
	2024		2023
Commercial and industrial	$	6,109,532	$	5,967,182
Energy:
Production	903,654		681,568
Service	203,629		194,126
Other	21,612		61,043
Total energy	1,128,895		936,737
Commercial real estate:
Commercial mortgages	7,165,220		6,746,709
Construction	2,264,076		1,680,724
Land	539,227		555,211
Total commercial real estate	9,968,523		8,982,644
Consumer real estate:
Home equity lines of credit	911,239		792,876
Home equity loans	914,738		694,966
Home improvement loans	852,536		765,887
1-4 family mortgage loans	259,456		38,923
Other	165,420		168,074
Total consumer real estate	3,103,389		2,460,726
Total real estate	13,071,912		11,443,370
Consumer and other	444,474		476,962
Total loans	$	20,754,813	$	18,824,251

Concentrations of Credit. Most of our lending activity occurs within the State of Texas, including the four largest metropolitan areas of Austin, Dallas/Ft. Worth, Houston and San Antonio, as well as other markets. The majority of our loan portfolio consists of commercial and industrial and commercial real estate loans. As of December 31, 2024, the largest industry concentrations were related to the automobile dealerships industry, which totaled 6.0% of total loans and the energy industry, which totaled 5.4% of total loans. Unfunded commitments to extend credit and standby letters of credit issued to customers in the automobile dealership industry totaled $535.5 million and $20.2 million, respectively, as of December 31, 2024, while unfunded commitments to extend credit and standby letters of

Non-Accrual and Past Due Loans. Loans are considered past due if the required principal and interest payments have not been received as of the date such payments were due. Loans are placed on non-accrual status when, in management’s opinion, the borrower may be unable to meet payment obligations as they become due, as well as when required by regulatory provisions. In determining whether or not a borrower may be unable to meet payment obligations for each class of loans, we consider the borrower’s debt service capacity through the analysis of current financial information, if available, and/or current information with regards to our collateral position. Regulatory provisions would typically require the placement of a loan on non-accrual status if (i) principal or interest has been in default for a period of 90 days or more unless the loan is both well secured and in the process of collection or (ii) full payment of principal and interest is not expected. Loans may be placed on non-accrual status regardless of whether or not such loans are considered past due. When interest accrual is discontinued, all unpaid accrued interest is reversed. Interest income on non-accrual loans is recognized only to the extent that cash payments are received in excess of principal due. A loan may be returned to accrual status when all the principal and interest amounts contractually due are brought current and future principal and interest amounts contractually due are reasonably assured, which is typically evidenced by a sustained period (at least six months) of repayment performance by the borrower.


	December 31, 2024
	2024		2023		2022		2021		2020		Prior		Revolving Loans		Revolving Loans Converted to Term		Total
Commercial and industrial	$	20,819	$	2,915	$	4,053	$	1,592	$	335	$	2,144	$	1,186	$	12,960	$	46,004
Energy	—		—		—		—		56		1,321		2,702		—		4,079
Commercial real estate:
Buildings, land and other	7,856		2,671		3,233		2,753		1,248		1,505		—		2,654		21,920
Construction	—		—		—		—		—		—		—		—		—
Consumer real estate	—		47		—		—		92		2,202		587		3,583		6,511
Consumer and other	—		352		—		—		—		—		—		—		352
Total	$	28,675	$	5,985	$	7,286	$	4,345	$	1,731	$	7,172	$	4,475	$	19,197	$	78,866


	December 31, 2023
	2023		2022		2021		2020		2019		Prior		Revolving Loans		Revolving Loans Converted to Term		Total
Commercial and industrial	$	—	$	359	$	1,635	$	985	$	1,257	$	1,006	$	9	$	14,294	$	19,545
Energy	5,875		—		—		56		1,321		—		4,102		146		11,500
Commercial real estate:
Buildings, land and other	20,099		—		150		—		1,451		720		—		—		22,420
Construction	—		—		—		—		—		—		—		—		—
Consumer real estate	—		—		—		38		2,281		483		1,600		3,040		7,442
Consumer and other	—		—		—		—		—		—		—		—		—
Total	$	25,974	$	359	$	1,785	$	1,079	$	6,310	$	2,209	$	5,711	$	17,480	$	60,907


	Loans 30-89 Days Past Due		Loans 90 or More Days Past Due		Total Past Due Loans		Current Loans		Total Loans		Accruing Loans 90 or More Days Past Due
Commercial and industrial	$	37,130	$	28,120	$	65,250	$	6,044,282	$	6,109,532	$	7,685
Energy	4,263		4,079		8,342		1,120,553		1,128,895		—
Commercial real estate:
Buildings, land and other	37,525		13,040		50,565		7,653,882		7,704,447		1,523
Construction	870		—		870		2,263,206		2,264,076		—
Consumer real estate	17,015		12,028		29,043		3,074,346		3,103,389		5,681
Consumer and other	6,693		822		7,515		436,959		444,474		822
Total	$	103,496	$	58,089	$	161,585	$	20,593,228	$	20,754,813	$	15,711

Modifications to Borrowers Experiencing Financial Difficulty. From time to time, we may modify certain loans to borrowers who are experiencing financial difficulty. In some cases, these modifications may result in new loans. Loan modifications to borrowers experiencing financial difficulty may be in the form of a principal forgiveness, an interest rate reduction, an other-than-insignificant payment delay, a term extension, or a combination thereof, among other things. The period-end balance of loan modifications, segregated by type of modification, to borrowers experiencing financial difficulty during 2024 and 2023 are set forth in the table below, regardless of whether such modifications resulted in a new loan. There were $44.1 million in commitments to lend additional funds to these borrowers at December 31, 2024.


	Payment Delay		Percent of Total Class of Loans		Combination: Payment Delay and Term Extension		Percent of Total Class of Loans		Interest Rate Reduction		Percent of Total Class of Loans
December 31, 2024
Commercial and industrial	$	6,126	0.1	%	$	45,835	0.8	%	$	—	—	%

Commercial real estate:
Buildings, land, and other	2,012		—		—		—		31,302		0.4



	$	8,138	—		$	45,835	0.2		$	31,302	0.2

	Payment Delay		Percent of Total Class of Loans		Combination: Payment Delay and Term Extension		Percent of Total Class of Loans		Combination: Interest Rate Reduction and Term Extension		Percent of Total Class of Loans
December 31, 2023
Commercial and industrial	$	—	—		$	13,813	0.2		$	—	—

Commercial real estate:
Buildings, land, and other	—		—		19,438		0.3		2,092		—



	$	—	—		$	33,251	0.2		$	2,092	—

During 2024, we modified the interest rate on one loan from a variable rate of prime plus a spread of 0.50% (8.50% as of the modification date) to a variable rate of prime minus a spread of 1.50% (6.50% after modification) with a floor of 6.00%. During 2023, we modified the interest rate on one loan from a variable rate of prime plus a spread of 1.75% (10.25% as of the modification date) to a fixed rate of 6.74% in addition to extending the term of the loan. The financial effects of the other loan modifications made to borrowers experiencing financial difficulty during 2024 and 2023 were not significant. The loan modifications reported in the table above did not significantly impact our determination of the allowance for credit losses on loans during 2024 or 2023.


	Payment Delay		Combination: Payment Delay and Term Extension
2024
Past due in excess of 90 days or on non-accrual status at period-end:
Commercial and industrial	$	1,693	$	—

Commercial real estate:
Buildings, land, and other	2,012		—



	$	3,705	$	—


















2023
Past due in excess of 90 days or on non-accrual status at period-end:
Commercial and industrial	$	—	$	13,813

Commercial real estate:
Buildings, land, and other	—		19,438



	$	—	$	33,251


















2022
Past due in excess of 90 days or on non-accrual status at period-end:


Commercial real estate:
Buildings, land, and other	$	1,051	$	—



	$	1,051	$	—
Charge-offs during the period:


Commercial real estate:
Buildings, land, and other	$	371	$	352



	$	371	$	352
Proceeds from sales:


Commercial real estate:
Buildings, land, and other	$	—	$	1,070



	$	—	$	1,070

In monitoring credit quality trends in the context of assessing the appropriate level of the allowance for credit losses on loans, we monitor portfolio credit quality by the weighted-average risk grade of each class of commercial loan. Individual relationship managers, under the oversight of credit administration, review updated financial information for all pass grade loans to reassess the risk grade on at least an annual basis. When a loan has a risk grade of 9, it is still considered a pass grade loan; however, it is considered to be on management’s “watch list,” where a significant risk-modifying action is anticipated in the near term. When a loan has a risk grade of 10 or higher, a special assets officer monitors the loan on an on-going basis.


	December 31, 2024
	2024		2023		2022		2021		2020		Prior		Revolving Loans		Revolving Loans Converted to Term		Total
Commercial and industrial
Risk grades 1-8	$	1,553,200	$	513,073	$	385,824	$	257,280	$	298,912	$	253,018	$	2,242,193	$	50,257	$	5,553,757
Risk grade 9	15,552		24,059		58,521		25,818		3,796		9,959		109,594		15,147		262,446
Risk grade 10	4,992		9,269		42,146		2,112		918		12,290		15,332		1,876		88,935
Risk grade 11	35,583		18,057		17,673		2,987		4,675		2,092		44,926		32,397		158,390
Risk grade 12	13,107		2,443		2,574		1,564		324		2,144		1,179		9,404		32,739
Risk grade 13	7,712		472		1,479		28		11		—		7		3,556		13,265
	$	1,630,146	$	567,373	$	508,217	$	289,789	$	308,636	$	279,503	$	2,413,231	$	112,637	$	6,109,532
W/A risk grade	6.73		7.12		7.52		7.13		5.58		6.11		6.30		9.12		6.64
Energy
Risk grades 1-8	$	387,904	$	22,510	$	35,357	$	16,150	$	1,516	$	2,648	$	639,362	$	5,872	$	1,111,319
Risk grade 9	—		1,677		662		2,011		—		398		5,035		1,400		11,183
Risk grade 10	—		—		52		—		—		—		—		—		52
Risk grade 11	188		—		2,038		—		36		—		—		—		2,262
Risk grade 12	—		—		—		—		56		1,321		2		—		1,379
Risk grade 13	—		—		—		—		—		—		2,700		—		2,700
	$	388,092	$	24,187	$	38,109	$	18,161	$	1,608	$	4,367	$	647,099	$	7,272	$	1,128,895
W/A risk grade	6.16		7.14		7.53		4.75		6.47		8.97		5.05		7.31		5.58
Commercial real estate:
Buildings, land, other
Risk grades 1-8	$	1,427,212	$	1,288,934	$	1,450,649	$	1,006,922	$	668,316	$	965,448	$	204,577	$	91,444	$	7,103,502
Risk grade 9	9,347		18,408		56,419		72,096		11,197		35,661		4,968		3,718		211,814
Risk grade 10	570		31,596		64,063		55,512		10,546		10,746		—		—		173,033
Risk grade 11	5,764		5,739		63,772		23,594		13,027		82,282		—		—		194,178
Risk grade 12	7,856		2,671		3,233		2,531		1,126		1,505		—		2,373		21,295
Risk grade 13	—		—		—		222		122		—		—		281		625
	$	1,450,749	$	1,347,348	$	1,638,136	$	1,160,877	$	704,334	$	1,095,642	$	209,545	$	97,816	$	7,704,447
W/A risk grade	7.16		7.32		7.39		7.52		7.05		7.17		6.01		6.80		7.25
Construction
Risk grades 1-8	$	615,683	$	601,151	$	427,984	$	59,895	$	2,727	$	559	$	151,846	$	159	$	1,860,004
Risk grade 9	46,456		9,283		65,590		35,006		—		—		15,276		—		171,611
Risk grade 10	107,666		—		48,001		76,794		—		—		—		—		232,461
Risk grade 11	—		—		—		—		—		—		—		—		—
Risk grade 12	—		—		—		—		—		—		—		—		—
Risk grade 13	—		—		—		—		—		—		—		—		—
	$	769,805	$	610,434	$	541,575	$	171,695	$	2,727	$	559	$	167,122	$	159	$	2,264,076
W/A risk grade	7.82		7.35		7.99		8.85		7.39		7.65		6.46		6.98		7.71
Total commercial real estate	$	2,220,554	$	1,957,782	$	2,179,711	$	1,332,572	$	707,061	$	1,096,201	$	376,667	$	97,975	$	9,968,523
W/A risk grade	7.39		7.33		7.54		7.69		7.06		7.17		6.21		6.80		7.35


	December 31, 2023
	2023		2022		2021		2020		2019		Prior		Revolving Loans		Revolving Loans Converted to Term		Total
Commercial and industrial
Risk grades 1-8	$	1,489,026	$	706,210	$	458,855	$	349,744	$	172,656	$	206,643	$	2,083,490	$	41,254	$	5,507,878
Risk grade 9	57,625		42,618		12,258		4,952		1,641		10,383		70,142		5,625		205,244
Risk grade 10	63,205		2,222		1,307		911		4,005		581		35,977		1,046		109,254
Risk grade 11	9,450		16,837		25,932		7,854		2,530		1,153		58,134		3,371		125,261
Risk grade 12	—		359		1,635		950		1,257		1,006		1		11,894		17,102
Risk grade 13	—		—		—		35		—		—		8		2,400		2,443
	$	1,619,306	$	768,246	$	499,987	$	364,446	$	182,089	$	219,766	$	2,247,752	$	65,590	$	5,967,182
W/A risk grade	6.53		7.05		7.26		5.87		6.01		6.04		6.50		8.48		6.60
Energy
Risk grades 1-8	$	270,710	$	54,185	$	75,004	$	3,673	$	1,819	$	4,047	$	451,897	$	9,886	$	871,221
Risk grade 9	1,137		7,315		1,041		—		456		—		17,680		14		27,643
Risk grade 10	—		—		33		—		291		494		—		—		818
Risk grade 11	—		—		25		106		2,989		—		21,650		785		25,555
Risk grade 12	5,875		—		—		56		1,321		—		1,402		146		8,800
Risk grade 13	—		—		—		—		—		—		2,700		—		2,700
	$	277,722	$	61,500	$	76,103	$	3,835	$	6,876	$	4,541	$	495,329	$	10,831	$	936,737
W/A risk grade	6.19		7.07		6.00		6.99		10.02		7.07		5.75		7.33		6.05
Commercial real estate:
Buildings, land, other
Risk grades 1-8	$	1,601,175	$	1,667,750	$	1,186,559	$	747,289	$	503,303	$	874,942	$	214,874	$	99,466	$	6,895,358
Risk grade 9	12,173		68,007		28,870		13,250		16,272		23,214		11,143		541		173,470
Risk grade 10	7,671		29,278		17,364		34,672		747		3,153		3,716		—		96,601
Risk grade 11	4,105		20,589		20,119		16,363		793		51,739		—		363		114,071
Risk grade 12	17,449		—		150		—		1,451		720		—		—		19,770
Risk grade 13	2,650		—		—		—		—		—		—		—		2,650
	$	1,645,223	$	1,785,624	$	1,253,062	$	811,574	$	522,566	$	953,768	$	229,733	$	100,370	$	7,301,920
W/A risk grade	7.23		7.18		7.29		7.22		6.90		7.16		7.49		6.77		7.20
Construction
Risk grades 1-8	$	538,072	$	537,705	$	264,770	$	28,063	$	296	$	1,613	$	155,567	$	—	$	1,526,086
Risk grade 9	3,414		35,565		79,871		—		—		—		8,252		—		127,102
Risk grade 10	13,322		—		—		—		—		—		3,713		—		17,035
Risk grade 11	5,912		3,104		—		—		—		—		1,485		—		10,501
Risk grade 12	—		—		—		—		—		—		—		—		—
Risk grade 13	—		—		—		—		—		—		—		—		—
	$	560,720	$	576,374	$	344,641	$	28,063	$	296	$	1,613	$	169,017	$	—	$	1,680,724
W/A risk grade	7.44		7.44		7.93		2.55		7.22		6.78		7.34		—		7.45
Total commercial real estate	$	2,205,943	$	2,361,998	$	1,597,703	$	839,637	$	522,862	$	955,381	$	398,750	$	100,370	$	8,982,644
W/A risk grade	7.28		7.24		7.43		7.07		6.90		7.15		7.43		6.77		7.24

At December 31, 2024 and 2023, the weighted-average risk grades for “pass grade” (risk grades 1-8) loans were 6.30 and 6.32, respectively, for commercial and industrial; 5.51 and 5.73, respectively, for energy; 7.01 and 7.03, respectively, for commercial real estate - buildings, land and other; and 7.31 and 7.27, respectively, for commercial real estate - construction. Furthermore, in the tables above, there are loans reported as 2024 originations as of December 31, 2024 and 2023 originations as of December 31, 2023 that have risk grades of 11 or higher. These loans were, for the most part, first originated in various years prior to 2024 and 2023, respectively, but were renewed in the respective year.


	December 31, 2024
	2024		2023		2022		2021		2020		Prior		Revolving Loans		Revolving Loans Converted to Term		Total
Consumer real estate:
Past due 30-89 days	$	632	$	1,030	$	1,897	$	965	$	645	$	1,944	$	9,790	$	112	$	17,015
Past due 90 or more days	—		292		972		1,165		213		3,255		2,452		3,679		12,028
Total past due	632		1,322		2,869		2,130		858		5,199		12,242		3,791		29,043
Current loans	699,196		544,811		387,344		248,225		146,972		152,517		886,848		8,433		3,074,346
Total	$	699,828	$	546,133	$	390,213	$	250,355	$	147,830	$	157,716	$	899,090	$	12,224	$	3,103,389
Consumer and other:
Past due 30-89 days	$	3,378	$	772	$	249	$	22	$	66	$	23	$	1,734	$	449	$	6,693
Past due 90 or more days	243		—		—		—		—		3		395		181		822
Total past due	3,621		772		249		22		66		26		2,129		630		7,515
Current loans	54,440		27,705		9,276		3,006		1,906		1,124		315,038		24,464		436,959
Total	$	58,061	$	28,477	$	9,525	$	3,028	$	1,972	$	1,150	$	317,167	$	25,094	$	444,474


	December 31, 2023
	2023		2022		2021		2020		2019		Prior		Revolving Loans		Revolving Loans Converted to Term		Total
Consumer real estate:
Past due 30-89 days	$	874	$	2,066	$	1,318	$	959	$	537	$	2,641	$	3,570	$	539	$	12,504
Past due 90 or more days	—		512		626		38		—		887		2,566		3,087		7,716
Total past due	874		2,578		1,944		997		537		3,528		6,136		3,626		20,220
Current loans	579,505		432,719		281,820		170,225		58,744		134,319		775,465		7,709		2,440,506
Total	$	580,379	$	435,297	$	283,764	$	171,222	$	59,281	$	137,847	$	781,601	$	11,335	$	2,460,726
Consumer and other:
Past due 30-89 days	$	3,014	$	488	$	148	$	66	$	28	$	40	$	2,553	$	158	$	6,495
Past due 90 or more days	153		—		27		—		20		—		51		—		251
Total past due	3,167		488		175		66		48		40		2,604		158		6,746
Current loans	67,272		28,885		6,290		3,581		1,199		1,230		339,789		21,970		470,216
Total	$	70,439	$	29,373	$	6,465	$	3,647	$	1,247	$	1,270	$	342,393	$	22,128	$	476,962

In assessing the general economic conditions in the State of Texas, management monitors and tracks the Texas Leading Index (“TLI”), which is produced by the Federal Reserve Bank of Dallas. The TLI is a single summary statistic that is designed to signal the likelihood of the Texas economy’s transition from expansion to recession and vice versa. Management believes this index provides a reliable indication of the direction of overall credit quality. The TLI is a composite of the following eight leading indicators: (i) Texas Value of the Dollar, (ii) U.S. Leading

Allowance For Credit Losses - Loans. The allowance for credit losses on loans is a contra-asset valuation account, calculated in accordance with ASC 326, that is deducted from the amortized cost basis of loans to present the net amount expected to be collected. The amount of the allowance represents management's best estimate of current expected credit losses on loans considering available information, from internal and external sources, relevant to assessing collectibility over the loans' contractual terms, adjusted for expected prepayments when appropriate. The contractual term excludes expected extensions, renewals and modifications unless (i) management has a reasonable expectation that a loan to an individual borrower that is experiencing financial difficulty will be modified or (ii) such extension or renewal options are not unconditionally cancellable by us and, in such cases, the borrower is likely to meet applicable conditions and likely to request extension or renewal. Relevant available information includes historical credit loss experience; current conditions; and reasonable and supportable forecasts. While historical credit loss experience provides the basis for the estimation of expected credit losses, adjustments to historical loss information may be made for differences in current portfolio-specific risk characteristics, environmental conditions, or other relevant factors. The allowance for credit losses is measured on a collective basis for portfolios of loans when similar risk characteristics exist. Loans that do not share risk characteristics are evaluated for expected credit losses on an individual basis and excluded from the collective evaluation. Expected credit losses for collateral dependent loans, including loans where the borrower is experiencing financial difficulty but foreclosure is not probable, are based on the fair value of the collateral at the reporting date, adjusted for selling costs as appropriate.

Credit loss expense related to loans reflects the totality of actions taken on all loans for a particular period including any necessary increases or decreases in the allowance related to changes in credit loss expectations associated with specific loans or pools of loans. Portions of the allowance may be allocated for specific credits; however, the entire allowance is available for any credit that, in management’s judgment, should be charged off. While management utilizes its best judgment and information available, the ultimate appropriateness of the allowance is dependent upon a variety of factors beyond our control, including the performance of our loan portfolio, the economy, changes in interest rates and the view of the regulatory authorities toward loan classifications.

In calculating the allowance for credit losses, most loans are segmented into pools based upon similar characteristics and risk profiles. Common characteristics and risk profiles include the type/purpose of loan, underlying collateral, geographical similarity, and historical/expected credit loss patterns. In developing these loan pools for the purposes of modeling expected credit losses, we also analyzed the degree of correlation in how loans within each portfolio respond when subjected to varying economic conditions and scenarios as well as other portfolio stress factors. For modeling purposes, our loan pools include (i) commercial and industrial non-revolving, (ii) commercial and industrial revolving, (iii) energy, (iv) commercial real estate - owner occupied, (v) commercial real estate - non-owner occupied, (vi) commercial real estate - construction/land development, (vii) consumer real estate and (viii) consumer and other. Prior to 2023, energy loans were included within the commercial and industrial loan pools. See discussion of the 2023 model updates below. We periodically reassess each pool to ensure the loans within the pool continue to share similar characteristics and risk profiles and to determine whether further segmentation is necessary.

For each loan pool, we measure expected credit losses over the life of each loan utilizing a combination of models which measure (i) probability of default (“PD”), which is the likelihood that loan will stop performing/default, (ii) probability of attrition (“PA”), which is the likelihood that a loan will pay-off prior to maturity, (iii) loss given default (“LGD”), which is the expected loss rate for loans in default and (iv) exposure at default (“EAD”), which is the estimated outstanding principal balance of the loans upon default, including the expected funding of unfunded commitments outstanding as of the measurement date. For commercial loan portfolios, the PD is calculated using a transition matrix to determine the likelihood of a customer’s risk grade migrating from one specified range of risk grades to a different specified range. Expected credit losses are calculated as the product of PD (adjusted for attrition), LGD and EAD. This methodology builds on default probabilities already incorporated into our risk grading process by utilizing pool-specific historical loss rates to calculate expected credit losses. These pool-specific historical loss rates may be adjusted for current macroeconomic assumptions, as further discussed below, and other factors such as differences in underwriting standards, portfolio mix, or when historical asset terms do not reflect the

The measurement of expected credit losses is impacted by loan/borrower attributes and certain macroeconomic variables. Significant loan/borrower attributes utilized in our modeling processes include, among other things, (i) origination date, (ii) maturity date, (iii) payment type, (iv) collateral type and amount, (v) current risk grade, (vi) current unpaid balance and commitment utilization rate, (vii) payment status/delinquency history and (viii) expected recoveries of previously charged-off amounts. Significant macroeconomic variables utilized in our modeling processes include, among other things, (i) Gross State Product for Texas and U.S. Gross Domestic Product, (ii) selected market interest rates including U.S. Treasury rates, bank prime rate, 30-year fixed mortgage rate, BBB corporate bond rate, among others, (iii) unemployment rates, (iv) commercial and residential property prices in Texas and the U.S. as a whole, (v) West Texas Intermediate crude oil price and (vi) total stock market index.

PD and PA were estimated by analyzing internally-sourced data related to historical performance of each loan pool over a complete economic cycle. PD and PA are adjusted to reflect the current impact of certain macroeconomic variables as well as their expected changes over a reasonable and supportable forecast period. We have determined that we are reasonably able to forecast the macroeconomic variables used in our modeling processes with an acceptable degree of confidence for a total of two years with the last twelve months of the forecast period encompassing a reversion process whereby the forecasted macroeconomic variables are reverted to their historical mean utilizing a rational, systematic basis. The macroeconomic variables utilized as inputs in our modeling processes were subjected to a variety of analysis procedures and were selected primarily based on statistical relevancy and correlation to our historical credit losses. By reverting these modeling inputs to their historical mean and considering loan/borrower specific attributes, our models are intended to yield a measurement of expected credit losses that reflects our average historical loss rates for periods subsequent to the twelve-month reversion period. The LGD is based on historical recovery averages for each loan pool, adjusted to reflect the current impact of certain macroeconomic variables as well as their expected changes over a two-year forecast period, with the final twelve months of the forecast period encompassing a reversion process, which management considers to be both reasonable and supportable. This same forecast/reversion period is used for all macroeconomic variables used in all of our models. EAD is estimated using a linear regression model that estimates the average percentage of the loan balance that remains at the time of a default event.

Management qualitatively adjusts model results for risk factors that are not considered within our modeling processes but are nonetheless relevant in assessing the expected credit losses within our loan pools. These qualitative factor (“Q-Factor”) and other qualitative adjustments may increase or decrease management's estimate of expected credit losses by a calculated percentage or amount based upon the estimated level of risk. The various risks that may be considered in making Q-Factor and other qualitative adjustments include, among other things, the impact of (i) changes in lending policies and procedures, including changes in underwriting standards and practices for collections, write-offs, and recoveries, (ii) actual and expected changes in international, national, regional, and local economic and business conditions and developments that affect the collectibility of the loan pools, (iii) changes in the nature and volume of the loan pools and in the terms of the underlying loans, (iv) changes in the experience, ability, and depth of our lending management and staff, (v) changes in volume and severity of past due financial assets, the volume of non-accrual assets, and the volume and severity of adversely classified or graded assets, (vi) changes in the quality of our credit review function, (vii) changes in the value of the underlying collateral for loans that are non-collateral dependent, (viii) the existence, growth, and effect of any concentrations of credit and (ix) other factors such as the regulatory, legal and technological environments; competition; and events such as natural disasters or health pandemics.

In some cases, management may determine that an individual loan exhibits unique risk characteristics which differentiate the loan from other loans within our loan pools. In such cases, the loans are evaluated for expected credit losses on an individual basis and excluded from the collective evaluation. Specific allocations of the allowance for credit losses are determined by analyzing the borrower’s ability to repay amounts owed, collateral deficiencies, the relative risk grade of the loan and economic conditions affecting the borrower’s industry, among other things. A loan is considered to be collateral dependent when, based upon management's assessment, the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the

operation or sale of the collateral. In such cases, expected credit losses are based on the fair value of the collateral at the measurement date, adjusted for estimated selling costs if satisfaction of the loan depends on the sale of the collateral. We reevaluate the fair value of collateral supporting collateral dependent loans on a quarterly basis. The fair value of real estate collateral supporting collateral dependent loans is evaluated by our internal appraisal services using a methodology that is consistent with the Uniform Standards of Professional Appraisal Practice. The fair value of collateral supporting collateral dependent construction loans is based on an “as is” valuation.

During the first quarter of 2024, we updated our non-owner-occupied commercial real estate loan models as well as our consumer and other loan models. Our prior non-owner-occupied commercial real estate loan models were legacy models developed for stress-testing purposes by a third-party using external market data. The updated non-owner-occupied commercial real estate loan models are now based on internal historical loan data and risk grade information and the modeling processes are now consistent with those used with our other commercial loan models. Our prior consumer and other loan models relied upon certain components that did not use loan level attributes and were less sensitive to macroeconomic variables. The updated consumer and other loan models are now based on internal historical loan data and utilize more loan-level attributes and the modeling processes are now consistent with those used with our consumer real estate loan models. The overall approximate impact of the model updates during the first quarter was a $7.2 million increase ($6.2 million related to non-owner-occupied commercial real estate loans and $923 thousand related to consumer and other loans) in modeled expected credit losses on loans; however, the impact of this increase was largely offset by reductions in qualitative adjustments as some of the risks to which those qualitative adjustments related are now considered and incorporated in the updated models.

During the first quarter of 2023, we recalibrated and updated all of our commercial loan models, with the exception of the models related to commercial real estate - non-owner-occupied loans, as well as our consumer real estate loan models. While the fundamental modeling methodologies remain unchanged, the updates included (i) separating the energy loan pool from the commercial and industrial pool as a result of differences in loss characteristics observed in recent history and (ii) changing the modeling approach related to loan renewals whereby each renewal is treated as a separate loan which impacted loan life assumptions. The overall approximate impact of the model updates during the first quarter was a $45.0 million decrease in modeled expected credit losses on loans though the impact of this decrease was largely offset with discretionary qualitative adjustments. The decrease in modeled expected credit losses on loans was largely driven by lower measurements for PD and LGD based on the historical data series (2008 through 2018) used for the recalibration. This period was one of relatively low losses and included higher levels of government stimulus. The lower PD and LGD measurements were also impacted by shorter loan life assumptions due to the aforementioned change in the modeling approach related to loan renewals.


	Commercial and Industrial		Energy		Commercial Real Estate		Consumer Real Estate		Consumer and Other		Total
December 31, 2024
Modeled expected credit losses	$	51,669	$	3,969	$	17,549	$	17,720	$	7,019	$	97,926
Q-Factor and other qualitative adjustments	22,635		3,323		125,031		620		3,095		154,704
Specific allocations	13,265		2,700		625		766		165		17,521
Total	$	87,569	$	9,992	$	143,205	$	19,106	$	10,279	$	270,151
December 31, 2023
Modeled expected credit losses	$	50,959	$	7,838	$	15,443	$	12,364	$	5,969	$	92,573
Q-Factor and other qualitative adjustments	20,612		7,276		112,505		433		4,071		144,897
Specific allocations	2,435		2,700		2,650		741		—		8,526
Total	$	74,006	$	17,814	$	130,598	$	13,538	$	10,040	$	245,996


	Commercial and Industrial		Energy		Commercial Real Estate		Consumer Real Estate		Consumer and Other		Total
2024
Beginning balance	$	74,006	$	17,814	$	130,598	$	13,538	$	10,040	$	245,996
Credit loss expense (benefit)	24,494		(8,977)		16,479		9,753		23,083		64,832
Charge-offs	(14,828)		(79)		(3,919)		(4,940)		(33,344)		(57,110)
Recoveries	3,897		1,234		47		755		10,500		16,433
Net (charge-offs) recoveries	(10,931)		1,155		(3,872)		(4,185)		(22,844)		(40,677)
Ending balance	$	87,569	$	9,992	$	143,205	$	19,106	$	10,279	$	270,151
2023
Beginning balance	$	104,237	$	18,062	$	90,301	$	8,004	$	7,017	$	227,621
Credit loss expense (benefit)	(16,709)		(1,067)		40,889		6,736		23,012		52,861
Charge-offs	(18,315)		(518)		(955)		(2,883)		(31,260)		(53,931)
Recoveries	4,793		1,337		363		1,681		11,271		19,445
Net (charge-offs) recoveries	(13,522)		819		(592)		(1,202)		(19,989)		(34,486)
Ending balance	$	74,006	$	17,814	$	130,598	$	13,538	$	10,040	$	245,996
2022
Beginning balance	$	72,091	$	17,217	$	144,936	$	6,585	$	7,837	$	248,666
Credit loss expense (benefit)	34,479		(313)		(54,775)		1,813		13,517		(5,279)
Charge-offs	(6,575)		(371)		(702)		(912)		(24,388)		(32,948)
Recoveries	4,242		1,529		842		518		10,051		17,182
Net (charge-offs) recoveries	(2,333)		1,158		140		(394)		(14,337)		(15,766)
Ending balance	$	104,237	$	18,062	$	90,301	$	8,004	$	7,017	$	227,621

Generally, a commercial loan, or a portion thereof, is charged-off immediately when it is determined, through the analysis of any available current financial information with regards to the borrower, that the borrower is incapable of servicing unsecured debt, there is little or no prospect for near term improvement and no realistic strengthening action of significance is pending or, in the case of secured debt, when it is determined, through analysis of current information with regards to our collateral position, that amounts due from the borrower are in excess of the calculated current fair value of the collateral. Notwithstanding the foregoing, generally, commercial loans that become past due 180 cumulative days are charged-off. Generally, a consumer loan, or a portion thereof, is charged-off in accordance with regulatory guidelines which provide that such loans be charged-off when we become aware of the loss, such as from a triggering event that may include new information about a borrower’s intent/ability to repay the loan, bankruptcy, fraud or death, among other things, but in any event the charge-off must be taken within specified delinquency time frames. Such delinquency time frames state that closed-end retail loans (loans with pre-defined maturity dates, such as real estate mortgages, home equity loans and consumer installment loans) that become past due 120 cumulative days and open-end retail loans (loans that roll-over at the end of each term, such as home equity lines of credit) that become past due 180 cumulative days should be classified as a loss and charged-off.


	2024		2023		2022		2021		2020		Prior		Revolving Loans		Revolving Loans Converted to Term		Total
Commercial and industrial	$	1,423	$	1,820	$	804	$	487	$	403	$	625	$	6,273	$	2,993	$	14,828
Energy	—		79		—		—		—		—		—		—		79
Commercial real estate:
Buildings, land and other	—		3,797		122		—		—		—		—		—		3,919
Construction	—		—		—		—		—		—		—		—		—
Consumer real estate	—		537		315		253		—		704		3,064		67		4,940
Consumer and other	24,485		5,793		218		56		30		71		2,459		232		33,344
Total	$	25,908	$	12,026	$	1,459	$	796	$	433	$	1,400	$	11,796	$	3,292	$	57,110