Q - Third Coast Bancshares,

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 nineteen branches, with ten 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, 2025, we had, on a consolidated basis, total assets of $4.90 billion, total loans of $3.99 billion, total deposits of $4.25 billion and total shareholders’ equity of $479.8 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. We provide financial results based on a fiscal year ending December 31 as a single reportable segment. Our market expertise, coupled with a deep understanding of our customers’ needs, allows us to deliver tailored financial products and services. We currently operate nineteen branches, with ten 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, 2025, we had, on a consolidated basis, total assets of $4.94 billion, total loans of $4.08 billion, total deposits of $4.28 billion and total shareholders’ equity of $496.1 million.

Previous wording

Net interest income increased $4.7 million, or 12.4%, during the three months ended March 31, 2025, compared to the three months ended March 31, 2024, primarily due to increased interest income from loan and investment securities growth offset by a decrease in federal funds sold, and a decrease in interest expense resulting from lower rates paid on interest-bearing deposits. Average loans increased from $3.67 billion for the three months ended March 31, 2024 to $3.98 billion for the three months ended March 31, 2025, with the growth well diversified in real estate loans and commercial loans. The yield on loans for the three months ended March 31, 2025 was 7.45%, compared to 7.75% for the three months ended March 31, 2024. Interest expense related to interest bearing deposit accounts was $36.2 million and $38.7 million for three months ended March 31, 2025 and 2024, respectively. Average interest-bearing deposits increased from $3.35 billion for the three months ended March 31, 2024 to $3.65 billion for the three months ended March 31, 2025. The average rate paid on interest-bearing deposits increased from 4.65% for the three months ended March 31, 2024 to 4.02% for the three months ended March 31, 2025. For the three months ended March 31, 2025, net interest margin and net interest spread were 3.80% and 3.09%, respectively, compared to 3.60% and 2.73%, respectively, for the three months ended March 31, 2024.

Current wording

Net interest income increased $10.5 million, or 27.1%, during the three months ended June 30, 2025, compared to the three months ended June 30, 2024, primarily due to increased interest income resulting from an increase in loans, a portion of which were securitized, and the purchase of associated securities resulted in an increase in investment yields offset by a decrease in federal funds sold. The increase in net interest income was also due to a decrease in interest expense resulting from lower rates paid on interest-bearing deposits. Average loans increased from $3.74 billion for the three months ended June 30, 2024 to $4.02 billion for the three months ended June 30, 2025, with the growth in commercial loans offset by a decrease in real estate loans and municipal and other. The yield on loans for the three months ended June 30, 2025 was 7.95%, compared to 7.86% for the three months ended June 30, 2024. Interest expense related to interest bearing deposit accounts was $37.5 million and $40.4 million for three months ended June 30, 2025 and 2024, respectively. Average interest-bearing deposits increased from $3.41 billion for the three months ended June 30, 2024 to $3.77 billion for the three months ended June 30, 2025. The average rate paid on interest-bearing deposits decreased from 4.76% for the three months ended June 30, 2024 to 4.00% for the three months ended June 30, 2025. For the three months ended June 30, 2025, net interest margin and net interest spread were 4.22% and 3.52%, respectively, compared to 3.62% and 2.75%, respectively, for the three months ended June 30, 2024.

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 $4.0 million and $3.5 million for the three months ended March 31, 2025 and 2024, 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 $6.6 million and $4.4 million for the three months ended June 30, 2025 and 2024, respectively.

Previous wording

The provision for credit losses for the three months ended March 31, 2025 was $450,000, compared to $1.6 million for the three months ended March 31, 2024. The decrease in the provision for credit losses is a reflection of the improvement in asset quality. No provision for credit losses for securities was recorded for the three months ended March 31, 2025 and 2024.

Current wording

The provision for credit losses for the six months ended June 30, 2025 was $2.6 million, compared to $3.5 million for the six months ended June 30, 2024. 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, 2025 and 2024.

Previous wording

As of March 31, 2025, the allowance for credit losses for loans totaled $40.5 million, or 1.01% of total loans, compared to $40.3 million, or 1.02% of total loans, as of December 31, 2024. At March 31, 2025, the allowance for credit losses for unfunded loan commitments was $1.3 million, compared to $1.4 million at December 31, 2024. No allowance for credit losses for securities was recorded as of March 31, 2025 or December 31, 2024.

Current wording

As of June 30, 2025, the allowance for credit losses for loans totaled $40.0 million, or 0.98% of total loans, compared to $40.3 million, or 1.02% of total loans, as of December 31, 2024. At June 30, 2025, the allowance for credit losses for unfunded loan commitments was $1.5 million, compared to $1.4 million at December 31, 2024. No allowance for credit losses for securities was recorded as of June 30, 2025 or December 31, 2024.

Previous wording

The increase in noninterest income of $764,000 for the three months ended March 31, 2025, compared to the three months ended March 31, 2024, was primarily due to increased service charges and fees, offset by losses on the sales of investment securities.

Current wording

The increase in noninterest income of $526,000 for the six months ended June 30, 2025, compared to the six months ended June 30, 2024, was primarily due to increased service charges and fees and increased earnings on bank-owned life insurance, offset by losses on the sales of investment securities and a decrease in Small Business Investment income.

Previous wording

The increase in noninterest expense of $2.2 million for the three months ended March 31, 2025, compared to the three months ended March 31, 2024, was primarily due to increases in salaries and employee benefit expenses, increase in regulatory assessments, and increased expenses related to new branch locations offset by decreased data processing and network expenses.

Current wording

The increase in noninterest expense of $3.2 million for the three months ended June 30, 2025, compared to the three months ended June 30, 2024, was primarily due to increases in salaries and employee benefit expenses, increased legal and professional fees, and increase in regulatory assessments.

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 $18.3 million for the three months ended March 31, 2025, an increase of $1.8 million, or 11.1%, compared to $16.5 million for the same period in 2024. The increase was primarily due to increased salary expense resulting from new hires, increased bonus expense and a reduction in salary expense deferral related to loan fundings during the first quarter of 2025. For the three months ended March 31, 2025, the average number of employees was 376, compared to an average number of employees of 363 for the three months ended March 31, 2024.

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 $18.2 million for the three months ended June 30, 2025, an increase of $2.3 million, or 14.2%, compared to $15.9 million for the same period in 2024. The increase was primarily due to increased salary expense resulting from new hires, increased bonus expense and a reduction in salary expense deferral related to loan fundings during the second quarter of 2025. For the three months ended June 30, 2025, the average number of employees was 380, compared to an average number of employees of 362 for the three months ended June 30, 2024.

Previous wording

Net occupancy and equipment expenses were $3.3 million and $3.0 million for the three months ended March 31, 2025 and 2024, respectively. Building, leasehold, furniture, fixtures and equipment depreciation and software amortization included in net occupancy and equipment expenses totaled $1.5 million and $1.3 million for the three months ended March 31, 2025 and 2024, respectively. The increases were primarily due to costs associated with additional branch locations opened in the second and third quarter of 2024.

Current wording

Occupancy and equipment expenses were $2.8 million for both the three months ended June 30, 2025 and 2024, respectively. Building, leasehold, furniture, fixtures and equipment depreciation included in net occupancy and equipment expenses totaled $1.0 million for both the three months ended June 30, 2025 and 2024, respectively.

Previous wording

Regulatory assessment fees increased from $1.0 million for the three months ended March 31, 2024 to $1.4 million for the three months ended March 31, 2025. The increase was primarily due to our growth in total assets from $4.66 billion at March 31, 2024 to $4.90 billion at March 31, 2025 and a change in our quarterly assessment rate.

Current wording

Regulatory assessment fees increased from $1.0 million for the three months ended June 30, 2024 to $1.2 million for the three months ended June 30, 2025. The increase was primarily due to our growth in total assets from $4.47 billion at June 30, 2024 to $4.94 billion at June 30, 2025 and a change in our quarterly assessment rate.

Previous wording

Total assets were $4.90 billion as of March 31, 2025 compared to $4.94 billion as of December 31, 2024. The decrease in total assets of $45.5 million was primarily due to a decrease in cash and cash equivalents resulting from a decrease in noninterest bearing deposits partially offset by organic loan growth, and investment security and BOLI purchases during the three months ended March 31, 2025.

Current wording

Total assets were $4.94 billion as of June 30, 2025, compared to $4.94 billion as of December 31, 2024. The increase in total assets of $1.3 million was primarily due to organic loan growth and investment security and BOLI purchases offset by a decrease in cash and cash equivalents resulting from a decrease in noninterest bearing deposits during the six months ended June 30, 2025.

Previous wording

As of March 31, 2025, total loans were $3.99 billion, an increase of $251.6 million, or 0.5%, compared to $3.97 billion as of December 31, 2024. Commercial and industrial loans accounted for the majority of the loan growth, increasing $107.8 million from December 31, 2024. The growth was partially offset by a $72.9 million decrease in real estate loans and a $12.9 million decrease in municipal loans from December 31, 2024. Total loans as a percentage of deposits were 93.9% and 92.0% as of March 31, 2025 and December 31, 2024, respectively. Total loans as a percentage of assets were 81.4% and 80.3% as of March 31, 2025 and December 31, 2024, respectively.

Current wording

As of June 30, 2025, total loans were $4.08 billion, an increase of $113.3 million, or 2.9%, compared to $3.97 billion as of December 31, 2024. Commercial and industrial loans accounted for the majority of the loan growth, increasing $227.2 million from December 31, 2024. The growth was partially offset by a $112.2 million decrease in real estate loans from December 31, 2024. Total loans as a percentage of deposits were 95.3% and 92.0% as of June 30, 2025 and December 31, 2024, respectively. Total loans as a percentage of assets were 82.5% and 80.3% as of June 30, 2025 and December 31, 2024, 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 $27.2 million, or 6.1%, to $420.9 million as of March 31, 2025 from $448.1 million as of December 31, 2024.

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 $24.2 million, or 5.4%, to $424.0 million as of June 30, 2025 from $448.1 million as of December 31, 2024.

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 decreased $18.9 million, or 2.9%, to $633.2 million as of March 31, 2025 from $652.1 million as of December 31, 2024.

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 $14.7 million, or 2.3%, to $666.8 million as of June 30, 2025 from $652.1 million as of December 31, 2024.

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 decreased $1.5 million, or 0.4%, to $335.3 million as of March 31, 2025 from $336.7 million as of December 31, 2024.

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 decreased $12.8 million, or 3.8%, to $323.9 million as of June 30, 2025 from $336.7 million as of December 31, 2024.

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 decreased $25.2 million, or 2.9%, to $846.2 million as of March 31, 2025 from $871.4 million as of December 31, 2024.

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 decreased $87.0 million, or 10.0%, to $784.4 million as of June 30, 2025 from $871.4 million as of December 31, 2024.

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, 2025 and December 31, 2024, outstanding factored receivables were $40.4 million and $31.0 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, 2025 and December 31, 2024, outstanding factored receivables were $24.9 million and $36.8 million, respectively.

Previous wording

Commercial and industrial loans increased $107.8 million, or 7.2%, to $1.61 billion as of March 31, 2025 from $1.50 billion as of December 31, 2024. The increase was primarily a result of increased productivity in response to market demand.

Current wording

Commercial and industrial loans increased $227.2 million, or 15.2%, to $1.72 billion as of June 30, 2025 from $1.50 billion as of December 31, 2024. The increase was primarily a result of increased productivity in response to market demand.

Previous wording

We had $27.3 million in nonperforming assets as of March 31, 2025 compared to $28.8 million as of December 31, 2024. Included in nonperforming assets, nonperforming loans were $18.6 million and $27.9 million as of March 31, 2025 and December 31, 2024, respectively.

Current wording

We had $28.7 million in nonperforming assets as of June 30, 2025, compared to $28.8 million as of December 31, 2024. Included in nonperforming assets, nonperforming loans were $20.1 million and $27.9 million as of June 30, 2025 and December 31, 2024, respectively.

Previous wording

As of March 31, 2025, the allowance for credit losses for loans totaled $40.5 million, or 1.01% of total loans. As of December 31, 2024, the allowance for credit losses for loans totaled $40.3 million, or 1.02% of total loans. The increase in our allowance for credit losses for loans was primarily due to the $450,000 provision for credit losses on loans recorded for the three months ended March 31, 2025 partially offset by $398,000 of net charge-offs.

Current wording

As of June 30, 2025, the allowance for credit losses for loans totaled $40.0 million, or 0.98% of total loans. As of December 31, 2024, the allowance for credit losses for loans totaled $40.3 million, or 1.02% of total loans. The decrease in our allowance for credit losses for loans was primarily due to $2.8 million of net charge-offs partially offset by the $2.6 million provision for credit losses on loans recorded for the six months ended June 30, 2025.

Previous wording

Our investment portfolio consists of U.S. government and agency securities, state and municipal securities, mortgage-backed securities and collateralized mortgage obligations, and corporate bonds classified as available-for-sale. The carrying value of such securities is adjusted for unrealized gain or loss, and any gain or loss is reported on an after-tax basis as a component of other comprehensive income in shareholders’ equity.

Current wording

Our investment portfolio consists of U.S. government and agency securities, state and municipal securities, mortgage-backed securities and collateralized mortgage obligations, corporate bonds classified as available-for-sale, and asset-backed securities classified as held-to-maturity. The carrying value of available-for-sale securities is adjusted for unrealized gain or loss, and any gain or loss is reported on an after-tax basis as a component of other comprehensive income in shareholders’ equity. Investment securities held-to-maturity represent those securities for which we have the positive intent and ability to hold until maturity and are reported at cost, adjusted for amortization of premiums and accretion of discounts.

Previous wording

Management assesses securities in its investment portfolio for impairment on a quarterly basis or when events or circumstances suggest that the carrying amount of an investment may be impaired. In accordance with ASC 326, available-for-sale securities are evaluated as of each reporting date when the fair value is less than amortized cost, and credit losses are to be calculated individually using a discounted cash flow method through which management compares the present value of the expected cash flows with the amortized costs. An allowance for credit losses is established to reflect the credit loss component of the decline in fair value.

Current wording

Management assesses securities in its investment portfolio for impairment on a quarterly basis or when events or circumstances suggest that the carrying amount of an investment may be impaired. In accordance with ASC 326, available-for-sale and held-to-maturity securities are evaluated as of each reporting date when the fair value is less than amortized cost, and credit losses are to be calculated individually using a discounted cash flow method through which management compares the present value of the expected cash flows with the amortized costs. An allowance for credit losses is established to reflect the credit loss component of the decline in fair value.

Previous wording

As of March 31, 2025, the carrying amount of the security portfolio was $397.4 million, compared to $384.0 million as of December 31, 2024, an increase of $13.4 million, or 3.5%. The increase relates primarily to net purchases of $18.0 million in agencies, municipal securities, mortgage-back securities and corporate bonds offset by maturities, calls and paydowns of $8.4 million during the three months ended March 31, 2025. Investment securities represented 8.1% and 7.8% of total assets as of March 31, 2025 and December 31, 2024, respectively.

Current wording

As of June 30, 2025, the carrying amount of the available-for-sale security portfolio was $355.8 million, compared to $384.0 million as of December 31, 2024, a decrease of $28.3 million, or 7.4%. The decrease relates primarily to maturities, calls and paydowns of $28.5 million and net sales of $2.7 million in agencies, municipal securities, mortgage-back securities and corporate bonds during the six months ended June 30, 2025. Investment securities available-for-sale represented 7.2% and 7.8% of total assets as of June 30, 2025 and December 31, 2024, respectively.

Previous wording

The amortized cost and estimated fair value of securities available-for-sale at March 31, 2025, by contractual maturity, are shown below:

Current wording

The amortized cost and estimated fair value of securities available-for-sale and held-to-maturity at June 30, 2025, by contractual maturity, are shown below:

Previous wording

The weighted average life of our investment portfolio was 5.76 years and 4.79 years as of March 31, 2025 and December 31, 2024, respectively.

Current wording

The weighted average life of our investment portfolio was 4.80 years and 4.79 years as of June 30, 2025 and December 31, 2024, respectively.

Previous wording

Total deposits as of March 31, 2025 were $4.25 billion, a decrease of $62.0 million, or 1.4%, compared to $4.31 billion as of December 31, 2024. Noninterest-bearing deposits as of March 31, 2025 were $448.5 million, a decrease of $153.5 million, or 25.5%, compared to $602.1 million as of December 31, 2024. Total interest-bearing account balances as of March 31, 2025 were $3.80 billion, an increase of $91.6 million, or 2.5%, from $3.71 billion as of December 31, 2024.

Current wording

Total deposits as of June 30, 2025 were $4.28 billion, a decrease of $29.6 million, or 0.7%, compared to $4.31 billion as of December 31, 2024. Noninterest-bearing deposits as of June 30, 2025 were $441.0 million, a decrease of $161.1 million, or 26.8%, compared to $602.1 million as of December 31, 2024. Total interest-bearing account balances as of June 30, 2025 were $3.84 billion, an increase of $131.5 million, or 3.6%, from $3.71 billion as of December 31, 2024.

Previous wording

The ratio of average noninterest-bearing deposits to average total deposits for the three months ended March 31, 2025 was 10.4% and for the year ended December 31, 2024 was 11.7%.

Current wording

The ratio of average noninterest-bearing deposits to average total deposits for the six months ended June 30, 2025 was 10.3% and for the year ended December 31, 2024 was 11.7%.

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, 2025 and December 31, 2024, borrowing capacity available under this arrangement was $684.7 million and $623.7 million, respectively. We had no FHLB advances outstanding at March 31, 2025 or December 31, 2024. Our cost of FHLB advances was 4.77% and 5.25% for the three months ended March 31, 2025 and for the year ended December 31, 2024, respectively. In addition, letters of credit with the FHLB in the amount of $494.2 million and $535.8 million were outstanding at March 31, 2025 and December 31, 2024, 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 2025 through October 2026 as of March 31, 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, 2025 and December 31, 2024, borrowing capacity available under this arrangement was $491.8 million and $623.7 million, respectively. We had no FHLB advances outstanding at June 30, 2025 or December 31, 2024. Our cost of FHLB advances was 4.72% and 5.25% for the six months ended June 30, 2025 and for the year ended December 31, 2024, respectively. In addition, letters of credit with the FHLB in the amount of $669.9 million and $535.8 million were outstanding at June 30, 2025 and December 31, 2024, 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 2025 through October 2026 as of June 30, 2025.

Previous 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

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 both June 30, 2025 and December 31, 2024, the outstanding balance was $30.9 million.

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. At both March 31, 2025 and December 31, 2024, the Company had $82.3 million in outstanding principal and $1.5 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, 2025 and December 31, 2024, the Company had $82.3 million in outstanding principal and $1.4 million and $1.5 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 6.22% and 6.98% for the three months ended March 31, 2025 and 2024, respectively.

Current wording

Our cost of our senior debt and note payable was 6.20% and 6.74% for the six months ended June 30, 2025 and 2024, respectively.

Previous wording

Federal Reserve Borrower-in-Custody (BIC) Loan Pledge Arrangement. The Company has a Borrower-in-Custody (“BIC”) arrangement in place with the Federal Reserve Bank of Dallas. The arrangement provides the Bank with the ability to secure collateralized contingency funding from the Federal Reserve Bank's Discount Window by pledging its commercial and industrial loans on a blanket floating lien status. As of both March 31, 2025 and December 31, 2024, total borrowing capacity under this arrangement was $1.5 billion. The Company had no advances outstanding under these lines as of March 31, 2025 or December 31, 2024.

Current wording

Federal Reserve Borrower-in-Custody (BIC) Loan Pledge Arrangement. The Company has a Borrower-in-Custody (“BIC”) arrangement in place with the Federal Reserve Bank of Dallas. The arrangement provides the Bank with the ability to secure collateralized contingency funding from the Federal Reserve Bank's Discount Window by pledging its commercial and industrial loans on a blanket floating lien status. As of June 30, 2025 and December 31, 2024, total borrowing capacity under this arrangement was $1.8 billion and $1.5 billion, respectively. The Company had no advances outstanding under these lines as of June 30, 2025 or December 31, 2024.

Previous wording

For the three months ended March 31, 2025 and for the year ended December 31, 2024, 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, 2025 and for the year ended December 31, 2024, liquidity needs were primarily met by core deposits, loan maturities, amortizing loan portfolios, brokered deposits, and borrowings.

Previous wording

At March 31, 2025, the Company had borrowing capacity available under FHLB advances of $684.7 million, line of credit - senior debt of $24.1 million, the Federal Reserve Bank of Dallas Discount Window of $1.5 billion, and federal funds lines of credit of $36.5 million. At December 31, 2024, the Company had borrowing capacity under FHLB advances of $623.7 million, line of credit - senior debt of $24.1 million, the Federal Reserve Bank of Dallas Discount Window of $1.5 billion, and federal funds lines of credit of $36.5 million.

Current wording

At June 30, 2025, the Company had borrowing capacity available under FHLB advances of $491.8 million, line of credit - senior debt of $24.1 million, the Federal Reserve Bank of Dallas Discount Window of $1.8 billion, and federal funds lines of credit of $36.5 million. At December 31, 2024, the Company had borrowing capacity under FHLB advances of $623.7 million, line of credit - senior debt of $24.1 million, the Federal Reserve Bank of Dallas Discount Window of $1.5 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 $4.72 billion for the three months ended March 31, 2025 and $4.54 billion for the year ended December 31, 2024.

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 $4.79 billion for the six months ended June 30, 2025 and $4.54 billion for the year ended December 31, 2024.

Previous wording

As of March 31, 2025, we had $1.58 billion in outstanding commitments to extend credit and $13.9 million in commitments associated with outstanding standby and commercial letters of credit. As of December 31, 2024, we had $1.57 billion in outstanding commitments to extend credit and $14.0 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, 2025, we had $1.64 billion in outstanding commitments to extend credit and $2.8 million in commitments associated with outstanding standby and commercial letters of credit. As of December 31, 2024, we had $1.57 billion in outstanding commitments to extend credit and $14.0 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, 2025 and December 31, 2024, we had no exposure to future cash requirements associated with known uncertainties or capital expenditure of a material nature. As of March 31, 2025, we had cash and cash equivalents of $329.4 million, compared to $421.2 million as of December 31, 2024.

Current wording

As of June 30, 2025 and December 31, 2024, we had no exposure to future cash requirements associated with known uncertainties or capital expenditure of a material nature. As of June 30, 2025, we had cash and cash equivalents of $119.0 million, compared to $421.2 million as of December 31, 2024.

Previous wording

Total shareholders’ equity increased to $479.8 million as of March 31, 2025, compared to $460.7 million as of December 31, 2024, an increase of $19.1 million, or 4.1%. This increase was primarily the result of the $13.6 million in net income and $5.8 million of other comprehensive income on securities and derivatives for the three months ended March 31, 2025 offset by the $1.2 million of dividends declared on the Series A Preferred Stock.

Current wording

Total shareholders’ equity increased to $496.1 million as of June 30, 2025, compared to $460.7 million as of December 31, 2024, an increase of $35.4 million, or 7.7%. This increase was primarily the result of the $30.3 million in net income and $6.1 million of other comprehensive income on securities and derivatives for the six months ended June 30, 2025 offset by the $2.4 million of dividends declared on the Series A Preferred Stock.

Previous wording

For the three months ended March 31, 2025 and 2024, approximately $600,000 and $352,000, respectively, was reclassified out of accumulated other comprehensive income and recognized as a reduction of interest expense on discontinued hedges. At March 31, 2025, the Company expected approximately $2.4 million of the unrealized gain to be reclassified as a reduction of interest expense over the next twelve month period.

Current wording

For the six months ended June 30, 2025 and 2024, approximately $1.3 million and $1.0 million, respectively, was reclassified out of accumulated other comprehensive income and recognized as a reduction of interest expense on discontinued hedges. For the three months ended June 30, 2025 and 2024, approximately $662,000 and $654,000, respectively, was reclassified out of accumulated other comprehensive income and recognized as a reduction of interest expense on discontinued hedges. At June 30, 2025, the Company expected approximately $2.5 million of the unrealized gain to be reclassified as a reduction of interest expense over the next twelve month period.

Previous wording

All derivatives are carried at fair value in either other assets or other liabilities in the accompanying consolidated balance sheets. At March 31, 2025, our derivative assets and liabilities totaled $3.1 million and $3.5 million, respectively.

Current wording

All derivatives are carried at fair value in either other assets or other liabilities in the accompanying consolidated balance sheets. At June 30, 2025, our derivative assets and liabilities totaled $3.1 million and $3.8 million, respectively.