 229,804  2.4  227,002  2.4 
1-4 Family Residential 257,846  2.7  259,745  2.7 
USDA and SBA 192,676  2.0  199,184  2.1 
Other 370  —  370  — 
Total Out of State Loans $ 2,598,443  26.8  % $ 2,504,347  26.1  %
Nonperforming Assets

The following table presents information regarding nonperforming assets by category as of the dates indicated:
  As of March 31, As of December 31,
  2024 2023
(Dollars in thousands)
Nonperforming loans(1)
Construction and land $ 6,737  $ 6,793 
1-4 family residential 3,263  1,965 
OOCRE 15,126  9,719 
NOOCRE 22,366  33,479 
    Commercial 37,627  40,868 
    Consumer 21  24 
Accruing loans 90 or more days past due 220  2,975 
        Total nonperforming loans 85,360  95,823 
OREO 18,445  — 
         Total nonperforming assets $ 103,805  $ 95,823 
Nonperforming assets to total assets 0.82  % 0.77  %
Nonperforming assets to total loans and OREO 1.06  % 0.99  %
Nonperforming loans to total loans 0.88  % 1.00  %
(1) At March 31, 2024 and December 31, 2023, nonaccrual loans included $9.4 million and $13.7 million, respectively, of PCD loans that are accounted for on a pooled basis.


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Potential Problem Loans

The following tables summarize our internal ratings of our loans as of the dates indicated.
  March 31, 2024
  Pass Special
Mention		 Substandard
PCD1
 Total
(Dollars in thousands)
Real estate:
Construction and land $ 1,541,159  $ 20,361  $ 6,737  $ —  $ 1,568,257 
Farmland 30,979  —  —  —  30,979 
1 - 4 family residential 948,307  4,949  15,031  1,114  969,401 
Multi-family residential 751,607  —  —  —  751,607 
OOCRE 728,797  27,485  21,526  10,568  788,376 
NOOCRE 2,053,124  248,849  41,236  9,784  2,352,993 
Commercial 2,661,014  48,114  76,439  420  2,785,987 
MW 449,531  —  —  —  449,531 
Consumer 8,720  82  69  11  8,882 
Total $ 9,173,238  $ 349,840  $ 161,038  $ 21,897  $ 9,706,013 
1 Within PCD loans, $13,503 are considered classified credits.
  December 31, 2023
  Pass Special
Mention		 Substandard PCD Total
(Dollars in thousands)
Real estate:
Construction and land $ 1,693,230  $ 34,231  $ 6,793  $ —  $ 1,734,254 
Farmland 31,114  —  —  —  31,114 
1 - 4 family residential 928,106  4,501  3,382  1,130  937,119 
Multi-family residential 579,021  11,701  15,095  —  605,817 
OOCRE 722,430  25,925  27,563  18,170  794,088 
NOOCRE 2,066,080  182,531  88,030  14,084  2,350,725 
Commercial 2,641,017  51,073  57,065  2,908  2,752,063 
MW 377,796  —  —  —  377,796 
Consumer 9,972  85  79  13  10,149 
Total $ 9,048,766  $ 310,047  $ 198,007  $ 36,305  $ 9,593,125 
 
ACL on LHI
We maintain an ACL that represents management’s best estimate of the credit losses and risks inherent in the loan portfolio. In determining the ACL, we estimate losses on specific loans, or groups of loans, where the probable loss can be identified and reasonably determined. The balance of the ACL is based on internally assigned risk classifications of loans, historical loan loss rates, changes in the nature of the loan portfolio, overall portfolio quality, industry concentrations, delinquency trends, current economic factors and the estimated impact of current economic conditions on certain historical loan loss rates.
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The following table presents, as of and for the periods indicated, an analysis of the ACL and other related data:
  March 31, 2024 December 31, 2023
  Allocated Allowance % of Loan Portfolio ACL to Loans Allocated Allowance % of Loan Portfolio ACL to Loans
 
Construction and land $ 19,781  16.2  % 1.26  % $ 21,032  18.1  % 1.21  %
Farmland 107  0.3  0.35  101  0.3  0.32 
1 - 4 family residential 11,516  10.0  1.19  9,539  9.8  1.02 
Multi-family residential 6,339  7.7  0.84  4,882  6.3  0.81 
OOCRE 9,802  8.1  1.24  10,252  8.3  1.29 
NOOCRE 31,137  24.2  1.32  27,729  24.5  1.18 
Commercial 32,791  28.8  1.18  35,886  28.7  1.30 
MW 404  4.6  0.09  260  3.9  0.07 
Consumer 155  0.1  1.75  135  0.1  1.33 
Total $ 112,032  100.0  % 1.15  % $ 109,816  100.0  % 1.14  %

The ACL increased $2.2 million to $112.0 million as of March 31, 2024 from December 31, 2023. The increase in the ACL compared to December 31, 2023, was primarily attributable to changes in economic factors resulting in increases in both general and qualitative factor reserves.


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(Dollars in thousands) Net (Charge-offs) Recoveries Average Loans Annualized Net (Charge-off) Recoveries to Average Loans
Three Months Ended March 31, 2024
Construction and land $ —  $ 1,709,399  —  %
Farmland —  31,584  — 
1 - 4 family residential 1  944,704  — 
Multi-family residential —  712,940  — 
OOCRE (120) 775,124  (0.06)
NOOCRE (4,293) 2,291,047  (0.75)
Commercial (850) 2,780,354  (0.12)
MW —  279,557  — 
Consumer (22) 9,115  (0.97)
Total $ (5,284) $ 9,533,824  (0.22) %
Three Months Ended March 31, 2023
Construction and land $ —  $ 1,913,734  —  %
Farmland —  46,370  — 
1 - 4 family residential 1  891,003  — 
Multi-family residential —  377,725  — 
OOCRE (116) 706,052  (0.07)
NOOCRE —  2,329,895  — 
Commercial (687) 2,866,017  (0.10)
MW —  360,172  — 
Consumer (56) 7,624  (2.98)
Total $ (858) $ 9,498,592  (0.04) %
Net charged-offs increased $4.4 million, or 18 bps to average loans annualized. Although we believe that we have established our ACL in accordance with GAAP and that the ACL was adequate to provide for known and inherent losses in the portfolio at all times shown above, future provisions will be subject to ongoing evaluations of the risks in our loan portfolio. If we experience economic declines or if asset quality deteriorates, material additional provisions could be required.
OBS Credit exposure
The ACL on off-balance-sheet credit exposures totaled $6.5 million and $8.0 million at March 31, 2024 and December 31, 2023, respectively. The level of the ACL on off-balance-sheet credit exposures depends upon the volume of outstanding commitments, underlying risk grades, the expected utilization of available funds and forecasted economic conditions impacting our loan portfolio.  
Equity Securities
As of March 31, 2024, we held equity securities with a readily determinable fair value of $9.8 million compared to $9.9 million as of December 31, 2023. These equity securities primarily represent investments in a publicly traded CRA fund and are subject to market pricing volatility, with changes in fair value recorded in earnings.

The Company held equity securities without a readily determinable fair values and measured at cost of $38.2 million at March 31, 2024, compared to $11.6 million at December 31, 2023. The Company measures equity securities that do not have readily determinable fair values at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer.




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FHLB Stock and FRB Stock

As of March 31, 2024, we held FHLB stock and FRB stock of $54.1 million compared to $53.7 million as of December 31, 2023. The Bank is a member of its regional FRB and of the FHLB system. FHLB members are required to own a certain amount of stock based on the level of borrowings and other factors, and may invest in additional amounts. Both FRB and FHLB stock are carried at cost, restricted for sale, and periodically evaluated for impairment based on ultimate recovery of par value. Both cash and stock dividends are reported as income.

Debt Securities
We use our debt securities portfolio to provide a source of liquidity, provide an appropriate return on funds invested, manage interest rate risk, meet collateral requirements and meet regulatory capital requirements. As of March 31, 2024, the carrying amount of debt securities totaled $1.34 billion, an increase of $87.9 million, or 7.0%, compared to $1.26 billion as of December 31, 2023. The increase was primarily due purchases of AFS debt securities of $230.0 million. The increase was partially offset by the sale of debt securities of $120.1 million at a loss of $6.3 million and $19.5 million in paydowns. Debt securities represented 10.6% and 10.1% of total assets as of March 31, 2024 and December 31, 2023, respectively.
All of our MBS and CMOs are issued and/or guaranteed by U.S. government agencies or U.S. government-sponsored entities. We do not hold any Fannie Mae or Freddie Mac preferred stock, corporate equity, collateralized debt obligations, structured investment vehicles, private label collateralized mortgage obligations, subprime, Alt-A, or second lien elements in our investment portfolio. As of March 31, 2024, our investment portfolio did not contain any securities that are directly backed by subprime or Alt-A mortgages.
 
Management evaluates AFS debt securities in unrealized loss positions to determine whether the impairment is due to credit-related factors or noncredit-related factors. Consideration is given to (1) the extent to which the fair value is less than cost, (2) the financial condition and near-term prospects of the issuer, and (3) the intent and ability of the Company to retain its investment in the security for a period of time sufficient to allow for any anticipated recovery in fair value. The Company has 133 AFS debt securities that were in an unrealized loss position totaling $94.4 million as of March 31, 2024. The Company evaluated all debt securities and no ACL on debt securities was recognized in the Company’s consolidated balance sheets as of March 31, 2024. The Company recorded no ACL for its held to maturity debt securities as of March 31, 2024 and December 31, 2023, respectively.

    As of March 31, 2024 and December 31, 2023, we did not own securities of any one issuer other than U.S. government agency securities for which aggregate cost exceeded 10.0% of our stockholders’ equity as of such respective dates
Deposits

Total deposits as of March 31, 2024 were $10.65 billion, an increase of $315.6 million, or 3.1%, compared to $10.34 billion as of December 31, 2023. The increase from December 31, 2023 was primarily the result of increases of $295.1 million in certificates and other time deposits, $131.2 million in noninterest-bearing transactions and $17.7 million in correspondent money market deposits. The increase was partially offset by a decrease of $128.3 million in interest-bearing demand deposits.
March 31, 2024
Ending Balance % of Total Average
Outstanding Balance
Noninterest-bearing $ 2,349,211  22.1  % $ 2,355,315 
Interest-bearing transaction 724,171  6.8  810,004 
Money market 3,326,742  31.2  3,096,567 
Savings 169,201  1.6  150,214 
   Certificates and other time deposits > $250k 1,307,412  12.3  1,318,235 
   Certificates and other time deposits < $250k 2,179,393  20.4  1,965,500 
Correspondent money market accounts 597,690  5.6  582,660 
Total deposits $ 10,653,820  100.0  % $ 10,278,495 
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December 31, 2023
Ending Balance % of Total Average
Outstanding Balance
Noninterest-bearing $ 2,218,036  21.4  % $ 2,322,556 
Interest-bearing transaction 927,193  9.0  851,375 
Money market 3,284,324  31.8  3,061,472 
Savings 136,868  1.3  115,519 
 Certificates and other time deposits > $250k 1,312,032  12.7  1,240,834 
 Certificates and other time deposits < $250k 1,879,705  18.2  2,044,330 
Correspondent money market accounts 580,037  5.6  519,544 
Total deposits $ 10,338,195  100.0  % $ 10,155,630 
Borrowings
We utilize short- and long-term borrowings to supplement deposits to fund our lending and investment activities, each of which is discussed below.
FHLB Advances 
The FHLB allows us to borrow on a blanket floating lien status collateralized by certain securities and loans. As of March 31, 2024 and December 31, 2023, total available borrowing capacity of $2.21 billion and $2.19 billion, respectively, was available under this arrangement with outstanding balances of $100.0 million and $100.0 million, respectively, and a weighted average interest rate of 5.54% for the three months ended March 31, 2024 and 4.70% for the year ended December 31, 2023. The FHLB has also issued standby letters of credit to the Company for $1.38 billion and $1.38 billion as of March 31, 2024 and December 31, 2023, respectively. Our current FHLB advances mature within 0.2 years. Other than FHLB borrowings, we had no other short-term borrowings at the dates indicated.
FRB  
The FRB has an available borrower in custody arrangement, which allows us to borrow on a collateralized basis. Certain commercial and consumer loans are pledged under this arrangement. We maintain this borrowing arrangement to meet liquidity needs pursuant to our contingency funding plan. The following table outlines the FRB availability:
Three Months Ended
March 31, December 31,
2024 2023
FRB loans pledged as collateral at period end $ 2,015,276  $ 2,143,269 
FRB securities pledged as collateral at period end 953,163  328,919 
BTFP availability at period end(1)
 —  455,361 
Total FRB availability $ 2,968,439  $ 2,927,549 
(1) There were no borrowings against the BTFP at the end of the respective periods.
Junior subordinated debentures and subordinated notes
The table below details our junior subordinated debentures and subordinated notes. Refer to Note 13 “Subordinated Debentures and Subordinated Notes” in our Annual Report on Form 10-K for the year ended December 31, 2023 for further discussion on the details of our junior subordinated debentures and subordinated notes.
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March 31, 2024
Balance Rate
(Dollars in thousands)
Junior subordinated debentures
Parkway National Capital Trust I $ 3,093  7.44%
SovDallas Capital Trust I 8,609  9.59
Patriot Bancshares Capital Trust I 5,155  7.43
Patriot Bancshares Capital Trust II 17,011  7.39
Subordinated notes
4.75% Fixed-to-Floating Rate Subordinated Notes 75,000  4.75
4.125% Fixed-to-Floating Rate Subordinated Notes 125,000  4.125

Liquidity and Capital Resources
Liquidity
Liquidity management involves our ability to raise funds to support asset growth and acquisitions or reduce assets to meet deposit withdrawals and other payment obligations, to maintain reserve requirements and otherwise to operate on an ongoing basis and manage unexpected events. For the three months ended March 31, 2024 and the year ended December 31, 2023, our liquidity needs were primarily met by core deposits, wholesale borrowings, security and loan maturities and amortizing investment and loan portfolios. Use of brokered deposits, purchased funds from correspondent banks and overnight advances from the FHLB and the FRB are available and have been utilized to take advantage of the cost of these funding sources.
We maintained five lines of credit with commercial banks that provide for extensions of credit with an availability to borrow up to an aggregate of $150.0 million as of March 31, 2024. We maintained five lines of credit with commercial banks that provide for extensions of credit with an availability to borrow up to an aggregate of $125.0 million as of December 31, 2023. There were no advances under these lines of credit outstanding as of March 31, 2024 and December 31, 2023.
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The following table illustrates, during the periods presented, the mix of our funding sources and the average assets in which those funds are invested as a percentage of our average total assets for the period indicated. Average assets totaled $12.34 billion for the three months ended March 31, 2024 and $12.28 billion for the year ended December 31, 2023.
  For the For the
  Three Months Ended Year Ended
  March 31, 2024 December 31, 2023
Sources of Funds:
Deposits:
Noninterest-bearing 19.1  % 18.8  %
Interest-bearing 37.6  34.2 
Certificates and other time deposits 26.6  24.2 
Advances from FHLB 0.8  7.1 
Other borrowings 1.9  1.9 
Other liabilities 1.6  1.6 
Stockholders’ equity 12.4  12.2 
Total 100.0  % 100.0  %
Uses of Funds:
Loans 76.7  % 77.3  %
Debt Securities 10.5  9.6 
Interest-bearing deposits in other banks 4.7  1.0 
Other noninterest-earning assets 8.1  12.1 
Total 100.0  % 100.0  %
Average noninterest-bearing deposits to average deposits 22.9  % 24.4  %
Average loans, excluding MW, to average deposits 90.3  % 97.5  %
Our primary source of funds is deposits, and our primary use of funds is loans. We do not expect a change in the primary source or use of our funds in the foreseeable future. Our average LHI decreased 0.4% for the three months ended March 31, 2024, compared to the year ended December 31, 2023. We use excess deposits to pay down FHLB borrowings to reduce wholesale funding.
As of March 31, 2024, we had $2.83 billion in outstanding commitments to extend credit, $794.5 million in unconditionally cancellable MW commitments and $113.4 million in commitments associated with outstanding standby and commercial letters of credit. As of December 31, 2023, we had $3.08 billion in outstanding commitments to extend credit, $803.7 million in MW commitments and $111.6 million in commitments associated with outstanding standby and commercial letters of credit. Since commitments associated with letters of credit and commitments to extend credit may expire unused, the total outstanding may not necessarily reflect the actual future cash funding requirements.
As of March 31, 2024, we had cash and cash equivalents of $740.8 million compared to $629.1 million as of December 31, 2023.

57

Analysis of Cash Flows
  For the Three Months Ended
  March 31, 2024 March 31, 2023
(In thousands)
Net cash provided by operating activities $ 44,269  $ 34,539 
Net cash used in investing activities (237,123) (66,508)
Net cash provided by financing activities 304,560  404,287 
Net change in cash and cash equivalents $ 111,706  $ 372,318 
Cash Flows Provided by Operating Activities
    For the three months ended March 31, 2024, net cash provided by operating activities increased by $9.7 million when compared to the same period in 2023. The increase in cash provided by operating activities was primarily attributable to a $18.6 million increase in proceeds from LHFS and a $17.3 million decrease in originations of LHFS. The increase was partially offset by a $21.8 million decrease in accounts payable and other liabilities.
Cash Flows Used in Investing Activities
    For the three months ended March 31, 2024, net cash used in investing activities increased by $170.6 million when compared to the same period in 2023. The increase in cash used in investing activities was primarily attributable to a $157.1 million decrease in maturities, and calls and sales/paydowns of AFS debt securities as part of our strategic restructuring of the portfolio.
Cash Flows Provided by Financing Activities
    For the three months ended March 31, 2024, net cash provided by financing activities decreased by $99.7 million when compared to the same period in 2023. The decrease in cash provided by financing activities was primarily attributable to a $505.0 million decrease in advances from FHLB, partially offset by a $405.2 million increase in new deposits.
    As of the three months ended March 31, 2024 and 2023, we had no exposure to future cash requirements associated with known uncertainties or capital expenditures of a material nature.
Share Repurchases
    On March 28, 2024, the Board authorized a stock buyback program (the "Stock Buyback Program") pursuant to which the Company could, from time to time, purchase up to $50,000 of its outstanding common stock in the aggregate. The Stock Buyback Program has an expiration date of March 31, 2025 and may be suspended, terminated, amended or modified by the Board at any time without prior notice at the Board’s discretion. The shares may be repurchased in the open market or in privately negotiated transactions from time to time, depending upon market conditions and other factors, and in accordance with applicable regulations of the SEC. The Stock Buyback Program does not obligate the Company to purchase any share and the program may be terminated or amended by the Board at any time prior to its expiration. All repurchases under the Stock Buyback Program to date were made subsequent to the three months ended March 31, 2024.

Share repurchases subsequent to three months ended March 31, 2024 are as follows:

As of
May 6, 2024 March 31, 2023
Number of shares repurchased 36,846 —
Weighted average price per share $ 19.97  $ — 
58


Capital Resources
Total stockholders’ equity increased to $1.54 billion as of March 31, 2024, compared to $1.53 billion as of December 31, 2023, an increase of $7.2 million, or 0.5%. The increase from December 31, 2023 to March 31, 2024 was primarily the result of $24.2 million of net income recognized and $2.9 million in stock-based compensation during the three months ended March 31, 2024. This increase was partially offset by $10.9 million in dividends declared and paid, $7.7 million in accumulated other comprehensive income, and $1.3 million of RSUs vesting during the three months ended March 31, 2024.
By comparison, total stockholders’ equity increased to $1.49 billion as of March 31, 2023, compared to $1.45 billion as of December 31, 2022, an increase of $44.0 million, or 3.0%. The increase from December 31, 2022 to March 31, 2023 was primarily the result of $38.4 million of net income recognized, $14.9 million in other comprehensive income along with $2.9 million in stock-based compensation and a $534 thousand increase due to the exercise of employee stock options during the three months ended March 31, 2023. This increase was partially offset by $10.8 million in dividends declared and paid and $1.9 million of RSUs vesting during the three months ended March 31, 2023.
Capital management consists of providing equity to support our current and future operations. Our regulators view capital levels as important indicators of an institution’s financial soundness. As a general matter, FDIC-insured depository institutions and their holding companies are required to maintain minimum capital relative to the amount and types of assets they hold. We are subject to regulatory capital requirements at the bank holding company and bank levels. See Note 11 – “Capital Requirements and Restrictions on Retained Earnings” in the notes to our consolidated financial statements for additional discussion regarding the regulatory capital requirements applicable to us and the Bank. As of March 31, 2024 and December 31, 2023, we and the Bank were in compliance with all applicable regulatory capital requirements, and the Bank was classified as “well capitalized” for purposes of the PCA regulations. As we employ our capital and continue to grow our operations, our regulatory capital levels may decrease depending on our level of earnings. However, we expect to monitor and control our growth in order to remain in compliance with all regulatory capital standards applicable to us.
The following table presents the actual capital amounts and regulatory capital ratios for us and the Bank as of the dates indicated.
  As of March 31, As of December 31,
  2024 2023
  Amount Ratio Amount Ratio
  (Dollars in thousands)
Veritex Holdings, Inc.
Total capital (to RWA) $ 1,520,656  13.33  % $ 1,500,703  13.18  %
Tier 1 capital (to RWA) 1,212,512  10.63  1,202,252  10.56 
CET1 (to RWA) 1,182,567  10.37  1,172,362  10.29 
Tier 1 capital (to average assets) 1,212,512  10.12  1,202,252  10.03 
Veritex Community Bank
Total capital (to RWA) $ 1,475,046  12.98  % $ 1,467,960  12.90  %
Tier 1 capital (to RWA) 1,365,973  12.02  1,368,384  12.03 
CET1 (to RWA) 1,365,973  12.02  1,368,384  12.03 
Tier 1 capital (to average assets) 1,365,973  11.41  1,368,384  11.43 
Contractual Obligations
In the ordinary course of the Company’s operations, we have entered into contractual obligations and have made other commitments to make future payments. Other than normal changes in the ordinary course of business and changes discussed within “Financial Condition—Borrowings,” there have been no significant changes in the types of contractual obligations or amounts due as of March 31, 2024 since December 31, 2023 as reported in our Annual Report on Form 10-K for the year ended December 31, 2023.

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Critical Accounting Policies
    Our accounting policies are fundamental to understanding our management’s discussion and analysis of our results of operations and financial condition. We have identified certain significant accounting policies which involve a higher degree of judgment and complexity in making certain estimates and assumptions that affect amounts reported in our consolidated financial statements. The significant accounting policies which we believe to be the most critical in preparing our consolidated financial statements relate to ACL, business combinations, debt securities and goodwill. Since December 31, 2023, there have been no changes in critical accounting policies as described under “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies” in our Form 10-K for the year ended December 31, 2023, except for those updates discussed in Note 1 - Summary of Significant Accounting Policies in the accompanying notes to the consolidated financial statements included in this report.

Cautionary Notice Regarding Forward-Looking Statements
    This Quarterly Report on Form 10-Q includes “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on various facts and derived utilizing assumptions, current expectations, estimates and projections and are subject to known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Forward-looking statements include, without limitation, statements relating to the expected payment date of our quarterly cash dividend, impact of certain changes in our accounting policies, standards and interpretations, a continuation of recent turmoil in the banking industry, responsive measures to mitigate and manage it and related supervisory and regulatory actions and costs and our future financial performance, business and growth strategy, projected plans and objectives, as well as other projections based on macroeconomic and industry trends, which are inherently unreliable due to the multiple factors that impact broader economic and industry trends, and any such variations may be material. Statements preceded by, followed by or that otherwise include the words “believes,” “expects,” “anticipates,” “intends,” “seeks,” “projects,” “estimates,” “targets,” “outlooks,” “plans” and similar expressions or future or conditional verbs such as “will,” “should,” “would,” “may” and “could” are generally forward-looking in nature and not historical facts, although not all forward-looking statements include the foregoing words. You should understand that the following important factors could affect our future results and cause actual results to differ materially from those expressed in the forward-looking statements:

•risks related to the concentration of our business in Texas, and specifically within the Dallas-Fort Worth metroplex and the Houston metropolitan area, including risks associated with any downturn in the real estate sector and risks associated with a decline in the values of single family homes in the Dallas-Fort Worth metroplex and the Houston metropolitan area;
•Uncertain market conditions and economic trends nationally, regionally and particularly in the Dallas-Fort Worth metroplex and Texas;
•the effects of regional or national civil unrest;
•the effects of war or other conflicts, including, but not limited to, the current conflicts between Russia and the Ukraine and Israel and Hamas, acts of terrorism, cyber attacks or other catastrophic events, including natural disasters such as storms, droughts, tornadoes, hurricanes and flooding, that may affect general economic conditions;
•changes in market interest rates that affect the pricing of our loans and deposits and our net interest income;
•risks related to our strategic focus on lending to small to medium-sized businesses;
•the sufficiency of the assumptions and estimates we make in establishing reserves for potential loan losses;
•our ability to implement our growth strategy, including identifying and consummating suitable acquisitions;
•our ability to recruit and retain successful bankers that meet our expectations in terms of customer relationships and profitability;
•changes in our accounting policies, standards and interpretations;
•our ability to retain executive officers and key employees and their customer and community relationships;
•risks associated with our CRE and construction loan portfolios, including the risks inherent in the valuation of the collateral securing such loans;
•risks associated with our commercial loan portfolio, including the risk of deterioration in value of the general business assets that generally secure such loans;
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•our level of nonperforming assets and the costs associated with resolving problem loans, if any, and complying with government-imposed foreclosure moratoriums;
•potential changes in the prices, values and sales volumes of commercial and residential real estate securing our real estate loans;
•risks related to the significant amount of credit that we have extended to a limited number of borrowers and in a limited geographic area;
•Changes in the financial performance and/or condition of our borrowers;
•our ability to maintain adequate liquidity (including the effect of the transition to the CECL methodology for allowances and related adjustments) and to raise necessary capital to fund our acquisition strategy and operations or to meet increased minimum regulatory capital levels;
•potential fluctuations in the market value and liquidity of our debt securities;
•the effects of competition from a wide variety of local, regional, national and other providers of financial, investment and insurance services;
•our ability to maintain an effective system of disclosure controls and procedures and internal control over financial reporting;
•risks associated with fraudulent and negligent acts by our customers, employees or vendors;
•our ability to keep pace with technological change or difficulties when implementing new technologies;
•risks associated with difficulties and/or terminations with third-party service providers and the services they provide;
•risks associated with unauthorized access, cyber-crime and other threats to data security;
•potential impairment on the goodwill we have recorded or may record in connection with business acquisitions;
•our ability to comply with various governmental and regulatory requirements applicable to financial institutions;
•the impact of recent and future legislative and regulatory changes, including changes in banking, securities and tax laws and regulations and their application by our regulators, and economic stimulus programs;
•uncertainty regarding the future of LIBOR and any replacement alternatives on our business;
•changes in consumer spending, borrowing and saving habits;
•the potential impact of climate change;
•the impact of pandemics, epidemics and any other health-related crisis;
•the effects of changes in governmental monetary and fiscal policies and laws, including the policies of the Federal Reserve;
•our ability to comply with supervisory actions by federal and state banking agencies;
•changes in the scope and cost of FDIC, insurance and other coverage; and
•systemic risks associated with the soundness of other financial institutions.

Other factors not identified above, including those described under the headings “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in our Annual Report on Form 10-K for the year ended December 31, 2023, may also cause actual results to differ materially from those described in our forward-looking statements. Most of these factors are difficult to anticipate and are generally beyond our control. Any forward-looking statement speaks only as of the date on which it is made. You should consider these factors in connection with considering any forward-looking statements that may be made by us. We undertake no obligation, and specifically decline any obligation to, publicly release any supplement, update or revision to any forward-looking statements, to report events or to report the occurrence of unanticipated events, whether as a result of new information, future developments or otherwise, unless we are required to do so by law.

Item 3.  Quantitative and Qualitative Disclosures About Market Risk

    As a financial institution, our primary component of market risk is interest rate volatility. Our asset, liability and funds management policy provides management with the guidelines for effective funds management, and we have established a measurement system for monitoring our net interest rate sensitivity position. We manage our sensitivity position within our established guidelines.
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    Fluctuations in interest rates will ultimately impact both the level of income and expense recorded on most of our assets and liabilities, and the market value of all interest-earning assets and interest-bearing liabilities, other than those which have a short term to maturity. Interest rate risk is the potential of economic losses due to future interest rate changes. These economic losses can be reflected as a loss of future net interest income and/or a loss of current fair market values. The objective is to measure the effect on net interest income and to adjust the balance sheet to minimize the inherent risk while at the same time maximizing income.
    We manage our exposure to interest rates by structuring our balance sheet in the ordinary course of business. With exception of our cash flow hedges designated as a hedging instrument, we do not enter into instruments such as leveraged derivatives, interest rate swaps, financial options, financial future contracts or forward delivery contracts for the purpose of reducing interest rate risk. We enter into interest rate swaps, caps and collars as an accommodation to our customers in connection with our interest rate swap program. Based upon the nature of our operations, we are not subject to foreign exchange or commodity price risk. We do not own any trading assets.
    Our exposure to interest rate risk is managed by the Asset-Liability Committee of the Bank in accordance with policies approved by its board of directors. The committee formulates strategies based on appropriate levels of interest rate risk. In determining the appropriate level of interest rate risk, the committee considers the impact on earnings and capital of the current outlook on interest rates, potential changes in interest rates, regional economies, liquidity, business strategies and other factors. The committee meets regularly to review, among other things, the sensitivity of assets and liabilities to interest rate changes, the book and market values of assets and liabilities, unrealized gains and losses, purchase and sale activities, commitments to originate loans and the maturities of investments and borrowings. Additionally, the committee reviews liquidity, cash flow flexibility, maturities of deposits and consumer and commercial deposit activity. Management employs methodologies to manage interest rate risk, which include an analysis of relationships between interest-earning assets and interest-bearing liabilities, and an interest rate shock simulation model.
We use an interest rate risk simulation model and shock analysis to test the interest rate sensitivity of net interest income and the balance sheet, respectively. Contractual maturities and repricing opportunities of loans are incorporated in the model as are prepayment assumptions, maturity data and call options within the investment portfolio.
We utilize static balance sheet rate shocks to estimate the potential impact on net interest income of changes in interest
rates under various rate scenarios. This analysis estimates a percentage of change in the metric from the stable rate base scenario versus alternative scenarios of rising and falling market interest rates by instantaneously shocking a static balance sheet.  Internal policy regarding internal rate risk simulations currently specifies that for instantaneous parallel shifts of the yield curve, estimated net income at risk for the subsequent one-year period should not decline by more than 5.0% for a 100 basis point shift, 10.0% for a 200 basis point shift, and 15.0% for a 300 basis point shift.

    The following table summarizes the simulated change in net interest income and fair value of equity over a 12-month horizon as of the dates indicated:
  As of March 31, 2024 As of December 31, 2023
  Percent Change Percent Change Percent Change Percent Change
Change in Interest in Net Interest in Fair Value in Net Interest in Fair Value
Rates (Basis Points) Income of Equity Income of Equity
+ 300 13.54  % (6.78) % 11.39  % (6.15) %
+ 200 9.12  (3.77) 7.70  (3.23)
+ 100 4.67  (1.33) 3.92  (1.05)
Base —  —  —  — 
−100 (5.89) (1.51) (4.16) (1.65)
−200 (10.32) (3.98) (10.01) (6.48)
    The results are primarily due to behavior of demand, money market and savings deposits during such rate fluctuations. We have found that, historically, interest rates on these deposits change more slowly than changes in the discount and Federal Funds Rates. This assumption is incorporated into the simulation model and is generally not fully reflected in a gap analysis. The assumptions incorporated into the model are inherently uncertain and, as a result, the model cannot precisely measure future net interest income or precisely predict the impact of fluctuations in market interest rates on net interest income. Actual results will differ from the model’s simulated results due to timing, magnitude and frequency of interest rate changes as well as changes in market conditions and the application and timing of various strategies.
62

Item 4.  Controls and Procedures

Evaluation of disclosure controls and procedures — As of the end of the period covered by this report, the Company carried out an evaluation, under the supervision and with the participation of its management, including its CEO and CFO, of the effectiveness of the design and operation of its disclosure controls and procedures. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management was required to apply judgment in evaluating its controls and procedures. Based on this evaluation, the Company’s CEO and CFO concluded that the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were effective as of the end of the period covered by this report.

There were no significant changes in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended March 31, 2024 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

63

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

We are from time to time subject to claims and litigation arising in the ordinary course of business. These claims and litigation may include, among other things, allegations of violation of banking and other applicable regulations, competition law, labor laws and consumer protection laws, as well as claims or litigation relating to intellectual property, securities, breach of contract and tort. We intend to defend ourselves vigorously against any pending or future claims and litigation.

At this time, in the opinion of management, the likelihood is remote that the impact of such proceedings, either individually or in the aggregate, would have a material adverse effect on our consolidated results of operations, financial condition or cash flows. However, one or more unfavorable outcomes in any claim or litigation against us could have a material adverse effect for the period in which they are resolved. In addition, regardless of their merits or their ultimate outcomes, such matters are costly, divert management’s attention and may materially adversely affect our reputation, even if resolved in our favor.

Item 1A.  Risk Factors

In evaluating an investment in our common stock, investors should consider carefully, among other things, the risk factors previously disclosed in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2023, as well as the information contained in this Quarterly Report on Form 10-Q and our other reports and registration statements filed with the SEC.
    There has been no material change in the risk factors previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2023.

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds

On March 26, 2024, the Board authorized a stock buyback program (the “Stock Buyback Program”) pursuant to which the Company is authorized to purchase up to $50 million shares of the Company’s outstanding common stock. The Stock Buyback Program has an expiration date of March 31, 2025, and may be suspended, terminated, amended or modified by the Board at any time without prior notice at the Board’s discretion. Repurchases under the Stock Buyback Program may be made, from time to time, in amounts and at prices the Company deems appropriate. The Stock Buyback Program does not obligate the Company to purchase any shares of its common stock. Repurchases by the Company under the Stock Buyback Program will be subject to general market and economic conditions, applicable legal and regulatory requirements and other considerations. During the three months ended March 31, 2024, the Company did not repurchase any shares of its common stock under the Stock Buyback Program.

64

Item 6.  Exhibits
 
Exhibit
Number		      Description of Exhibit

 
 
 
 
 
101*  
The following materials from Veritex Holdings, Inc.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2024, formatted in Inline XBRL (Inline eXtensible Business Reporting Language): (i) Cover Page, (ii) Consolidated Balance Sheets, (iii) Consolidated Statements of Income, (iv) Consolidated Statements of Comprehensive Income, (v) Consolidated Statements of Changes in Stockholders’ Equity, (vi) Consolidated Statements of Cash Flows, and (vii) Notes to Consolidated Financial Statements.
104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
______________________________
* Filed with this Quarterly Report on Form 10-Q
** Furnished with this Quarterly Report on Form 10-Q
The agreements and other documents filed as exhibits to this report are not intended to provide factual information or other disclosure, other than with respect to the terms of the agreements or other documents themselves, and you should not rely on them for that purpose. In particular, any representations and warranties made by us in these agreements or other documents were made solely within the specific context of the relevant agreement or document and may not describe the actual state of affairs as of the date they were made or at any other time.
65

SIGNATURES

    Pursuant to the requirements of the Exchange Act, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
     
    VERITEX HOLDINGS, INC.
    (Registrant)
     
     
     
     
     
Date: May 6, 2024   /s/ C. Malcolm Holland, III
    C. Malcolm Holland, III
    Chairman and Chief Executive Officer
    (Principal Executive Officer)
     
     
     
     
Date: May 6, 2024   /s/ Terry S. Earley
    Terry S. Earley
    Chief Financial Officer
    (Principal Financial and Accounting Officer)
     
     
     

66
EX-31.1 2 a2024q1-exhibit311.htm EX-31.1 Document
EXHIBIT 31.1
 


CERTIFICATION
 
I, C. Malcolm Holland, III, certify that:
 
1.I have reviewed this Annual Report on Form 10-K of Veritex Holdings, Inc. for the period ended March 31, 2024;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
 
Date: May 6, 2024
 
 
/s/ C. Malcolm Holland, III
C. Malcolm Holland, III
Chairman of the Board & Chief Executive Officer

EX-31.2 3 a2024q1-exhibit312.htm EX-31.2 Document
EXHIBIT 31.2


CERTIFICATION
 
I, Terry S. Earley, certify that:
 
1.I have reviewed this Annual Report on Form 10-K of Veritex Holdings, Inc. for the period ended March 31, 2024;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 6, 2024
 
 
/s/ Terry S. Earley
Terry S. Earley
Chief Financial Officer


EX-32.1 4 a2024q1-exhibit321.htm EX-32.1 Document
Exhibit 32.1


CERTIFICATION

    In connection with the Annual Report on Form 10-K of Veritex Holdings, Inc. (the “Company”) for the period ended March 31, 2024 (the “Report”), as filed with the Securities and Exchange Commission on the date hereof, I, C. Malcolm Holland, III, Chairman and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

1.The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ C. Malcolm Holland, III
C. Malcolm Holland, III
Chairman of the Board & Chief Executive Officer
Date: May 6, 2024

EX-32.2 5 a2024q1-exhibit322.htm EX-32.2 Document
Exhibit 32.2


CERTIFICATION

    In connection with the Annual Report on Form 10-K of Veritex Holdings, Inc. (the “Company”) for the period ended March 31, 2024 (the “Report”), as filed with the Securities and Exchange Commission on the date hereof, I, Terry S. Earley, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

1.The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
 

/s/ Terry S. Earley
Terry S. Earley
Chief Financial Officer
Date: May 6, 2024