Company: TCBI
Filing Date: 2025-02-11
Form Type: 10-K
Source: 0001077428-25-000036
Chunk: 120

Company: TEXAS CAPITAL BANCSHARES INC/TX
Filing Date: 2025-02-11
Form: 10-K
Item: Item 1A
Chunk 120
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 consider the impact of competition and other conditions affecting loans and deposits.

Interest rate risk can also result from mismatches between the dollar amounts of repricing or maturing assets and liabilities and from mismatches in the timing and rates at which the assets and liabilities reprice. The Company actively monitors and manages the balances of maturing and repricing assets and liabilities to reduce the adverse impact of changes in interest rates, but there can be no assurance that the Company will be able to avoid material adverse effects on net interest margin in all market conditions.

Rising interest rates in prior periods have increased interest expense, with a commensurate positive effect on net interest income; however, interest rates have begun to decrease following three cuts to the Federal Funds rate by the Federal Reserve in 2024. Rapid and unexpected volatility in interest rates creates additional uncertainty and potential for adverse financial effects. There can be no assurance that the Company will not be materially adversely affected by future changes in interest rates.

The company must effectively manage market risk associated primarily with sales and trading activities.    In addition to interest rate risk, the Company is exposed to market risk, principally related to trading activities conducted to support customer transactions or to provide customers with liquidity. The Company typically seeks to manage the market risks of its positions with offsetting positions that eliminate or reduce market risk to fall within acceptable tolerances.

The Company uses VaR as a primary risk measure to aggregate, monitor and limit risks at the portfolio level across all trading activities. VaR is calculated based on one year historical moves in key market risk factors relevant to the financial asset and any associated portfolio and estimates potential loss on subject positions at 95th percentile confidence interval.

Changes in interest rates affect the value of the Company’s securities portfolio, and the Company may realize losses if it were to sell such securities at a time when interest rates are higher than the yield on the Company’s securities portfolio.    As a result of inflationary pressures and the resulting rapid increases in interest rates in prior periods, the trading value of previously issued government and other fixed income securities declined significantly. These securities make up a majority of the securities portfolio of most banks in the U.S., including the Company’s, resulting in unrealized losses embedded in U.S. banks’ securities portfolios. If the Company were to sell securities with embedded unrealized losses, as the Company did in the third quarter of 2024, it may incur losses, which could impair the Company’s capital, financial condition, and results of operations and require the Company to raise additional capital on unfavorable terms,