Third Coast Bancshares Inc

Previous wording

We are a bank holding company with headquarters in Humble, Texas that operates through our wholly owned subsidiary, the Bank, and the Bank’s wholly owned subsidiary, TCCC. We focus on providing commercial banking solutions to small and medium-sized businesses and professionals with operations in our markets. Our market expertise, coupled with a deep understanding of our customers’ needs, allows us to deliver tailored financial products and services. We currently operate seventeen branches, with eight branches in the Greater Houston market, three branches in the Dallas-Fort Worth market, five branches in the Austin-San Antonio market, and one branch in Detroit, Texas. As of March 31, 2024, we had, on a consolidated basis, total assets of $4.66 billion, total loans of $3.75 billion, total deposits of $4.05 billion and total shareholders’ equity of $423.6 million.

Current wording

We are a bank holding company with headquarters in Humble, Texas that operates through our wholly owned subsidiary, the Bank, and the Bank’s wholly owned subsidiary, TCCC. We focus on providing commercial banking solutions to small and medium-sized businesses and professionals with operations in our markets. Our market expertise, coupled with a deep understanding of our customers’ needs, allows us to deliver tailored financial products and services. We currently operate eighteen branches, with nine branches in the Greater Houston market, three branches in the Dallas-Fort Worth market, five branches in the Austin-San Antonio market, and one branch in Detroit, Texas. As of June 30, 2024, we had, on a consolidated basis, total assets of $4.47 billion, total loans of $3.76 billion, total deposits of $3.86 billion and total shareholders’ equity of $435.0 million.

Previous wording

Net interest income increased $5.2 million, or 16.0%, during the three months ended March 31, 2024, compared to the three months ended March 31, 2023, primarily due to increased interest income from loan growth and increased yields on loans offset by an increase in interest expense resulting from deposit growth and increased rates paid on interest-bearing deposits. Average loans increased from $3.17 billion for the three months ended March 31, 2023 to $3.67 billion for the three months ended March 31, 2024, with the growth well diversified in real estate loans and commercial loans. The yield on loans for the three months ended March 31, 2024 was 7.75% compared to 6.90% for the three months ended March 31, 2023, primarily a result of the increases in the Prime Rate over the past twelve months. Interest expense related to interest bearing deposit accounts was $38.7 million and $22.1 million for three months ended March 31, 2024 and 2023, respectively. Average interest bearing deposits increased from $2.60 billion for the three months ended March 31, 2023 to $3.35 billion for the three months ended March 31, 2024. The average rate paid on interest-bearing deposits increased from 3.45% for the three months ended March 31, 2023 to 4.65% for the three months ended March 31, 2024. For the three months ended March 31, 2024, net interest margin and net interest spread were 3.60% and 2.73%, respectively, compared to 3.79% and 3.01%, respectively, for the three months ended March 31, 2023.

Current wording

Net interest income increased $4.8 million, or 14.0%, during the three months ended June 30, 2024, compared to the three months ended June 30, 2023, primarily due to increased interest income from loan growth and increased yields on loans offset by an increase in interest expense resulting from deposit growth and increased rates paid on interest-bearing deposits. Average loans increased from $3.26 billion for the three months ended June 30, 2023 to $3.74 billion for the three months ended June 30, 2024, with the growth well diversified in real estate loans and commercial loans. The yield on loans for the three months ended June 30, 2024 was 7.86% compared to 7.29% for the three months ended June 30, 2023, primarily a result of the increases in the Prime Rate during 2023. Interest expense related to interest bearing deposit accounts was $40.4 million and $24.9 million for three months ended June 30, 2024 and 2023, respectively. Average interest-bearing deposits increased from $2.58 billion for the three months ended June 30, 2023 to $3.41 billion for the three months ended June 30, 2024. The average rate paid on interest-bearing deposits increased from 3.87% for the three months ended June 30, 2023 to 4.76% for the three months ended June 30, 2024. For the three months ended June 30, 2024, net interest margin and net interest spread were 3.62% and 2.75%, respectively, compared to 3.82% and 2.96%, respectively, for the three months ended June 30, 2023.

Previous wording

Interest earned/paid includes accretion of deferred loan fees, premiums and discounts. Interest income on loans includes loan fees and discount accretion of $3.5 million and $3.1 million for the three months ended March 31, 2024 and 2023, respectively.

Current wording

Interest earned/paid includes accretion of deferred loan fees, premiums and discounts. Interest income on loans includes loan fees and discount accretion of $4.4 million and $3.6 million for the three months ended June 30, 2024 and 2023, respectively.

Previous wording

The provision for credit losses for the three months ended March 31, 2024 was $1.6 million compared to $1.2 million for the three months ended March 31, 2023. The provisions for each period related primarily to provisioning for new loans and commitments booked during the periods. No provision for credit losses for securities was recorded for the three months ended March 31, 2024 or 2023.

Current wording

The provision for credit losses for the six months ended June 30, 2024 was $3.5 million compared to $2.6 million for the six months ended June 30, 2023. The provisions for each period related primarily to provisioning for new loans and commitments booked during the periods. No provision for credit losses for securities was recorded for the six months ended June 30, 2024 or 2023.

Previous wording

As of March 31, 2024, the allowance for credit losses for loans totaled $38.1 million, or 1.02% of total loans, compared to $37.0 million, or 1.02% of total loans, as of December 31, 2023. At March 31, 2024, the allowance for credit losses for unfunded loan commitments was $2.1 million compared to $2.4 million at December 31, 2023. No allowance for credit losses for securities was recorded as of March 31, 2024 or December 31, 2023.

Current wording

As of June 30, 2024, the allowance for credit losses for loans totaled $38.2 million, or 1.02% of total loans, compared to $37.0 million, or 1.02% of total loans, as of December 31, 2023. At June 30, 2024, the allowance for credit losses for unfunded loan commitments was $2.1 million compared to $2.4 million at December 31, 2023. No allowance for credit losses for securities was recorded as of June 30, 2024 or December 31, 2023.

Previous wording

The increase in noninterest income of $441,000 for the three months ended March 31, 2024, compared to the three months ended March 31, 2023, was primarily due to increased service charges and other fees and increased earnings on bank-owned life insurance, offset by a decrease in advisory fee income.

Current wording

The increase in noninterest income of $1.0 million for the six months ended June 30, 2024, compared to the six months ended June 30, 2023, was primarily due to increased service charges and fees, increased earnings on bank-owned life insurance, and gains on the sales of investment securities, offset by a decrease in derivative and advisory fee income.

Previous wording

Other noninterest expenses were $1.1 million and $758,000 for the three months ended March 31, 2024 and 2023, respectively. The Company incurred additional expenses related to franchise taxes, deposit related fees, and board of director related expenses.

Current wording

Other noninterest expenses were $2.3 million and $1.7 million for the six months ended June 30, 2024 and 2023, respectively. The Company incurred additional expenses related to fraud losses, deposit related fees, and board of director and investor relations related expenses.

Previous wording

The increase in noninterest expense of $3.9 million for the three months ended March 31, 2024, compared to the three months ended March 31, 2023, was primarily due to increases in salaries and employee benefits expenses, investment in new technology and software, increase in regulatory assessments, increase in data processing expenses related to growth and new products, increased expenses related to new offices and increased other expenses such as franchise taxes, fraud losses, and deposit related fees.

Current wording

The increase in noninterest expense of $1.8 million for the three months ended June 30, 2024, compared to the three months ended June 30, 2023, was primarily due to increases in salaries and employee benefit expenses, increased expenses related to new branch locations, increases in regulatory assessments, investment in new technology and software, and increased other expenses such as deposit related fees and board of director and investor relations related expenses.

Previous wording

Salaries and employee benefits are the largest component of noninterest expense and include payroll expense, the cost of incentive compensation, benefit plans, health insurance and payroll taxes. Salaries and employee benefits were $16.5 million for the three months ended March 31, 2024, an increase of $2.8 million, or 20.3%, compared to $13.7 million for the same period in 2023. The increase was primarily due to our continued investment in our employees with annual wage increases and merit awards and a decrease in deferred salary expense resulting from a decrease in new loan volume.

Current wording

Salaries and employee benefits are the largest component of noninterest expense and include payroll expense, the cost of incentive compensation, benefit plans, health insurance and payroll taxes. Salaries and employee benefits were $15.9 million for the three months ended June 30, 2024, an increase of $884,000, or 5.9%, compared to $15.0 million for the same period in 2023. The increase was primarily due to our continued investment in our employees with annual wage increases and merit awards.

Previous wording

Net occupancy and equipment expenses were $3.0 million and $2.6 million for the three months ended March 31, 2024 and 2023, respectively. This category includes building, leasehold, furniture, fixtures and equipment depreciation and software amortization totaling $1.3 million and $1.1 million for the three months ended March 31, 2024 and 2023, respectively. The increase was due to costs associated with additional lease space at several of our locations and increased computer software amortization.

Current wording

Net occupancy and equipment expenses were $3.1 million and $2.9 million for the three months ended June 30, 2024 and 2023, respectively. Building, leasehold, furniture, fixtures and equipment depreciation and software amortization included in net occupancy and equipment expenses totaled $1.4 million and $1.3 million for the three months ended June 30, 2024 and 2023, respectively. The increases were primarily due to costs associated with opening two branch locations in the second quarter of 2024.

Previous wording

Regulatory assessment fees increased from $666,000 for the three months ended March 31, 2023 to $980,000 for the three months ended March 31, 2024. The increase was primarily due to our growth in total assets from $3.86 billion at March 31, 2023 to $4.66 billion at March 31, 2024 and a change in our quarterly assessment rate.

Current wording

Regulatory assessment fees increased from $458,000 for the three months ended June 30, 2023 to $1.0 million for the three months ended June 30, 2024. The increase was primarily due to our growth in total assets from $3.96 billion at June 30, 2023 to $4.47 billion at June 30, 2024 and a change in our quarterly assessment rate.

Previous wording

The Company's software-related expenditures, including software purchases and maintenance, amounted to $817,000 and $352,000 for the three months ended March 31, 2024, and 2023, respectively. The increase in these expenses is attributed to our continued investment towards adopting new and advanced technology and software aimed at achieving greater efficiency in lending and deposit processes and management of risk.

Current wording

The Company's software-related expenditures, including software purchases and maintenance, amounted to $828,000 and $455,000 for the three months ended June 30, 2024, and 2023, respectively. The increase in these expenses is attributed to our continued investment towards adopting new and advanced technology and software aimed at achieving greater efficiency in lending and deposit processes and management of risk.

Previous wording

Total assets were $4.66 billion as of March 31, 2024 compared to $4.40 billion as of December 31, 2023. The increase in total assets of $264.3 million was primarily due to organic loan growth, the purchase of investment securities, and the increase in cash and cash equivalents during the three months ended March 31, 2024. The increases were funded primarily by the growth in total deposits and additional advance on the Company's line of credit.

Current wording

Total assets were $4.47 billion as of June 30, 2024 compared to $4.40 billion as of December 31, 2023. The increase in total assets of $78.0 million was primarily due to organic loan growth and the purchase of investment securities during the six months ended June 30, 2024. The increases were funded primarily by the growth in total deposits, the decrease in cash and due from accounts, the decrease in federal funds sold, and earnings.

Previous wording

As of March 31, 2024, total loans were $3.75 billion, an increase of $107.4 million, or 3.0%, compared to $3.64 billion as of December 31, 2023. The increase in loans was well diversified in real estate loans and commercial loans. Total loans as a percentage of deposits were 92.5% and 95.7% as of March 31, 2024 and December 31, 2023, respectively. Total loans as a percentage of assets were 80.4% and 82.8% as of March 31, 2024 and December 31, 2023, respectively.

Current wording

As of June 30, 2024, total loans were $3.76 billion, an increase of $119.4 million, or 3.3%, compared to $3.64 billion as of December 31, 2023. The increase in loans was well diversified in real estate loans and commercial loans offset slightly by a decrease in municipal loans. Total loans as a percentage of deposits were 97.5% and 95.7% as of June 30, 2024 and December 31, 2023, respectively. Total loans as a percentage of assets were 84.0% and 82.8% as of June 30, 2024 and December 31, 2023, respectively.

Previous wording

Owner-occupied commercial real estate loans are a key component of our lending strategy to owner-operated businesses, representing a large percentage of our total commercial real estate loans. Owner-occupied commercial real estate loans decreased $10.6 million, or 2.0%, to $510.3 million as of March 31, 2024 from $520.8 million as of December 31, 2023.

Current wording

Owner-occupied commercial real estate loans are a key component of our lending strategy to owner-operated businesses, representing a large percentage of our total commercial real estate loans. Owner-occupied commercial real estate loans decreased $20.9 million, or 4.0%, to $499.9 million as of June 30, 2024 from $520.8 million as of December 31, 2023.

Previous wording

Non-owner-occupied commercial real estate loans are loans for income producing properties and are generally for retail strip centers, office buildings, self-storage facilities, and multi and single tenant office warehouses, all within our markets. Non-owner-occupied commercial real estate loans increased $11.7 million, or 2.0%, to $598.3 million as of March 31, 2024 from $586.6 million as of December 31, 2023.

Current wording

Non-owner-occupied commercial real estate loans are loans for income producing properties and are generally for retail strip centers, office buildings, self-storage facilities, and multi and single tenant office warehouses, all within our markets. Non-owner-occupied commercial real estate loans increased $25.6 million, or 4.4%, to $612.3 million as of June 30, 2024 from $586.6 million as of December 31, 2023.

Previous wording

Residential Real Estate Loans. Residential real estate loans consist of 1-4 family residential loans and multi-family residential loans. Our 1-4 family residential loan portfolio is predominately comprised of loans secured by 1-4 family homes, which are investor owned. While we do have some owner-occupied 1-4 family residential loans, we have not historically pursued this product line; however, we do offer limited mortgage products through our mortgage department. Our multi-family residential loan portfolio is comprised of loans secured by properties deemed multi-family, which includes apartment buildings. Our current multifamily loans are to operators who we believe are seasoned and successful and possess quality alternative repayment sources. Residential real estate loans increased $3.3 million, or 1.0%, to $345.9 million as of March 31, 2024 from $342.6 million as of December 31, 2023.

Current wording

Residential Real Estate Loans. Residential real estate loans consist of 1-4 family residential loans and multi-family residential loans. Our 1-4 family residential loan portfolio is predominately comprised of loans secured by 1-4 family homes, which are investor owned. While we do have some owner-occupied 1-4 family residential loans, we have not historically pursued this product line; however, we do offer limited mortgage products through our mortgage department. Our multi-family residential loan portfolio is comprised of loans secured by properties deemed multi-family, which includes apartment buildings. Our current multifamily loans are to operators who we believe are seasoned and successful and possess quality alternative repayment sources. Residential real estate loans increased $6.9 million, or 2.0%, to $349.5 million as of June 30, 2024 from $342.6 million as of December 31, 2023.

Previous wording

Construction, Development and Other Loans. Construction and development loans are comprised of loans used to fund construction, land acquisition and land development. The properties securing the portfolio are primarily in the Greater Houston and Dallas markets and are generally diverse in terms of type. During 2021, we expanded our construction and development portfolio through the formation of our builder finance group, which provides traditional homebuilder lines secured by lots and single-family homes, and land acquisition and development loans. This group also finances bond anticipation notes and lines of credit to large national institutional tier-one funds that invest equity in various real estate assets. Construction, development and other loans increased $31.6 million, or

Current wording

Construction, Development and Other Loans. Construction and development loans are comprised of loans used to fund construction, land acquisition and land development. The properties securing the portfolio are primarily in the Greater Houston and Dallas markets and are generally diverse in terms of type. During 2021, we expanded our construction and development portfolio through the formation of our builder finance group, which provides traditional homebuilder lines secured by lots and single-family homes, and land acquisition and development loans. This group also finances bond anticipation notes and lines of credit to large national institutional tier-one funds that invest equity in various real estate assets. Construction, development and other loans increased $63.1 million, or 9.1%, to $756.6 million as of June 30, 2024 from $693.6 million as of December 31, 2023 due primarily to the additional productivity from the builder finance group.

Previous wording

In addition, the commercial and industrial loan category includes factored receivables. TCCC provides working capital solutions for small- to medium-sized businesses throughout the United States. TCCC provides working capital financing through the purchase of accounts receivables. Our factored receivables portfolio consists primarily of customers in the transportation, energy services and service industries. At March 31, 2024 and December 31, 2023, outstanding factored receivables were $31.0 million and $26.5 million, respectively.

Current wording

In addition, the commercial and industrial loan category includes factored receivables. TCCC provides working capital solutions for small- to medium-sized businesses throughout the United States. TCCC provides working capital financing through the purchase of accounts receivables. Our factored receivables portfolio consists primarily of customers in the transportation, energy services and service industries. At June 30, 2024 and December 31, 2023, outstanding factored receivables were $31.5 million and $26.5 million, respectively.

Previous wording

Commercial and industrial loans increased $87.2 million, or 6.9%, to $1.35 billion as of March 31, 2024 from $1.26 billion as of December 31, 2023. The increase was primarily a result of increased productivity of existing lenders in response to market demand.

Current wording

Commercial and industrial loans increased $98.3 million, or 7.8%, to $1.36 billion as of June 30, 2024 from $1.26 billion as of December 31, 2023. The increase was primarily a result of increased productivity in response to market demand.

Previous wording

Nonperforming assets include nonaccrual loans, loans that are accruing over 90 days past due, restructured loans - accruing, and foreclosed assets. Effective January 1, 2023, the Company adopted the provisions of ASU 2022-02, which discontinued the recognition and measurement guidance previously required on troubled debt restructurings. Therefore, restructure loans included in nonperforming assets as of March 31, 2024 exclude any loan modifications that are performing but would have previously required disclosure as troubled debt restructurings. Generally, loans are placed on nonaccrual status when they become more than 90 days past due and/or collection of principal or interest is in doubt.

Current wording

Nonperforming assets include nonaccrual loans, loans that are accruing over 90 days past due, restructured loans - accruing, and foreclosed assets. Effective January 1, 2023, the Company adopted the provisions of ASU 2022-02, which discontinued the recognition and measurement guidance previously required on troubled debt restructurings. Therefore, restructured loans included in nonperforming assets as of June 30, 2024 exclude any loan modifications that are performing but would have previously required disclosure as troubled debt restructurings. Generally, loans are placed on nonaccrual status when they become more than 90 days past due and/or collection of principal or interest is in doubt.

Previous wording

We had $21.7 million in nonperforming assets as of March 31, 2024 compared to $17.3 million as of December 31, 2023. Included in nonperforming assets, nonperforming loans were $21.7 million and $17.3 million as of March 31, 2024 and December 31, 2023, respectively. The increase in non-performing loans was primarily the result of three commercial and industrial loans and a commercial real estate loan being placed on nonaccrual totaling $3.0 million. The increase was partially offset by nonaccrual loan charge-offs of $549,000 and nonaccrual loan paydowns of $629,000 during the quarter. The increase in loans over 90 days and still accruing was primarily the result of a $2.9 million commercial real estate loan that matured and was pending renewal at the end of the quarter.

Current wording

We had $24.4 million in nonperforming assets and nonperforming loans as of June 30, 2024 compared to $17.3 million as of December 31, 2023. The increase was primarily the result of three commercial and industrial loans totaling $2.4 million being placed on nonaccrual in the first quarter of 2024 and one commercial real estate loan relationship consisting of five loans totaling $7.9 million being placed on nonaccrual during the second quarter of 2024. Two of the commercial and industrial loans totaling $1.1 million have a 75% SBA guaranty and are paying as agreed. The other commercial and industrial loan that was placed on nonaccrual during the first quarter of 2024 was subsequently charged-off for $1.2 million in the second quarter of 2024. The loan value on the real estate supporting the five commercial real estate loans is 69% and management does not anticipate a loss on this relationship. The increase in nonperforming assets and nonperforming loans was partially offset by additional nonaccrual loan charge-offs of $1.4 million and paydowns on nonaccrual loans during the six months ended June 30, 2024.

Previous wording

As of March 31, 2024, the allowance for credit losses for loans totaled $38.1 million, or 1.02% of total loans. As of December 31, 2023, the allowance for credit losses totaled $37.0 million, or 1.02% of total loans. The increase in our allowance for credit losses was primarily due to the $1.9 million provision for credit losses on loans recorded for the three months ended March 31, 2024 partially offset by $742,000 of net charge-offs.

Current wording

As of June 30, 2024, the allowance for credit losses for loans totaled $38.2 million, or 1.02% of total loans. As of December 31, 2023, the allowance for credit losses totaled $37.0 million, or 1.02% of total loans. The increase in our allowance for credit losses was primarily due to the $3.8 million provision for credit losses on loans recorded for the six months ended June 30, 2024 partially offset by $2.6 million of net charge-offs.

Previous wording

During the three months ended March 31, 2024, the Company recorded net charge-offs of $742,000. During the three months ended March 31, 2023, net recoveries were $364,000.

Current wording

During the three and six months ended June 30, 2024, the Company recorded net charge-offs of $1.8 million and $2.6 million, respectively. During the three and six months ended June 30, 2023, the Company recorded net charge-offs of $72,000 and net recoveries of $292,000, respectively.

Previous wording

As of March 31, 2024, the carrying amount of the security portfolio was $246.3 million compared to $178.1 million as of December 31, 2023, an increase of $68.2 million, or 38.3%. The increase relates primarily to net purchases of $71.6 million in corporate bonds, agencies, and municipal securities offset by paydowns of $2.4 million in mortgage-backed securities during the three months ended March 31, 2024. Investment securities represented 5.3% and 4.1% of total assets as of March 31, 2024 and December 31, 2023, respectively.

Current wording

As of June 30, 2024, the carrying amount of the security portfolio was $286.2 million compared to $178.1 million as of December 31, 2023, an increase of $108.1 million, or 60.7%. The increase relates primarily to purchases of $1.92 billion in agencies, municipal securities, mortgage-back securities and corporate bonds offset by maturities, calls and paydowns of $1.81 billion during the six months ended June 30, 2024. Investment securities represented 6.4% and 4.1% of total assets as of June 30, 2024 and December 31, 2023, respectively.

Previous wording

The weighted average life of our investment portfolio was 7.15 years and 7.47 years as of March 31, 2024 and December 31, 2023, respectively.

Current wording

The weighted average life of our investment portfolio was 6.84 years and 7.47 years as of June 30, 2024 and December 31, 2023, respectively.

Previous wording

Noninterest-bearing deposits as of March 31, 2024 were $424.0 million, a decrease of $35.5 million, or 7.7%, compared to $459.6 million as of December 31, 2023. Total interest-bearing account balances as of March 31, 2024 were $3.63 billion, an increase of $283.1 million, or 8.5%, from $3.34 billion as of December 31, 2023.

Current wording

Total deposits as of June 30, 2024 were $3.86 billion, an increase of $52.4 million, or 1.4%, compared to $3.80 billion as of December 31, 2023. Noninterest-bearing deposits as of June 30, 2024 were $464.5 million, an increase of $4.9 million, or 1.1%, compared to $459.6 million as of December 31, 2023. Total interest-bearing account balances as of June 30, 2024 were $3.39 billion, an increase of $47.5 million, or 1.4%, from $3.34 billion as of December 31, 2023.

Previous wording

The ratio of average noninterest-bearing deposits to average total deposits for the three months ended March 31, 2024 was 12.0% and for the year ended December 31, 2023 was 14.5%.

Current wording

The ratio of average noninterest-bearing deposits to average total deposits for the six months ended June 30, 2024 was 11.7% and for the year ended December 31, 2023 was 14.5%.

Previous wording

Federal Home Loan Bank (FHLB) Advances. The FHLB allows us to borrow on a blanket floating lien status collateralized by FHLB stocks and real estate loans. As of March 31, 2024 and December 31, 2023, borrowing capacity available under this arrangement was $643.9 million and $565.1 million, respectively. We had no FHLB advances outstanding at March 31, 2024 or during the three months ended March 31, 2024. We had no FHLB advances outstanding at December 31, 2023. Our cost of FHLB advances was 5.43% for the year ended December 31, 2023. In addition, letters of credit with the FHLB in the amount of $428.6 million and $463.1 million were outstanding at March 31, 2024 and December 31, 2023, respectively. The letters of credit are used to collateralize public fund deposit accounts in excess of FDIC insurance limits and have expirations ranging from April 2024 through July 2025.

Current wording

Federal Home Loan Bank (FHLB) Advances. The FHLB allows us to borrow on a blanket floating lien status collateralized by FHLB stocks and real estate loans. As of June 30, 2024 and December 31, 2023, borrowing capacity available under this arrangement was $652.0 million and $565.1 million, respectively. We had no FHLB advances outstanding at June 30, 2024 or during the six months ended June 30, 2024. We had no FHLB advances outstanding at December 31, 2023. Our cost of FHLB advances was 5.43% for the year ended December 31, 2023. In addition, letters of credit with the FHLB in the amount of $418.0 million and $463.1 million were outstanding at June 30, 2024 and December 31, 2023, respectively. The letters of credit are used to collateralize public fund deposit accounts in excess of FDIC insurance limits and have expirations ranging from July 2024 through October 2025.

Previous wording

10 th day of March, June, September and December through maturity date of March 10, 2026. All principal and unpaid interest is due at maturity. The note is secured by 100% of the outstanding stock of the Bank and is senior in rights to the subordinated debt described below. Prior to the modification, the $50.0 million facility was due on September 10, 2024, and bore interest at The Wall Street Journal US Prime Rate, as such changes from time to time, plus 0.50%, with a floor rate of 5.00% per annum. At March 31, 2024 and December 31, 2023, the outstanding balance was $43.9 million and $38.9 million, respectively.

Current wording

Line of Credit - Senior Debt. The Company has a $55.0 million revolving line of credit facility that was modified effective March 12, 2024, whereby the facility was increased by $5.0 million and the note rate was decreased to The Wall Street Journal US Prime Rate, as such changes from time to time, less 0.625%, with a floor rate of 5.00% per annum. Interest continues to be payable quarterly on the 10 th day of March, June, September and December through maturity date of March 10, 2026. All principal and unpaid interest is due at maturity. The note is secured by 100% of the outstanding stock of the Bank and is senior in rights to the subordinated debt described below. Prior to the modification, the $50.0 million facility was due on September 10, 2024, and bore interest at The Wall Street Journal US Prime Rate, as such changes from time to time, plus 0.50%, with a floor rate of 5.00% per annum. At June 30, 2024 and December 31, 2023, the outstanding balance was $36.9 million and $38.9 million, respectively.

Previous wording

Note Payable - Subordinated Debt. On March 31, 2022, the Company issued and sold $82.3 million in aggregate principal amount of the Notes. As of March 31, 2024 and December 31, 2023, the outstanding balance was $80.6 million, net of $1.7 million in unamortized debt issuance costs. For additional information on our Note Payable - Subordinated Debt, see Note 7 – FHLB Advances and Other Borrowings in the accompanying notes to the consolidated financial statements included elsewhere in this Form 10-Q.

Current wording

Note Payable - Subordinated Debt. On March 31, 2022, the Company issued and sold $82.3 million in aggregate principal amount of the Notes. At June 30, 2024 and December 31, 2023, the Company had $82.3 million in outstanding principal and $1.6 million and $1.7 million, respectively, in unamortized debt issuance costs. For additional information on our Note Payable - Subordinated Debt, see Note 7 – FHLB Advances and Other Borrowings in the accompanying notes to the consolidated financial statements included elsewhere in this Form 10-Q.

Previous wording

Our cost of our senior debt and note payable was 6.98% and 6.61% for the three months ended March 31, 2024 and 2023, respectively.

Current wording

Our cost of our senior debt and note payable was 6.74% and 6.65% for the six months ended June 30, 2024 and 2023, respectively.

Previous wording

For the three months ended March 31, 2024 and for the year ended December 31, 2023, liquidity needs were primarily met by core deposits, loan maturities, amortizing loan portfolios, brokered deposits, and borrowings.

Current wording

For the six months ended June 30, 2024 and for the year ended December 31, 2023, liquidity needs were primarily met by core deposits, loan maturities, amortizing loan portfolios, brokered deposits, and borrowings.

Previous wording

At March 31, 2024, the Company had borrowing capacity available under FHLB advances of $643.9 million, line of credit - senior debt of $11.1 million, the Federal Reserve Bank of Dallas Discount Window of $1.3 billion, and federal funds lines of credit of $36.5 million. At December 31, 2023, the Company had borrowing capacity under FHLB advances of $565.1 million, line of credit - senior debt of $11.1 million, the Federal Reserve Bank of Dallas Discount Window of $1.2 billion, and federal funds lines of credit of $36.5 million.

Current wording

At June 30, 2024, the Company had borrowing capacity available under FHLB advances of $652.0 million, line of credit - senior debt of $18.1 million, the Federal Reserve Bank of Dallas Discount Window of $1.3 billion, and federal funds lines of credit of $36.5 million. At December 31, 2023, the Company had borrowing capacity under FHLB advances of $565.1 million, line of credit - senior debt of $11.1 million, the Federal Reserve Bank of Dallas Discount Window of $1.2 billion, and federal funds lines of credit of $36.5 million.

Previous wording

The following table illustrates, during the periods presented, the composition of our funding sources and the average assets in which those funds are invested as a percentage of average total assets for the periods indicated. Average assets were $4.41 billion for the three months ended March 31, 2024 and $3.90 billion for the year ended December 31, 2023.

Current wording

The following table illustrates, during the periods presented, the composition of our funding sources and the average assets in which those funds are invested as a percentage of average total assets for the periods indicated. Average assets were $4.44 billion for the six months ended June 30, 2024 and $3.90 billion for the year ended December 31, 2023.

Previous wording

As of March 31, 2024, we had $1.42 billion in outstanding commitments to extend credit and $25.7 million in commitments associated with outstanding standby and commercial letters of credit. As of December 31, 2023, we had $1.35 billion in outstanding commitments to extend credit and $26.9 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.

Current wording

As of June 30, 2024, we had $1.56 billion in outstanding commitments to extend credit and $24.9 million in commitments associated with outstanding standby and commercial letters of credit. As of December 31, 2023, we had $1.35 billion in outstanding commitments to extend credit and $26.9 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.

Previous wording

As of March 31, 2024 and December 31, 2023, we had no exposure to future cash requirements associated with known uncertainties or capital expenditure of a material nature. As of March 31, 2024, we had cash and cash equivalents of $498.3 million, compared to $411.8 million as of December 31, 2023.

Current wording

As of June 30, 2024 and December 31, 2023, we had no exposure to future cash requirements associated with known uncertainties or capital expenditure of a material nature. As of June 30, 2024, we had cash and cash equivalents of $253.9 million, compared to $411.8 million as of December 31, 2023.

Previous wording

Total shareholders’ equity increased to $423.6 million as of March 31, 2024, compared to $412.0 million as of December 31, 2023, an increase of $11.6 million, or 2.8%. This increase was primarily the result of the $10.4 million in net income and $1.9 million of other comprehensive income for the three months ended March 31, 2024 offset by the $1.2 million of dividends declared on the Series A Preferred Stock.

Current wording

Total shareholders’ equity increased to $435.0 million as of June 30, 2024, compared to $412.0 million as of December 31, 2023, an increase of $23.0 million, or 5.6%. This increase was primarily the result of the $21.2 million in net income and $3.3 million of other comprehensive income on securities and derivatives for the six months ended June 30, 2024 offset by the $2.4 million of dividends declared on the Series A Preferred Stock.

Previous wording

As part of its hedging strategy, the Company entered into two five-year pay-fixed interest rate swap agreements during December 2023. The instruments have notional amounts of $100 million each with pay-fixed interest rates of 3.718% and 3.473%, respectively. The instruments are designated as cash flow hedges, and changes in fair value are recognized in other comprehensive income. The facilities are scheduled to mature on December 6, 2028 and December 21, 2028, respectively.

Current wording

The Company entered into two five-year pay-fixed interest rate swap agreements with notional amounts of $100 million each and pay-fixed interest rates of 3.718% and 3.473% during December 2023. The instruments were designated as cash flow hedges, and changes in fair value are recognized in other comprehensive income. The facilities, which were scheduled to mature on December 6, 2028 and December 21, 2028, were discontinued on April 10, 2024, and a combined gain of $5.4 million was recognized by the Company. The gain is being accreted from other comprehensive income, net of deferred taxes, into interest expense through the maturity date of the contracts.

Previous wording

During March 2023 and as part of our hedging strategy, we entered into a five-year pay-fixed interest rate swap agreement with a notional amount of $200 million. The facility, which was scheduled to mature on March 31, 2028, was discontinued on May 26 2023, and a gain of $5.0 million was recognized by the Company. The gain is being accreted from other comprehensive income, net of deferred taxes, into interest expense through the maturity date of the contract.

Current wording

During March 2023, we entered into a five-year pay-fixed interest rate swap agreement with a notional amount of $200 million. The facility, which was scheduled to mature on March 31, 2028, was discontinued on May 26, 2023, and a gain of $5.0 million was recognized by the Company. The gain is being accreted from other comprehensive income, net of deferred taxes, into interest expense through the maturity date of the contract.