The Company and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory (and possibly additional discretionary) actions by regulators that, if undertaken, could have a direct material adverse effect on the Company’s and the Bank’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and the Bank must meet specific capital guidelines that involve quantitative measures of the Company’s and the Bank’s assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The Company’s and the Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.

The Basel III Capital Rules adopted by U.S. federal banking agencies, among other things, (i) establish the capital measure called “Common Equity Tier 1” (“CET1”), (ii) specify that Tier 1 capital consists of CET1 and “Additional Tier 1 Capital” instruments meeting stated requirements, (iii) require that most deductions/adjustments to regulatory capital measures be made to CET1 and not to other components of capital and (iv) define the scope of the deductions/adjustments to the capital measures.

Additionally, the Basel III Capital Rules require that the Company maintain a 2.5% capital conservation buffer comprised of CET1, with respect to each of CET1, Tier 1 and total capital to risk-weighted asset ratios. A financial institution with a conservation buffer of less than the required amount is subject to limitations on capital distributions, including dividend payments and stock repurchases, and certain discretionary bonus payments to executive officers. No dividends were declared or paid on the Company’s common stock during the nine months ended September 30, 2024 or during 2023. On January 17, 2024, the Company’s board of directors authorized a new share repurchase program under which the Company could repurchase up to $150.0 million in shares of its outstanding common stock, which is set to expire on January 31, 2025. During the nine months ended September 30, 2024, the Company repurchased 1,381,436 shares of its common stock for an aggregate price, including excise tax expense, of $81.5 million, at a weighted average price of $58.57 per share.

In February 2019, the federal bank regulatory agencies issued a final rule (the “2019 CECL Rule”) that revised certain capital regulations to account for changes to credit loss accounting under GAAP. The 2019 CECL Rule included a transition option that allows banking organizations to phase in, over a three-year period, the day-one adverse effects of adopting the new accounting standard related to the measurement of current expected credit losses on their regulatory capital ratios (three-year transition option). In March 2020, the federal bank regulatory agencies issued an interim final rule that maintains the three-year transition option of the 2019 CECL Rule and also provides banking organizations that were required under GAAP to implement CECL before the end of 2020 the option to delay for two years an estimate of the effect of CECL on regulatory capital, relative to the incurred loss methodology's effect on regulatory capital, followed by a three-year transition period (five-year transition option). The Company adopted CECL on January 1, 2020 and has elected to utilize the five-year transition option. The ratios presented below include the effects of the election to utilize the five-year CECL transition described above.

At the beginning of each of the last five years of the life of the Bank-issued fixed rate subordinated notes due 2026, the amount that is eligible to be included in Tier 2 capital is reduced by 20% of the original amount of the notes (net of redemptions). In 2024, the amount of the notes that qualify as Tier 2 capital has been reduced by 80%.

The table below summarizes the Company’s and the Bank’s actual and required capital ratios under the Basel III Capital Rules and other standards. As shown in the table below, the Company’s and Bank’s capital ratios exceeded the regulatory definition of well capitalized as of September 30, 2024 and December 31, 2023.


					September 30, 2024				December 31, 2023
(dollars in thousands)	Minimum Capital Required(2)		Capital Required to be Well Capitalized		Capital Amount		Ratio		Capital Amount		Ratio
The Company
CET1 capital (to risk-weighted assets)	7.00	%	N/A		$	3,183,035	11.19	%	$	3,264,609	12.65	%
Tier 1 capital (to risk-weighted assets)	8.50	%	6.00	%	3,593,035		12.63	%	3,674,609		14.24	%
Total capital (to risk-weighted assets)	10.50	%	10.00	%	4,315,608		15.17	%	4,405,575		17.07	%
Tier 1 capital (to average assets)(1)	4.00	%	N/A		3,593,035		11.44	%	3,674,609		12.21	%
The Bank
CET1 capital (to risk-weighted assets)	7.00	%	6.50	%	$	3,570,548	12.65	%	$	3,599,919	14.01	%
Tier 1 capital (to risk-weighted assets)	8.50	%	8.00	%	3,570,548		12.65	%	3,599,919		14.01	%
Total capital (to risk-weighted assets)	10.50	%	10.00	%	3,921,007		13.89	%	3,959,100		15.41	%
Tier 1 capital (to average assets)(1)	4.00	%	5.00	%	3,570,548		11.44	%	3,599,919		12.00	%

(1) The Tier 1 capital ratio (to average assets) is not impacted by the Basel III Capital Rules; however, the Federal Reserve Board and the FDIC may require the Company and the Bank, respectively, to maintain a Tier 1 capital ratio (to average assets) above the required minimum.