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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
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☒ | Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. |
For the quarterly period ended March 31, 2022
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☐ | Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. |
For the transition period from to
Commission file number 001-34657
TEXAS CAPITAL BANCSHARES, INC.
(Exact name of registrant as specified in its charter)
| | | | | | | | |
Delaware | | 75-2679109 |
(State or other jurisdiction of incorporation or organization) | | (I.R.S. Employer Identification Number) |
| | | | | | | | | | | | | | | | | | | | |
2000 McKinney Avenue | |
Suite 700 | |
| Dallas | TX | USA | | | 75201 |
(Address of principal executive offices) | (Zip Code) |
(214) 932-6600
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
________________________________________
Securities registered pursuant to Section 12(b) of the Act:
| | | | | | | | | | | | | | |
Title of each class | | Trading Symbol(s) | | Name of each exchange on which registered |
Common Stock, par value $0.01 per share | | TCBI | | Nasdaq Stock Market |
| | | | |
5.75% Non-Cumulative Perpetual Preferred Stock Series B, par value $0.01 per share | | TCBIO | | Nasdaq Stock Market |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ý ¨ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. | | | | | | | | | | | | | | | | | | | | | | | |
Large Accelerated Filer | x | | Accelerated Filer | | ☐ | | |
Non-Accelerated Filer | ☐ | | Smaller Reporting Company | | ☐ | | |
| | | Emerging Growth Company | | ☐ | | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ý
On April 20, 2022, the number of shares set forth below was outstanding with respect to each of the issuer's classes of common stock:
Common Stock, par value $0.01 per share 50,723,232
Texas Capital Bancshares, Inc.
Form 10-Q
Quarter Ended March 31, 2022
Index
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| Item 1. | | |
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| Item 2. | | |
| Item 3. | | |
| Item 4. | | |
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| Item 1. | | |
| Item 1A. | | |
| Item 2. | | |
| Item 6. | | |
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PART I—FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
TEXAS CAPITAL BANCSHARES, INC.
CONSOLIDATED BALANCE SHEETS - UNAUDITED | | | | | | | | | | | |
(in thousands except share data) | March 31, 2022 | | December 31, 2021 |
| (Unaudited) | | |
Assets | | | |
Cash and due from banks | $ | 234,853 | | | $ | 180,663 | |
Interest-bearing cash and cash equivalents | 5,136,680 | | | 7,765,996 | |
| | | |
Available-for-sale debt securities | 2,591,218 | | | 3,538,201 | |
Held-to-maturity debt securities | 1,009,972 | | | — | |
Equity securities | 40,825 | | | 45,607 | |
Investment securities | 3,642,015 | | | 3,583,808 | |
Loans held for sale | 8,085 | | | 8,123 | |
| | | |
Loans held for investment, mortgage finance | 5,827,965 | | | 7,475,497 | |
Loans held for investment | 15,849,434 | | | 15,331,457 | |
Less: Allowance for credit losses on loans | 211,151 | | | 211,866 | |
Loans held for investment, net | 21,466,248 | | | 22,595,088 | |
| | | |
| | | |
Premises and equipment, net | 24,181 | | | 20,901 | |
Accrued interest receivable and other assets | 556,154 | | | 559,897 | |
Goodwill and intangible assets, net | 17,161 | | | 17,262 | |
Total assets | $ | 31,085,377 | | | $ | 34,731,738 | |
| | | |
Liabilities and Stockholders’ Equity | | | |
Liabilities: | | | |
Non-interest bearing | $ | 13,434,723 | | | $ | 13,390,370 | |
Interest bearing | 11,943,215 | | | 14,718,995 | |
| | | |
Total deposits | 25,377,938 | | | 28,109,365 | |
Accrued interest payable | 8,560 | | | 7,699 | |
| | | |
Other liabilities | 252,394 | | | 273,488 | |
Short-term borrowings | 1,427,033 | | | 2,202,832 | |
Long-term debt | 929,414 | | | 928,738 | |
| | | |
| | | |
Total liabilities | 27,995,339 | | | 31,522,122 | |
| | | |
Stockholders’ equity: | | | |
Preferred stock, $0.01 par value, $1,000 liquidation value: | | | |
Authorized shares - 10,000,000 | | | |
Issued shares - 300,000 at March 31, 2022 and December 31, 2021 | 300,000 | | | 300,000 | |
Common stock, $0.01 par value: | | | |
Authorized shares - 100,000,000 | | | |
Issued shares - 50,710,858 and 50,618,911 at March 31, 2022 and December 31, 2021, respectively | 507 | | | 506 | |
Additional paid-in capital | 1,011,353 | | | 1,008,559 | |
Retained earnings | 1,983,611 | | | 1,948,274 | |
Treasury stock - 417 shares at cost at March 31, 2022 and December 31, 2021 | (8) | | | (8) | |
Accumulated other comprehensive income/(loss), net of taxes | (205,425) | | | (47,715) | |
Total stockholders’ equity | 3,090,038 | | | 3,209,616 | |
Total liabilities and stockholders’ equity | $ | 31,085,377 | | | $ | 34,731,738 | |
See accompanying notes to consolidated financial statements.
TEXAS CAPITAL BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF INCOME AND OTHER
COMPREHENSIVE INCOME/(LOSS) - UNAUDITED
| | | | | | | | | | | | | | | | | |
| | | Three months ended March 31, |
(in thousands except per share data) | | | | | 2022 | | 2021 |
Interest income | | | | | | | |
Interest and fees on loans | | | | | $ | 187,657 | | | $ | 210,331 | |
Investment securities | | | | | 17,302 | | | 9,887 | |
| | | | | | | |
Interest-bearing cash and cash equivalents | | | | | 3,571 | | | 2,933 | |
Total interest income | | | | | 208,530 | | | 223,151 | |
Interest expense | | | | | | | |
Deposits | | | | | 13,630 | | | 20,004 | |
| | | | | | | |
| | | | | | | |
Short-term borrowings | | | | | 758 | | | 2,592 | |
Long-term debt | | | | | 10,595 | | | 5,743 | |
| | | | | | | |
| | | | | | | |
Total interest expense | | | | | 24,983 | | | 28,339 | |
Net interest income | | | | | 183,547 | | | 194,812 | |
Provision for credit losses | | | | | (2,000) | | | (6,000) | |
Net interest income after provision for credit losses | | | | | 185,547 | | | 200,812 | |
Non-interest income | | | | | | | |
Service charges on deposit accounts | | | | | 6,022 | | | 4,716 | |
Wealth management and trust fee income | | | | | 3,912 | | | 2,855 | |
| | | | | | | |
Brokered loan fees | | | | | 3,970 | | | 9,311 | |
Servicing income | | | | | 237 | | | 9,009 | |
Investment banking and trading income | | | | | 4,179 | | | 5,787 | |
Net gain/(loss) on sale of loans held for sale | | | | | — | | | 5,572 | |
Other | | | | | 1,962 | | | 7,103 | |
Total non-interest income | | | | | 20,282 | | | 44,353 | |
Non-interest expense | | | | | | | |
Salaries and benefits | | | | | 100,098 | | | 87,522 | |
Occupancy expense | | | | | 8,885 | | | 8,274 | |
Marketing | | | | | 4,977 | | | 1,697 | |
Legal and professional | | | | | 10,302 | | | 8,277 | |
Communications and technology | | | | | 14,700 | | | 15,969 | |
Federal Deposit Insurance Corporation (“FDIC”) insurance assessment | | | | | 3,981 | | | 6,613 | |
Servicing-related expenses | | | | | — | | | 12,989 | |
| | | | | | | |
| | | | | | | |
Other | | | | | 10,149 | | | 8,975 | |
Total non-interest expense | | | | | 153,092 | | | 150,316 | |
Income before income taxes | | | | | 52,737 | | | 94,849 | |
Income tax expense | | | | | 13,087 | | | 22,911 | |
Net income | | | | | 39,650 | | | 71,938 | |
Preferred stock dividends | | | | | 4,313 | | | 3,779 | |
Net income available to common stockholders | | | | | $ | 35,337 | | | $ | 68,159 | |
Other comprehensive income/(loss): | | | | | | | |
Change in unrealized gain/(loss) on available-for-sale debt securities, before tax | | | | | $ | (199,633) | | | $ | (91,407) | |
Income tax benefit | | | | | (41,923) | | | (19,196) | |
Other comprehensive loss, net of tax | | | | | (157,710) | | | (72,211) | |
Comprehensive loss | | | | | $ | (118,060) | | | $ | (273) | |
Basic earnings per common share | | | | | $ | 0.70 | | | $ | 1.35 | |
Diluted earnings per common share | | | | | $ | 0.69 | | | $ | 1.33 | |
See accompanying notes to consolidated financial statements.
TEXAS CAPITAL BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY - UNAUDITED
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Preferred Stock | | Common Stock | | Additional | | | | Treasury Stock | | Accumulated Other | | |
| Paid-in | | Retained | | Comprehensive | | |
(in thousands except share data) | Shares | | Amount | | Shares | | Amount | | Capital | | Earnings | | Shares | | Amount | | Income/(Loss) | | Total |
Balance at December 31, 2020 (audited) | 6,000,000 | | | $ | 150,000 | | | 50,470,867 | | | $ | 504 | | | $ | 991,898 | | | $ | 1,713,056 | | | (417) | | | $ | (8) | | | $ | 15,774 | | | $ | 2,871,224 | |
| | | | | | | | | | | | | | | | | | | |
Comprehensive income/(loss): | | | | | | | | | | | | | | | | | | | |
Net income | — | | | — | | | — | | | — | | | — | | | 71,938 | | | — | | | — | | | — | | | 71,938 | |
Change in unrealized gain/(loss) on available-for-sale debt securities, net of taxes | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (72,211) | | | (72,211) | |
Total comprehensive loss | | | | | | | | | | | | | | | | | | | (273) | |
| | | | | | | | | | | | | | | | | | | |
Stock-based compensation expense recognized in earnings | — | | | — | | | — | | | — | | | 5,461 | | | — | | | — | | | — | | | — | | | 5,461 | |
Issuance of preferred stock | 300,000 | | | 300,000 | | | — | | | — | | | (10,277) | | | — | | | — | | | — | | | — | | | 289,723 | |
Preferred stock dividend | — | | | — | | | — | | | — | | | — | | | (3,779) | | | — | | | — | | | — | | | (3,779) | |
Issuance of stock related to stock-based awards | — | | | — | | | 87,317 | | | 1 | | | (2,875) | | | — | | | — | | | — | | | — | | | (2,874) | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Balance at March 31, 2021 | 6,300,000 | | | $ | 450,000 | | | 50,558,184 | | | $ | 505 | | | $ | 984,207 | | | $ | 1,781,215 | | | (417) | | | $ | (8) | | | $ | (56,437) | | | $ | 3,159,482 | |
| | | | | | | | | | | | | | | | | | | |
Balance at December 31, 2021 (audited) | 300,000 | | | $ | 300,000 | | | 50,618,911 | | | $ | 506 | | | $ | 1,008,559 | | | $ | 1,948,274 | | | (417) | | | $ | (8) | | | $ | (47,715) | | | $ | 3,209,616 | |
| | | | | | | | | | | | | | | | | | | |
Comprehensive income/(loss): | | | | | | | | | | | | | | | | | | | |
Net income | — | | | — | | | — | | | — | | | — | | | 39,650 | | | — | | | — | | | — | | | 39,650 | |
Change in unrealized gain/(loss) on available-for-sale debt securities, net of taxes | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (157,710) | | | (157,710) | |
Total comprehensive loss | | | | | | | | | | | | | | | | | | | (118,060) | |
| | | | | | | | | | | | | | | | | | | |
Stock-based compensation expense recognized in earnings | — | | | — | | | — | | | — | | | 5,407 | | | — | | | — | | | — | | | — | | | 5,407 | |
| | | | | | | | | | | | | | | | | | | |
Preferred stock dividend | — | | | — | | | — | | | — | | | — | | | (4,313) | | | — | | | — | | | — | | | (4,313) | |
Issuance of stock related to stock-based awards | — | | | — | | | 91,947 | | | 1 | | | (2,613) | | | — | | | — | | | — | | | — | | | (2,612) | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Balance at March 31, 2022 | 300,000 | | | $ | 300,000 | | | 50,710,858 | | | $ | 507 | | | $ | 1,011,353 | | | $ | 1,983,611 | | | (417) | | | $ | (8) | | | $ | (205,425) | | | $ | 3,090,038 | |
See accompanying notes to consolidated financial statements.
TEXAS CAPITAL BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED
| | | | | | | | | | | |
| Three months ended March 31, |
(in thousands) | 2022 | | 2021 |
Operating activities | | | |
Net income | $ | 39,650 | | | $ | 71,938 | |
Adjustments to reconcile net income to net cash provided by operating activities: | | | |
Provision/(benefit) for credit losses | (2,000) | | | (6,000) | |
| | | |
Depreciation and amortization expense | 10,604 | | | 26,067 | |
Net (gain)/loss on sale of loans held for sale | — | | | (5,572) | |
Decrease in valuation allowance on mortgage servicing rights | — | | | (16,448) | |
| | | |
| | | |
Stock-based compensation expense | 5,588 | | | 6,368 | |
| | | |
Purchases and originations of loans held for sale | — | | | (1,133,239) | |
Proceeds from sales and repayments of loans held for sale | 571 | | | 1,233,725 | |
| | | |
| | | |
| | | |
Changes in operating assets and liabilities: | | | |
Accrued interest receivable and other assets | 43,200 | | | 48,927 | |
Accrued interest payable and other liabilities | (24,691) | | | (27,335) | |
Net cash provided by operating activities | 72,922 | | | 198,431 | |
Investing activities | | | |
Purchases of available-for-sale debt securities | (376,415) | | | (460,793) | |
Proceeds from maturities, redemptions and pay-downs of available-for-sale debt securities | 104,338 | | | 118,316 | |
| | | |
Proceeds from maturities, redemptions and pay-downs of held-to-maturity debt securities | 9,882 | | | — | |
Sales/(purchases) of equity securities, net | 940 | | | (588) | |
Originations of loans held for investment, mortgage finance | (26,902,960) | | | (48,097,222) | |
Proceeds from pay-offs of loans held for investment, mortgage finance | 28,550,492 | | | 48,167,550 | |
| | | |
Net (increase)/decrease in loans held for investment, excluding mortgage finance | (517,465) | | | (54,141) | |
Purchases of premises and equipment, net | (2,709) | | | (924) | |
| | | |
| | | |
| | | |
Net cash provided by/(used in) investing activities | 866,103 | | | (327,802) | |
Financing activities | | | |
Net increase/(decrease) in deposits | (2,731,427) | | | 2,395,381 | |
Issuance of stock related to stock-based awards | (2,612) | | | (2,874) | |
| | | |
Net proceeds from issuance of preferred stock | — | | | 289,723 | |
| | | |
Preferred stock dividends paid | (4,313) | | | (3,779) | |
Net decrease in short-term borrowings | (775,799) | | | (596,164) | |
| | | |
| | | |
Net proceeds from issuance of long-term debt | — | | | 268,815 | |
| | | |
| | | |
Net cash provided by/(used in) financing activities | (3,514,151) | | | 2,351,102 | |
Net increase/(decrease) in cash and cash equivalents | (2,575,126) | | | 2,221,731 | |
Cash and cash equivalents at beginning of period | 7,946,659 | | | 9,206,380 | |
Cash and cash equivalents at end of period | $ | 5,371,533 | | | $ | 11,428,111 | |
Supplemental disclosures of cash flow information: | | | |
Cash paid during the period for interest | $ | 24,122 | | | $ | 33,860 | |
Cash paid during the period for income taxes | 302 | | | 440 | |
Transfers of debt securities from available-for-sale to held-to-maturity | 1,019,365 | | | — | |
| | | |
See accompanying notes to consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
(1) Operations and Summary of Significant Accounting Policies
Organization and Nature of Business
Texas Capital Bancshares, Inc. (“we,” “us”, “TCBI” or the “Company”), a Delaware corporation, was incorporated in November 1996 and commenced banking operations in December 1998. The consolidated financial statements of the Company include the accounts of the Company and its wholly owned subsidiary, Texas Capital Bank (the “Bank”).
We serve the needs of commercial businesses and professionals and entrepreneurs located in Texas as well as operate several lines of business serving a regional or national clientele of commercial borrowers. We are primarily a secured lender, with the majority of our loans held for investment, excluding mortgage finance loans and other national lines of business, being made to businesses headquartered or with operations in Texas. Our national lines of business provide specialized lending products to businesses throughout the United States.
Basis of Presentation
Our accounting and reporting policies conform to accounting principles generally accepted in the United States (“GAAP”) and to generally accepted practices within the banking industry. Certain prior period balances have been reclassified to conform to the current period presentation.
The consolidated interim financial statements are unaudited and certain information and disclosures in the notes to consolidated unaudited financial statements that are presented in accordance with GAAP have been condensed or omitted. In the opinion of management, the interim financial statements include all normal and recurring adjustments and the disclosures made are adequate to make the interim financial information not misleading. The consolidated financial statements have been prepared in accordance with GAAP for interim financial information and the instructions to Form 10-Q adopted by the U.S. Securities and Exchange Commission (“SEC”). Accordingly, the financial statements do not include all of the information and notes to the consolidated unaudited financial statements required by GAAP for complete annual financial statements and should be read in conjunction with our consolidated financial statements, and notes thereto, for the year ended December 31, 2021, included in our Annual Report on Form 10-K for the year ended December 31, 2021 (the “2021 Form 10-K”). Operating results for the interim periods disclosed herein are not necessarily indicative of the results that may be expected for a full year or any future period.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. Actual results could differ from those estimates. The allowance for credit losses, the fair value of financial instruments and the status of contingencies are particularly susceptible to significant change.
(2) Earnings Per Share
The following table presents the computation of basic and diluted earnings per share:
| | | | | | | | | | | | | | | | | |
| | | Three months ended March 31, |
(in thousands except share and per share data) | | | | | 2022 | | 2021 |
Numerator: | | | | | | | |
Net income | | | | | $ | 39,650 | | | $ | 71,938 | |
Preferred stock dividends | | | | | 4,313 | | | 3,779 | |
Net income available to common stockholders | | | | | $ | 35,337 | | | $ | 68,159 | |
Denominator: | | | | | | | |
Denominator for basic earnings per common share—weighted average common shares | | | | | 50,667,090 | | | 50,513,277 | |
Effect of dilutive outstanding stock-settled awards | | | | | 656,937 | | | 556,234 | |
| | | | | | | |
Denominator for dilutive earnings per common share—weighted average diluted common shares | | | | | 51,324,027 | | | 51,069,511 | |
| | | | | | | |
Basic earnings per common share | | | | | $ | 0.70 | | | $ | 1.35 | |
Diluted earnings per common share | | | | | $ | 0.69 | | | $ | 1.33 | |
| | | | | | | |
Anti-dilutive outstanding stock-settled awards | | | | | 229,488 | | | 80,263 | |
(3) Investment Securities
The following is a summary of our investment securities:
| | | | | | | | | | | | | | | | | | | | | | | |
(in thousands) | Amortized Cost(1) | | Gross Unrealized Gains | | Gross Unrealized Losses | | Estimated Fair Value |
March 31, 2022 | | | | | | | |
Available-for-sale debt securities: | | | | | | | |
U.S. Treasury securities | $ | 376,569 | | | $ | — | | | $ | (8,715) | | | $ | 367,854 | |
U.S. government agency securities | 125,000 | | | — | | | (11,484) | | | 113,516 | |
Residential mortgage-backed securities | 2,099,900 | | | 46 | | | (167,844) | | | 1,932,102 | |
| | | | | | | |
Tax-exempt asset-backed securities | 166,889 | | | 926 | | | (1,970) | | | 165,845 | |
Credit risk transfer (“CRT”) securities | 14,713 | | | — | | | (2,812) | | | 11,901 | |
Total available-for-sale debt securities | 2,783,071 | | | 972 | | | (192,825) | | | 2,591,218 | |
Held-to-maturity debt securities: | | | | | | | |
Residential mortgage-backed securities | 1,009,972 | | | — | | | (36,381) | | | 973,591 | |
Total held-to-maturity debt securities | 1,009,972 | | | — | | | (36,381) | | | 973,591 | |
Equity securities | | | | | | | 40,825 | |
Total investment securities(2) | | | | | | | $ | 3,642,015 | |
| | | | | | | |
December 31, 2021 | | | | | | | |
Available-for-sale debt securities: | | | | | | | |
U.S. government agency securities | $ | 125,000 | | | $ | — | | | $ | (4,056) | | | $ | 120,944 | |
Residential mortgage-backed securities | 3,288,261 | | | 156 | | | (63,039) | | | 3,225,378 | |
Tax-exempt asset-backed securities | 170,626 | | | 9,407 | | | — | | | 180,033 | |
CRT securities | 14,713 | | | — | | | (2,867) | | | 11,846 | |
Total available-for-sale debt securities | 3,598,600 | | | 9,563 | | | (69,962) | | | 3,538,201 | |
Equity securities | | | | | | | 45,607 | |
Total investment securities(2) | | | | | | | $ | 3,583,808 | |
| | | | | | | |
(1)Excludes accrued interest receivable of $5.5 million and $6.6 million at March 31, 2022 and December 31, 2021, respectively, related to available-for-sale debt securities, and $1.6 million at March 31, 2022 related to held-to-maturity debt securities that is recorded in accrued interest receivable and other assets on the consolidated balance sheets.
(2)Includes available-for-sale debt securities and equity securities at estimated fair value and held-to-maturity debt securities at amortized cost.
Debt Securities
In the first quarter of 2022, we transferred $1.0 billion of available-for-sale debt securities to held-to-maturity at fair value. The transfer was the result of deliberate actions taken to execute on our asset-liability management strategies in response to rising interest rates. Management determined that it has both the positive intent and ability to hold these securities to maturity. On the date of transfer, the difference between the carrying value and fair value of these securities, which was recorded, net of tax, as a loss in accumulated other comprehensive income/(loss) (“AOCI”), resulted in the securities transferring at a discount of $69.2 million. The discount and unrealized loss, net of tax, in AOCI will be amortized to interest income over the remaining life of the securities using the interest method. There were no gains or losses recognized as a result of this transfer.
The amortized cost and estimated fair value as of March 31, 2022, excluding accrued interest receivable, of available-for-sale and held-to-maturity debt securities are presented below by contractual maturity. Actual maturities may differ from contractual maturities of mortgage-backed securities because borrowers may have the right to call or prepay obligations with or without prepayment penalties.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Available-for-sale | | Held-to-maturity |
(in thousands) | | Amortized Cost | | Fair Value | | Amortized Cost | | Fair Value |
Due within one year | | $ | 95 | | | $ | 101 | | | $ | — | | | $ | — | |
Due after one year through five years | | 376,612 | | | 367,899 | | | — | | | — | |
Due after five years through ten years | | 156,492 | | | 140,462 | | | — | | | — | |
Due after ten years | | 2,249,872 | | | 2,082,756 | | | 1,009,972 | | | 973,591 | |
Total | | $ | 2,783,071 | | | $ | 2,591,218 | | | $ | 1,009,972 | | | $ | 973,591 | |
The following table discloses our available-for-sale debt securities that have been in a continuous unrealized loss position for less than 12 months and those that have been in a continuous unrealized loss position for 12 or more months:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Less Than 12 Months | | 12 Months or Longer | | Total |
(in thousands) | Fair Value | | Unrealized Loss | | Fair Value | | Unrealized Loss | | Fair Value | | Unrealized Loss |
March 31, 2022 | | | | | | | | | | | |
U.S. treasury securities | $ | 367,854 | | | $ | (8,715) | | | $ | — | | | $ | — | | | $ | 367,854 | | | $ | (8,715) | |
U.S. government agency securities | — | | | — | | | 113,516 | | | (11,484) | | | 113,516 | | | (11,484) | |
Residential mortgage-backed securities | 962,312 | | | (77,250) | | | 967,491 | | | (90,594) | | | 1,929,803 | | | (167,844) | |
Tax-exempt asset-backed securities | 70,464 | | | (1,970) | | | — | | | — | | | 70,464 | | | (1,970) | |
CRT securities | — | | | — | | | 11,901 | | | (2,812) | | | 11,901 | | | (2,812) | |
Total | $ | 1,400,630 | | | $ | (87,935) | | | $ | 1,092,908 | | | $ | (104,890) | | | $ | 2,493,538 | | | $ | (192,825) | |
December 31, 2021 | | | | | | | | | | | |
U.S. government agency securities | $ | 24,085 | | | $ | (915) | | | $ | 96,859 | | | $ | (3,141) | | | $ | 120,944 | | | $ | (4,056) | |
Residential mortgage-backed securities | 2,871,052 | | | (50,721) | | | 303,491 | | | (12,318) | | | 3,174,543 | | | (63,039) | |
CRT securities | — | | | — | | | 11,846 | | | (2,867) | | | 11,846 | | | (2,867) | |
Total | $ | 2,895,137 | | | $ | (51,636) | | | $ | 412,196 | | | $ | (18,326) | | | $ | 3,307,333 | | | $ | (69,962) | |
| | | | | | | | | | | |
At March 31, 2022, we had 81 available-for-sale debt securities in an unrealized loss position, comprised of five U.S. treasury securities, five U.S. government agency securities, 68 residential mortgage-backed securities, one tax-exempt asset-backed security and two CRT securities. The unrealized losses on the available-for-sale debt securities were the result of changes in market interest rates compared to the date the securities were acquired rather than the credit quality of the issuers or underlying loans. We do not intend to sell and it is not more likely than not that we will be required to sell before recovery of the amortized cost of the available-for-sale debt securities in an unrealized loss position and have recorded the unrealized losses related to this portfolio in AOCI. Held-to-maturity debt securities consist of government guaranteed securities for which no loss is expected. At March 31, 2022 and December 31, 2021, no allowance for credit losses was established for available-for-sale or held-to-maturity debt securities.
Debt securities with carrying values of approximately $19.5 million and $1.9 million were pledged to secure certain customer repurchase agreements and deposits, respectively, at March 31, 2022. The comparative amounts at December 31, 2021 were $22.0 million and $2.0 million, respectively.
Equity Securities
Equity securities consist of investments that qualify for consideration under the regulations implementing the Community Reinvestment Act and investments related to our non-qualified deferred compensation plan. The following is a summary of unrealized and realized gains/(losses) recognized on equity securities included in other non-interest income on the consolidated statements of income and other comprehensive income/(loss):
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| | | Three months ended March 31, |
(in thousands) | | | | | 2022 | | 2021 |
Net gains/(losses) recognized during the period | | | | | $ | (3,640) | | | $ | 378 | |
Less: Realized net gains/(losses) recognized on securities sold | | | | | 202 | | | 398 | |
Unrealized net gains/(losses) recognized on securities held | | | | | $ | (3,842) | | | $ | (20) | |
(4) Loans and Allowance for Credit Losses on Loans
Loans are summarized by portfolio segment as follows:
| | | | | | | | | | | |
(in thousands) | March 31, 2022 | | December 31, 2021 |
Loans held for investment: | | | |
Commercial | $ | 10,175,668 | | | $ | 9,897,561 | |
Energy | 797,191 | | | 721,373 | |
Mortgage finance | 5,827,965 | | | 7,475,497 | |
Real estate | 4,943,195 | | | 4,777,530 | |
Gross loans held for investment(1) | 21,744,019 | | | 22,871,961 | |
Unearned income (net of direct origination costs) | (66,620) | | | (65,007) | |
Total loans held for investment(1) | 21,677,399 | | | 22,806,954 | |
Allowance for credit losses on loans | (211,151) | | | (211,866) | |
Total loans held for investment, net(1) | $ | 21,466,248 | | | $ | 22,595,088 | |
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Loans held for sale: | | | |
Mortgage loans, at fair value | $ | 8,085 | | | $ | 8,123 | |
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Total loans held for sale | $ | 8,085 | | | $ | 8,123 | |
(1) Excludes accrued interest receivable of $49.7 million and $50.3 million at March 31, 2022 and December 31, 2021, respectively, that is recorded in accrued interest receivable and other assets on the consolidated balance sheets.
The following tables summarize our gross loans held for investment by year of origination and internally assigned credit grades:
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(in thousands) | | 2022 | | 2021 | | 2020 | | 2019 | | 2018 | | 2017 and prior | | Revolving lines of credit | | Revolving lines of credit converted to term loans | | Total |
March 31, 2022 | | | | | | | | | | | | | | | | | | |
Commercial | | | | | | | | | | | | | | | | | | |
(1-7) Pass | | $ | 234,841 | | | $ | 3,863,274 | | | $ | 330,939 | | | $ | 453,566 | | | $ | 305,767 | | | $ | 430,483 | | | $ | 4,264,331 | | | $ | 34,280 | | | $ | 9,917,481 | |
(8) Special mention | | 3,118 | | | 26,848 | | | 4,077 | | | 26,776 | | | — | | | 5,043 | | | 28,622 | | | 3,907 | | | 98,391 | |
(9) Substandard - accruing | | — | | | 666 | | | 3,410 | | | 77,915 | | | 24,366 | | | 16,847 | | | 9,458 | | | 1,664 | | | 134,326 | |
(9+) Non-accrual | | — | | | 2,003 | | | — | | | 44 | | | 12,898 | | | 6,918 | | | 3,607 | | | — | | | 25,470 | |
Total commercial | | $ | 237,959 | | | $ | 3,892,791 | | | $ | 338,426 | | | $ | 558,301 | | | $ | 343,031 | | | $ | 459,291 | | | $ | 4,306,018 | | | $ | 39,851 | | | $ | 10,175,668 | |
Energy | | | | | | | | | | | | | | | | | | |
(1-7) Pass | | $ | 34,710 | | | $ | 61,000 | | | $ | — | | | $ | — | | | $ | — | | | $ | 1,581 | | | $ | 673,649 | | | $ | — | | | $ | 770,940 | |
(8) Special mention | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
(9) Substandard - accruing | | — | | | — | | | — | | | — | | | — | | | 7,984 | | | — | | | |