First Financial Bankshares(FFIN) - 2024 Q1 - Quarterly Report

PART I - FINANCIAL INFORMATION Item 1. Financial Statements Presents the unaudited consolidated financial statements of First Financial Bankshares, Inc. and its subsidiaries for Q1 2024, encompassing balance sheets, earnings, comprehensive earnings (loss), shareholders' equity, cash flows, and notes Consolidated Balance Sheets – Unaudited Provides a snapshot of the company's financial position, detailing assets, liabilities, and shareholders' equity at key reporting dates Consolidated Balance Sheet Highlights (Dollars in thousands): | Item | March 31, 2024 | December 31, 2023 | March 31, 2023 | | :--------------------------------- | :------------- | :---------------- | :------------- | | Total assets | $13,191,158 | $13,105,594 | $13,007,986 | | Total cash and cash equivalents | $600,161 | $536,591 | $446,211 | | Securities available-for-sale | $4,658,526 | $4,732,762 | $5,298,557 | | Net loans held-for-investment | $7,139,848 | $7,060,057 | $6,495,397 | | Total deposits | $11,289,808 | $11,138,300 | $10,936,418 | | Total liabilities | $11,699,791 | $11,606,694 | $11,635,133 | | Total shareholders' equity | $1,491,367 | $1,498,900 | $1,372,853 | Consolidated Statements of Earnings – Unaudited Details the company's financial performance over the period, including interest income, expenses, and net earnings Consolidated Statements of Earnings Highlights (Dollars in thousands, except per share amounts): | Item | Three-Months Ended March 31, 2024 | Three-Months Ended March 31, 2023 | | :--------------------------------- | :-------------------------------- | :-------------------------------- | | Total interest income | $149,495 | $121,508 | | Total interest expense | $49,253 | $25,222 | | Net interest income | $100,242 | $96,286 | | Provision for credit losses | $808 | $2,781 | | Total noninterest income | $29,383 | $28,007 | | Total noninterest expense | $63,940 | $57,256 | | Net earnings | $53,397 | $52,568 | | Net earnings per share, basic | $0.37 | $0.37 | | Net earnings per share, diluted | $0.37 | $0.37 | | Dividends per share | $0.18 | $0.17 | Consolidated Statements of Comprehensive Earnings (Loss) – Unaudited Presents net earnings alongside other comprehensive income (loss) items, such as unrealized gains/losses on securities Consolidated Statements of Comprehensive Earnings (Loss) Highlights (Dollars in thousands): | Item | Three-Months Ended March 31, 2024 | Three-Months Ended March 31, 2023 | | :-------------------------------------------------------------------------------- | :-------------------------------- | :-------------------------------- | | Net earnings | $53,397 | $52,568 | | Change in unrealized gain (loss) on investment securities available-for-sale, before income taxes | $(48,011) | $97,454 | | Total comprehensive earnings (loss) | $15,468 | $129,547 | Consolidated Statements of Shareholders' Equity – Unaudited Outlines changes in shareholders' equity, reflecting net earnings, dividends, stock activities, and other comprehensive income Key Changes in Shareholders' Equity (Dollars in thousands): | Item | Three-Months Ended March 31, 2024 | Three-Months Ended March 31, 2023 | | :-------------------------------------------------------------------------------- | :-------------------------------- | :-------------------------------- | | Net earnings | $53,397 | $52,568 | | Stock option exercises/stock unit conversions/restricted stock activity | $1,623 | $884 | | Cash dividends declared | $(25,753) | $(24,267) | | Change in unrealized gain (loss) in investment securities available-for-sale, net of related income taxes | $(37,929) | $76,979 | | Stock-based compensation expense | $1,129 | $952 | | Balances at March 31, 2024 / 2023 | $1,491,367 | $1,372,853 | Consolidated Statements of Cash Flows – Unaudited Summarizes cash inflows and outflows from operating, investing, and financing activities, showing changes in cash and equivalents Consolidated Statements of Cash Flows Highlights (Dollars in thousands): | Activity | Three-Months Ended March 31, 2024 | Three-Months Ended March 31, 2023 | | :--------------------------------------- | :-------------------------------- | :-------------------------------- | | Net cash provided by operating activities | $75,643 | $95,916 | | Net cash provided by (used in) investing activities | $(69,511) | $121,674 | | Net cash provided by (used in) financing activities | $57,438 | $(102,057) | | Net increase (decrease) in cash and cash equivalents | $63,570 | $115,533 | | Cash and cash equivalents, end of period | $600,161 | $446,211 | Notes to Consolidated Financial Statements – Unaudited Provides detailed explanations and additional information supporting the consolidated financial statements, clarifying accounting policies and specific items Note 1 – Summary of Significant Accounting Policies Outlines the Company's operations, financial statement basis, estimates, consolidation, stock repurchase, new accounting guidance, and policies for investments, loans, and credit losses - First Financial Bankshares, Inc. operates as a financial holding company with one bank and 79 Texas locations, offering loans and banking services, alongside trust and asset management subsidiaries[25] - The Board authorized repurchasing up to 5 million common shares through July 31, 2024, with 101,337 shares repurchased in September 2023 at an average of $26.99 per share[30] - Recent accounting standards (ASU 2020-04, 2021-01, 2022-02, 2022-06, 2023-02, 2023-09) are not expected to significantly impact the Company's financial statements[31][33][34][35][36] - No allowance for credit losses was recorded on available-for-sale or held-to-maturity securities at March 31, 2024, March 31, 2023, or December 31, 2023[46][48] - The reserve for unfunded commitments totaled $7.46 million at March 31, 2024[67] - Unrealized net losses on available-for-sale securities, net of taxes, totaled $441.23 million at March 31, 2024[74] - Total unrecognized compensation cost for unvested share-based arrangements was $4.72 million at March 31, 2024, to be recognized over 1.44 years[149] Note 2 - Securities Details available-for-sale securities, including amortized cost, fair value, unrealized gains/losses by type and maturity, and information on pledged securities and sales Available-for-Sale Securities (Dollars in thousands): | Security Type | Amortized Cost Basis (Mar 31, 2024) | Gross Unrealized Holding Gains (Mar 31, 2024) | Gross Unrealized Holding Losses (Mar 31, 2024) | Estimated Fair Value (Mar 31, 2024) | | :----------------------------------- | :---------------------------------- | :------------------------------------ | :------------------------------------- | :---------------------------------- | | U.S. Treasury securities | $445,399 | $— | $(13,231) | $432,168 | | Obligations of states and political subdivisions | $1,592,523 | $570 | $(139,058) | $1,454,035 | | Residential mortgage-backed securities | $2,685,896 | $72 | $(386,691) | $2,299,277 | | Commercial mortgage-backed securities | $381,198 | $52 | $(12,344) | $368,906 | | Corporate bonds and other | $112,501 | $— | $(8,361) | $104,140 | | Total securities available-for-sale | $5,217,517 | $694 | $(559,685) | $4,658,526 | - Unrealized losses on investment securities are attributed to interest rate changes, not credit-related events[82] - Securities totaling approximately $2.52 billion were pledged as collateral at March 31, 2024[83] - No available-for-sale investment securities were sold in Q1 2024; Q1 2023 sales totaled $145.95 million with $12,000 net realized gains[84] Note 3 – Loans Held-for-Investment and Allowance for Credit Losses Details the loan portfolio by segment, nonaccrual/past due loans, and allowance for credit losses (ACL), including activity, evaluation methods, risk ratings, and aging Loans Held-for-Investment by Portfolio Segment (Dollars in thousands): | Portfolio Segment | March 31, 2024 | December 31, 2023 | March 31, 2023 | | :--------------------------------- | :------------- | :---------------- | :------------- | | Commercial | $1,402,529 | $1,379,661 | $1,176,065 | | Agricultural | $87,882 | $84,890 | $77,017 | | Real Estate | $5,037,914 | $5,007,955 | $4,637,872 | | Consumer | $701,085 | $676,285 | $685,261 | | Total Loans | $7,229,410 | $7,148,791 | $6,576,215 | | Less: Allowance for credit losses | $(89,562) | $(88,734) | $(80,818) | | Loans, net | $7,139,848 | $7,060,057 | $6,495,397 | Nonaccrual and Past Due Loans (Dollars in thousands): | Item | March 31, 2024 | December 31, 2023 | March 31, 2023 | | :--------------------------------------- | :------------- | :---------------- | :------------- | | Nonaccrual loans | $36,157 | $33,609 | $24,171 | | Loans still accruing and past due 90 days or more | $33 | $1,004 | $22 | | Total nonperforming loans | $36,190 | $34,613 | $24,193 | - The Q1 2024 provision for credit losses was $808,000, comprising a $1.26 million loan loss provision and a $448,000 reversal for unfunded commitments[92] Allowance for Credit Losses by Evaluation Method (Dollars in thousands): | Item | March 31, 2024 | March 31, 2023 | | :--------------------------------------- | :------------- | :------------- | | Loans individually evaluated for credit losses | $19,077 | $16,845 | | Loans collectively evaluated for credit losses | $70,485 | $63,973 | | Total | $89,562 | $80,818 | - Loan modifications for financially distressed borrowers were insignificant in Q1 2024 and Q1 2023[117] Note 4 - Loans Held-for-Sale Details loans held-for-sale, primarily secondary market mortgage loans, valued using a market approach with most classified as Level 2 in the fair value hierarchy - Loans held-for-sale totaled $16.11 million at March 31, 2024[119] - These loans are valued using a market approach, primarily with Level 2 inputs in the fair value hierarchy[120] Note 5 - Derivative Financial Instruments Describes the Company's use of IRLCs and forward mortgage-backed securities contracts to manage interest rate risk from mortgage originations, carried at fair value Outstanding Derivative Positions (Dollars in thousands): | Item | Outstanding Notional Balance (Mar 31, 2024) | Asset Derivative Fair Value (Mar 31, 2024) | Liability Derivative Fair Value (Mar 31, 2024) | | :--------------------------------------- | :------------------------------------ | :--------------------------------- | :----------------------------------- | | IRLCs | $53,206 | $803 | $— | | Forward mortgage-backed securities trades | $70,000 | $— | $91 | | Total | $123,206 | $803 | $91 | - IRLCs are classified as Level 3 in fair value disclosures, while forward mortgage-backed securities contracts are Level 2[124][125] Note 6 – Borrowings Details the Company's borrowings, including repurchase agreements, federal funds, other borrowings, and a revolving line of credit with Frost Bank Borrowings (Dollars in thousands): | Item | March 31, 2024 | December 31, 2023 | March 31, 2023 | | :--------------------------------------- | :------------- | :---------------- | :------------- | | Securities sold under agreements with customers to repurchase | $307,297 | $381,928 | $608,299 | | Federal funds purchased | $5,750 | $1,100 | $3,575 | | Other borrowings | $21,053 | $21,053 | $21,053 | | Total | $334,100 | $404,081 | $632,927 | - The Company has a $25 million revolving line of credit with Frost Bank, with no outstanding balance at March 31, 2024[129] Note 7 - Income Taxes Provides income tax expense and effective tax rate, explaining deviations from the statutory rate due to tax-exempt income and credit programs, including LIHTC and NMTC investments Income Tax Information (Dollars in thousands, except percentages): | Item | Three-Months Ended March 31, 2024 | Three-Months Ended March 31, 2023 | | :--------------------------------------- | :-------------------------------- | :-------------------------------- | | Income tax expense | $11,480 | $11,688 | | Effective tax rate on pretax income | 17.70% | 18.19% | - Effective tax rates differ from the 21% federal rate due to tax-exempt interest, ESOP dividend deductibility, deferred compensation benefits, and NMTC benefits[131] - CDE investments in other assets totaled $25.41 million at March 31, 2024, related to the federal New Market Tax Credits program[133] Note 8 - Stock Based Compensation Details the Company's stock-based compensation plans, including restricted stock units, performance units, restricted awards, and stock options, summarizing activity and unrecognized costs - As of March 31, 2024, 1,617,290 common shares remained available for issuance under the 2021 Omnibus Stock and Incentive Plan[135] - Total unrecognized compensation cost for unvested share-based arrangements was $4.72 million at March 31, 2024, to be recognized over 1.44 years[149] Stock Option Activity (Three-Months Ended March 31, 2024): | Item | Shares | Weighted Average Exercise Price | | :--------------------------------------- | :------- | :------------------------------ | | Outstanding, December 31, 2023 | 1,552,249 | $30.45 | | Exercised | (82,614) | $20.77 | | Cancelled | (21,692) | $36.49 | | Outstanding, March 31, 2024 | 1,447,943 | $30.91 | | Exercisable, March 31, 2024 | 813,657 | $25.85 | Note 9 - Fair Value Disclosures Defines fair value and its hierarchy (Level 1, 2, 3 inputs), summarizing recurring fair value measurements for securities, loans held-for-sale, and derivatives, and non-recurring measurements for non-financial assets - The fair value hierarchy categorizes inputs into Level 1 (quoted prices), Level 2 (observable inputs), and Level 3 (unobservable inputs)[155] Fair Value Measurements (Dollars in thousands) at March 31, 2024: | Item | Level 1 Inputs | Level 2 Inputs | Level 3 Inputs | Total Fair Value | | :--------------------------------------- | :------------- | :------------- | :------------- | :------------- | | Available-for-sale investment securities | $436,591 | $4,221,935 | $— | $4,658,526 | | Loans held-for-sale | $— | $15,080 | $— | $15,080 | | IRLCs | $— | $— | $803 | $803 | | Forward mortgage-backed securities trades | $— | $(91) | $— | $(91) | - No transfers between Level 2 and Level 3 occurred during Q1 2024 and Q1 2023[155] Note 10 - Subsequent Events Discloses a significant post-reporting event: the conversion of First Financial Bank, N.A. and First Financial Trust and Asset Management Company, N.A. to Texas state charters - Effective April 22, 2024, First Financial Bank, N.A. and First Financial Trust and Asset Management Company, N.A. converted to Texas state charters[170] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Provides management's perspective on financial condition and operations, including forward-looking statements, critical accounting policies, recent developments, and analysis of income, expenses, balance sheet, risk, capital, and liquidity Forward-Looking Statements Highlights that the report contains forward-looking statements subject to various risks and uncertainties, with no obligation for public updates - The report contains forward-looking statements subject to risks including economic conditions, interest rates, regulatory changes, competition, and geopolitical events[172][173][174] - The Company undertakes no obligation to publicly update or revise any forward-looking statements[175] Introduction Introduces the primary revenue sources and key performance metrics used to evaluate the Company's financial health and operational efficiency - Primary revenue sources include interest on loans and investments, trust fees, mortgage loan sales gains, and deposit service charges[176] - Performance is measured by return on average assets, return on average equity, regulatory capital ratios, net interest margin, and efficiency ratio[176] Critical Accounting Policies Identifies the most critical accounting policies, emphasizing those requiring significant management estimates and assumptions for financial reporting - Critical accounting policies include the allowance for credit losses and financial instrument valuation, both requiring significant estimates and assumptions[180] Stock Repurchase Details the Board's authorization for common share repurchases and summarizes recent repurchase activity, including shares bought back and average price - The Board renewed authorization to repurchase up to 5 million common shares through July 31, 2024[181] - 101,337 shares were repurchased and retired in September 2023 at an average price of $26.99 per share[181] Recent Developments Highlights significant events occurring shortly after the reporting period, specifically the conversion of key entities to Texas state charters - Effective April 22, 2024, First Financial Bank, N.A. and First Financial Trust and Asset Management Company, N.A. converted to Texas state banking charters[182] Results of Operations Analyzes the Company's financial performance, detailing key income and expense components, and providing insights into profitability drivers Performance Summary Summarizes key financial performance metrics, including net earnings, diluted earnings per share, return on average assets, and return on average equity Performance Summary (Dollars in millions, except per share amounts): | Metric | Q1 2024 | Q1 2023 | | :----------------------- | :------ | :------ | | Net earnings | $53.40 | $52.57 | | Diluted earnings per share | $0.37 | $0.37 | | Return on average assets | 1.62% | 1.65% | | Return on average equity | 14.43% | 16.32% | Net Interest Income Analyzes changes in tax-equivalent net interest income and net interest margin, identifying drivers such as loan growth and interest rate fluctuations - Tax-equivalent net interest income increased to $102.82 million in Q1 2024 from $99.42 million in Q1 2023[186] - The increase was primarily driven by a $705.09 million rise in average loans, partially offset by lower investment securities and higher deposit/borrowing rates[186] - The tax-equivalent net interest margin remained stable at 3.34% for both Q1 2024 and Q1 2023[189][193] Noninterest Income Examines the components of noninterest income, including trust fees, service charges, debit card fees, and mortgage loan gains, and their respective changes Noninterest Income (Dollars in thousands): | Item | Q1 2024 | Q1 2023 | Change | | :--------------------------------- | :------ | :------ | :----- | | Trust fees | $11,379 | $9,845 | $1,534 | | Service charges on deposit accounts | $6,246 | $6,036 | $210 | | Debit card fees | $4,891 | $4,936 | $(45) | | Gain on sale and fees on mortgage loans | $3,128 | $2,974 | $154 | | Total Noninterest Income | $29,383 | $28,007 | $1,376 | - Trust fees increased as the market value of trust assets managed rose to $10.15 billion at March 31, 2024, from $9.10 billion a year prior[196] - Service charges on deposit accounts increased due to the opening of over 2,000 net new accounts in Q1 2024[196] Noninterest Expense Analyzes the various categories of noninterest expense, such as salaries, occupancy, and FDIC premiums, and their impact on the efficiency ratio Noninterest Expense (Dollars in thousands): | Item | Q1 2024 | Q1 2023 | Change | | :--------------------------------- | :------ | :------ | :----- | | Salaries, commissions and employee benefits | $36,683 | $31,461 | $5,222 | | Net occupancy expense | $3,470 | $3,430 | $40 | | FDIC insurance premiums | $1,965 | $1,654 | $311 | | Software amortization and expense | $3,005 | $2,311 | $694 | | Total Noninterest Expense | $63,940 | $57,256 | $6,684 | - The efficiency ratio was 48.37% for Q1 2024, up from 44.93% in Q1 2023, indicating decreased efficiency[198] - Salaries, commissions, and employee benefits increased primarily due to merit/market pay raises, higher profit sharing ($1.65 million), medical insurance ($1.29 million), and officer incentive accruals ($1.18 million)[199] - An additional $440,000 was accrued in Q1 2024 for the FDIC special assessment[200] Balance Sheet Review Reviews key balance sheet components, including loans, asset quality, allowance for credit losses, securities, deposits, and borrowings, highlighting significant changes Loans Examines the total loans held-for-investment and the proportion of variable interest rate loans within the portfolio at the reporting date - Total loans held-for-investment reached $7.23 billion at March 31, 2024, an increase of $80.62 million from December 31, 2023[202] - Variable interest rate loans comprised 57.98% of total loans held-for-investment at March 31, 2024[209] Asset Quality Assesses the quality of the Company's assets by detailing nonperforming loans, foreclosed assets, and their ratios to total assets and loans Nonperforming Assets (Dollars in thousands, except percentages): | Item | March 31, 2024 | December 31, 2023 | March 31, 2023 | | :--------------------------------------- | :------------- | :---------------- | :------------- | | Total nonperforming loans | $36,190 | $34,613 | $24,193 | | Foreclosed assets | $1,014 | $483 | $196 | | Total nonperforming assets | $37,204 | $35,096 | $24,389 | | As a % of loans held-for-investment and foreclosed assets | 0.51% | 0.49% | 0.37% | | As a % of total assets | 0.28% | 0.27% | 0.19% | Allowance for Credit Losses Provides an overview of the allowance for credit losses, including period-end balances, loan loss experience, and coverage ratios Loan Loss Experience and Allowance for Credit Losses (Dollars in thousands, except percentages): | Item | Q1 2024 | Q1 2023 | | :--------------------------------------- | :------ | :------ | | Allowance for credit losses at period-end | $89,562 | $80,818 | | Loans held-for-investment at period-end | $7,229,410 | $6,576,215 | | Net charge-offs (recoveries)/average loans (annualized) | 0.02% | (0.02)% | | Allowance for loan losses/period-end loans held-for-investment | 1.24% | 1.23% | Interest-Bearing Demand Deposits in Banks Reports the total amount of interest-bearing demand deposits held in banks, highlighting changes over the reporting periods - Interest-bearing deposits in banks increased to $365.40 million at March 31, 2024, from $221.34 million at March 31, 2023[216] Available-for-Sale Securities Discusses the fair value of available-for-sale securities, changes in the portfolio, and its overall yield and modified duration - Fair value of available-for-sale securities was $4.66 billion at March 31, 2024, a $74.24 million decrease from December 31, 2023[217] - The investment portfolio had a tax equivalent yield of 2.33% and a modified duration of 5.93 years at March 31, 2024[221] Deposits Reports total deposits, changes in their cost, and the estimated amount of uninsured and uncollateralized deposits at the reporting date - Total deposits were $11.29 billion at March 31, 2024, an increase from $10.94 billion at March 31, 2023[221] - The total cost of deposits increased to 1.62% for Q1 2024 from 0.81% for Q1 2023[223] - Estimated uninsured and uncollateralized deposits were approximately $5.28 billion at March 31, 2024[223] Borrowings Details total borrowings and the weighted average interest rate paid, highlighting changes over the reporting periods - Total borrowings were $334.10 million at March 31, 2024, a decrease from $632.93 million at March 31, 2023[224] - The weighted average interest rate on borrowings increased to 4.36% for Q1 2024 from 3.10% for Q1 2023[224] Interest Rate Risk Assesses the Company's exposure to interest rate fluctuations, including the impact on net interest income and unrealized losses on securities - The Company's earnings simulation model indicates an asset-sensitive position, projecting an 8.69% increase in net interest income for an immediate +400 basis point rate change at March 31, 2024[230] - Unrealized pre-tax losses on the available-for-sale portfolio increased to $558.99 million at March 31, 2024, from $510.92 million at December 31, 2023, primarily due to rising interest rates[232] Capital and Liquidity Evaluates the Company's capital adequacy and liquidity position, including regulatory ratios, funding sources, and off-balance sheet commitments Capital Details total shareholders' equity and regulatory capital ratios, emphasizing compliance with Basel III requirements and well-capitalized thresholds - Total shareholders' equity was $1.49 billion, representing 11.31% of total assets, at March 31, 2024[234] Regulatory Capital Ratios (Consolidated) at March 31, 2024: | Ratio | Actual Ratio | Minimum Capital Required-Basel III | Required to be Considered Well Capitalized | | :--------------------------------------- | :----------- | :--------------------------------- | :----------------------------------------- | | Total Capital to Risk-Weighted Assets | 19.70% | 10.50% | 10.00% | | Tier 1 Capital to Risk-Weighted Assets | 18.60% | 8.50% | 6.00% | | Common Equity Tier 1 Capital to Risk-Weighted Assets | 18.60% | 7.00% | N/A | | Leverage Ratio | 12.12% | 4.00% | N/A | - Unrealized losses on available-for-sale investment securities are excluded from all regulatory capital ratio calculations[234][241] Liquidity Describes the Company's liquidity sources, including cash, marketable assets, deposits, and available credit lines, and assesses its adequacy - Liquidity is provided by cash, marketable assets, core depositors, correspondent banks, and funding sources like FHLB ($1.98 billion available credit at March 31, 2024) and the Federal Reserve Bank of Dallas[242] - The Company's liquidity is adequate for short-term and long-term needs, supported by a diversified core deposit base and low loan-to-deposit ratios[245] Off-Balance Sheet ("OBS")/Reserve for Unfunded Commitments Details the Company's off-balance sheet commercial commitments, including unfunded lines of credit and standby letters of credit, and the associated reserve Commercial Commitments (Dollars in thousands) at March 31, 2024: | Item | Total Notional Amounts Committed | | :--------------------------------------- | :------------------------------- | | Unfunded lines of credit | $1,215,592 | | Unfunded commitments to extend credit | $826,437 | | Standby letters of credit | $55,117 | | Total commercial commitments | $2,097,146 | - The Company's reserve for unfunded commitments totaled $7.46 million at March 31, 2024[246] Parent Company Funding Reports the amount available for intercompany dividends from subsidiaries and summarizes dividend payments made by subsidiaries - $290.26 million was available for intercompany dividends from subsidiaries without prior regulatory approval at March 31, 2024[252] - Subsidiaries paid aggregate dividends of $12.00 million in Q1 2024, compared to $2.50 million for the same period in 2023[252] Dividends Outlines the Company's long-term dividend policy, loan covenant restrictions, and the cash dividend payout ratio for the current period - The long-term dividend policy targets cash dividends of approximately 35% to 40% of annual net earnings[253] - A loan covenant with Frost Bank restricts dividends to no more than 55% of consolidated net income[253] - The cash dividend payout ratio was 48.23% of net earnings for the first three months of 2024[253] Item 3. Quantitative and Qualitative Disclosures About Market Risk Identifies interest rate risk as a significant market risk for the Company, with detailed disclosures provided in the Management's Discussion and Analysis - Management identifies interest rate risk as a significant market risk for the Company[256] Item 4. Controls and Procedures Management evaluated disclosure controls and procedures as effective at a reasonable assurance level as of March 31, 2024, with no significant internal control changes - Disclosure controls and procedures were evaluated and deemed effective at the reasonable assurance level as of March 31, 2024[258][259] - No significant changes in internal controls over financial reporting occurred subsequent to the evaluation[260] PART II - OTHER INFORMATION Item 1. Legal Proceedings The Company and its subsidiaries are involved in ordinary course lawsuits, but no material legal proceedings are pending as of the reporting date - No material pending legal proceedings against the Company or its subsidiaries[263] Item 1A. Risk Factors No material changes to risk factors have occurred since the Company's Annual Report on Form 10-K for the year ended December 31, 2023 - No material changes in risk factors since the December 31, 2023, Form 10-K[264] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This item is not applicable to the current report Item 3. Defaults Upon Senior Securities This item is not applicable to the current report Item 4. Mine Safety Disclosures This item is not applicable to the current report Item 5. Other Information This item is not applicable to the current report Item 6. Exhibits Lists all exhibits filed with the Form 10-Q, including organizational documents, stock plans, loan agreements, and certifications - Exhibits include Amended and Restated Certificate of Formation, Bylaws, Stock and Incentive Plans, Promissory Note and Loan Agreement with Frost Bank, and various certifications[267] Signatures The report is signed by F. Scott Dueser (Chairman, President, CEO) and Michelle S. Hickox (EVP, CFO, Secretary, Treasurer) on May 3, 2024 - Report signed by F. Scott Dueser (Chairman, President, CEO) and Michelle S. Hickox (EVP, CFO, Secretary, Treasurer) on May 3, 2024[271]