BORROWINGS AND BORROWING CAPACITY
The Company has an available line of credit with the FHLB, which allows the Company to borrow on a collateralized basis. FHLB advances are used to manage liquidity as needed. The advances are secured by blanket liens on certain loans. Maturing advances are replaced by drawing on available cash, making additional borrowings or through increased customer deposits. At December 31, 2025, the Company had total borrowing capacity of $3.17 billion of which $997.1 million was available under the agreement and $2.17 billion was outstanding pursuant to FHLB letters of credit. At December 31, 2025 and 2024, the Company had no FHLB advances outstanding.
At December 31, 2025, the Company had FHLB letters of credit pledged as collateral for public and other deposits of state and local government agencies which will expire in the following periods (in thousands):
| | | | | |
| 2026 | $ | 1,618,496 | |
| 2027 | 366,000 | |
| 2028 | 56,000 | |
| 2029 | 77,000 | |
| Thereafter | 55,000 | |
| Total | $ | 2,172,496 | |
On December 13, 2024, the Company renewed its loan agreement with another financial institution (the “Loan Agreement”), that provides for a $75.0 million revolving line of credit. At December 31, 2025, there were no outstanding borrowings on this line of credit and no draws were taken on this line of credit during 2025 or 2024. Interest accrues on outstanding borrowings at a per annum rate equal to 3-month SOFR plus 2.75% calculated in accordance with the terms of the revolving promissory note and payable quarterly through the first 24 months. The entire outstanding balance and unpaid interest is payable in full on December 13, 2033, the maturity date. The Company may prepay the principal amount of the line of credit without premium or penalty. The obligations of the Company under the Loan Agreement are secured by a pledge of all of the issued and outstanding shares of capital stock of the Bank.
Covenants made under the Loan Agreement include, among other things, while there are obligations outstanding under Loan Agreement, the Company shall maintain a cash flow to debt service (as defined in the Loan Agreement) of not less than 1.25, the Bank’s Texas Ratio (as defined in the Loan Agreement) not to exceed 20.0%, the Bank shall maintain a Tier 1 Leverage Ratio (as defined under the Loan Agreement) of at least 8.0% and includes restrictions on the ability of the Company and its subsidiaries to incur certain additional debt. As of December 31, 2025, the Company believes it was in compliance with all such debt covenants and had not been made aware of any noncompliance by the lender.
About Debt Disclosures
Debt disclosures detail a company's borrowing structure — the types of instruments, interest rates, maturity schedule, and covenant restrictions that define its financial obligations and flexibility. This section is essential for assessing refinancing risk, interest rate exposure, and the margin of safety against financial distress.
Key signals: the maturity schedule reveals concentration risk — large maturities within 1-2 years during tight credit markets can force dilutive refinancing or asset sales. Compare the fair value of debt against carrying amount to gauge whether the market views the company's credit risk differently than the balance sheet suggests. Watch covenant compliance disclosures for tightening cushions, especially leverage and interest coverage ratios. Variable-rate debt exposure quantifies sensitivity to interest rate changes. Secured versus unsecured mix affects recovery rates and future borrowing capacity. Compare net debt-to-EBITDA against industry peers and covenant limits to assess financial health.