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Texas Capital Bancshares, Inc. Announces Operating Results for 2019

DALLAS, Jan. 22, 2020 (GLOBE NEWSWIRE) -- Texas Capital Bancshares, Inc. (TCBI), the parent company of Texas Capital Bank, announced earnings and operating results for the fourth quarter and full year of 2019.

“We are pleased with our 2019 results as we finished the year with a meaningful improvement in year-over-year EPS, despite headwinds from interest rate decreases, and a continued focus on proactively dealing with credit to strengthen our balance sheet and future earning power," said Keith Cargill, CEO. "Our results this year highlight the continued strength of our organic business model having gained meaningful market share over the past 7 years while more than tripling our balance sheet and more than doubling EPS. We are confident that our pending merger with Independent Bank Group will better position us to drive long-term shareholder value, improve client experience and invest even more effectively in our talent, technology and communities due to the scale advantage and complementary strengths we each offer."

  • Average mortgage finance loans, including mortgage correspondent aggregation ("MCA") loans held for sale ("LHS"), increased 7% on a linked quarter basis and increased 61% from the fourth quarter of 2018.
  • Average demand deposits and average total deposits increased 9% and 6%, respectively, on a linked quarter basis and increased 47% and 35%, respectively from the fourth quarter of 2018.
  • Average loans held for investment ("LHI"), excluding mortgage finance loans, decreased 1% on a linked quarter basis and increased less than 1% from the fourth quarter of 2018, reflecting planned reductions in our leveraged lending and energy balances.
  • Net income and EPS for full year 2019 both increased 7% compared to full year 2018.

FINANCIAL SUMMARY
(Dollars and shares in thousands)

  2019   2018   % Change
ANNUAL OPERATING RESULTS          
Net income $ 322,866     $ 300,824     7 %
Net income available to common stockholders $ 313,116     $ 291,074     8 %
Diluted EPS $ 6.21     $ 5.79     7 %
Diluted shares 50,419     50,273     %
ROA 1.04 %   1.19 %    
ROE 12.38 %   13.14 %    
QUARTERLY OPERATING RESULTS          
Net income $ 73,917     $ 71,891     3 %
Net income available to common stockholders $ 71,480     $ 69,454     3 %
Diluted EPS $ 1.42     $ 1.38     3 %
Diluted shares 50,462     50,333     %
ROA 0.85 %   1.09 %    
ROE 10.68 %   11.82 %    
BALANCE SHEET          
LHS $ 2,577,134     $ 1,969,474     31 %
LHI, mortgage finance 8,169,849     5,877,524     39 %
LHI 16,476,413     16,690,550     (1 )%
Total LHI 24,646,262     22,568,074     9 %
Total loans 27,223,396     24,537,548     11 %
Total assets 32,548,069     28,257,767     15 %
Demand deposits 9,438,459     7,317,161     29 %
Total deposits 26,478,593     20,606,113     28 %
Stockholders’ equity 2,832,258     2,500,394     13 %
                 

DETAILED FINANCIALS

Texas Capital Bancshares, Inc. reported net income of $322.9 million and net income available to common stockholders of $313.1 million for the year ended December 31, 2019, compared to net income of $300.8 million and net income available to common stockholders of $291.1 million for the year ended December 31, 2018. For the fourth quarter of 2019, net income was $73.9 million and net income available to common stockholders was $71.5 million, compared to net income of $71.9 million and net income available to common stockholders of $69.5 million for the same period in 2018. On a fully diluted basis, earnings per common share were $6.21 for the year ended December 31, 2019 compared to $5.79 for the same period in 2018. Diluted earnings per common share were $1.42 for the quarter ended December 31, 2019 compared to $1.38 for the same period of 2018. The fourth quarter of 2019 includes $1.3 million, or $.02 per common share, of merger-related expenses.

Return on common equity ("ROE") was 12.38 percent and return on average assets ("ROA") was 1.04 percent for the year ended December 31, 2019, compared to 13.14 percent and 1.19 percent, respectively, for the year ended December 31, 2018. ROE was 10.68 percent and ROA was 0.85 percent for the fourth quarter of 2019, compared to 13.22 percent and 1.06 percent, respectively, for the third quarter of 2019 and 11.82 percent and 1.09 percent, respectively, for the fourth quarter of 2018. The linked quarter decreases in ROE and ROA for the fourth quarter of 2019 resulted primarily from increases in non-interest expense and provision for credit losses, as well as from decreases in net interest and non-interest income.

Net interest income was $248.4 million for the fourth quarter of 2019, compared to $252.2 million for the third quarter of 2019 and $240.7 million for the fourth quarter of 2018. The linked quarter decrease is due primarily to decreases in loan yields and the year over year increase is primarily due to growth in total loans, offset by decreases in loan yields. Net interest margin for the fourth quarter of 2019 was 2.95 percent, a decrease of 21 basis points from the third quarter of 2019 and a decrease of 83 basis points from the fourth quarter of 2018. LHI, excluding mortgage finance loans, yields were down 37 basis points from the third quarter of 2019, and were down 56 basis points compared to the fourth quarter of 2018. Mortgage finance, excluding MCA, yields for the fourth quarter of 2019 decreased 18 basis points compared to the third quarter of 2019 and decreased 54 basis points compared to the fourth quarter of 2018. Total cost of deposits for the fourth quarter of 2019 decreased 22 basis points to 0.99 percent compared to 1.21 percent for the third quarter of 2019, and decreased 18 basis points from 1.17 percent for the fourth quarter of 2018.

Average LHI, excluding mortgage finance loans, for the year ended December 31, 2019 were $16.8 billion, an increase of $728.9 million, or 5 percent, from the same period in 2018. Average LHI, excluding mortgage finance loans, for the fourth quarter of 2019 were $16.7 billion, a decrease of $234.1 million, or 1 percent, from the third quarter of 2019 and an increase of $23.7 million, less than 1 percent, from the fourth quarter of 2018. The linked quarter decrease in average LHI, excluding mortgage finance loans, reflects slower loan growth and planned reductions in our leveraged lending and energy balances. Average total mortgage finance loans, including MCA loans, for the fourth quarter of 2019 were $11.4 billion, an increase of $765.4 million, or 7 percent, from the third quarter of 2019 and an increase of $4.3 billion, or 61 percent, from the fourth quarter of 2018. The linked quarter and year-over-year increases in total mortgage finance loans were due to increases in volumes from continued lower long-term interest rates.

Average total deposits for the year ended December 31, 2019 were $24.7 billion, an increase of $4.4 billion, or 22 percent, from the same period in 2018. Average demand deposits for the year ended December 31, 2019 were $9.0 billion, an increase of $1.1 billion, or 14 percent, from the same period in December 31, 2018. Average total deposits for the fourth quarter of 2019 increased $1.7 billion, or 6 percent, from the third quarter of 2019 and increased $7.4 billion, or 35 percent, from the fourth quarter of 2018. Average demand deposits for the fourth quarter of 2019 increased $941.5 million, or 9 percent, to $10.9 billion from $10.0 billion for the third quarter of 2019, and increased $3.5 billion, or 47 percent, from the fourth quarter of 2018.

We recorded a $17.0 million provision for credit losses for the fourth quarter of 2019 compared to $11.0 million for the third quarter of 2019 and $35.0 million for the fourth quarter of 2018. The provision for the fourth quarter of 2019 was driven by the consistent application of our methodology. The linked quarter increase in the provision resulted from an increase in non-performing assets partially offset by a decline in charge-offs, while the year-over-year decrease resulted from decreases in charge-offs and LHI, excluding mortgage finance, balances. The total allowance for credit losses at December 31, 2019 increased to 0.83 percent of total LHI, compared to 0.81 percent at September 30, 2019 and decreased from 0.90 percent at December 31, 2018. In management’s opinion, the allowance is appropriate and is derived from consistent application of the methodology for establishing reserves for the loan portfolio.

Non-performing assets ("NPAs") increased in the fourth quarter of 2019 compared to the third quarter of 2019 and fourth quarter of 2018, primarily related to our energy and leveraged lending portfolios. The ratio of NPAs to total LHI plus other real estate owned ("OREO") for the fourth quarter of 2019 was 0.91 percent, compared to 0.49 percent for the third quarter of 2019 and 0.36 percent for the fourth quarter of 2018. Net charge-offs for the fourth quarter of 2019 were $12.8 million compared to $36.9 million for the third quarter of 2019 and $32.6 million for the fourth quarter of 2018. Of the $12.8 million charge-offs for the fourth quarter of 2019, $588,000 related to energy and $6.2 million related to leveraged lending. For the fourth quarter of 2019, net charge-offs were 0.21 percent of average total LHI, compared to 0.58 percent for the third quarter of 2019 and 0.60 percent for the same period in 2018.

Non-interest income decreased $2.5 million, or 13 percent, during the fourth quarter of 2019 compared to the third quarter of 2019, and increased $2.5 million, or 16 percent, compared to the fourth quarter of 2018. The linked quarter decrease is primarily related to decreases in net gain/loss on sale of LHS and other non-interest income, partially offset by increases in servicing income and swap fees. The year-over-year increase is primarily related to increases in brokered loan fees and servicing income, partially offset by a decrease in other non-interest income.

Non-interest expense for the fourth quarter of 2019 increased $9.3 million, or 6 percent, compared to the third quarter of 2019, and increased $28.8 million, or 22 percent, compared to the fourth quarter of 2018. The linked quarter increase in non-interest expense was primarily related to increases in legal and professional expense and communications and technology expense, partially offset by a decrease in servicing related expenses. The year-over-year increase was primarily due to increases in salaries and employee benefits, legal and professional expense, communications and technology expense and marketing expense. The linked quarter and year-over-year increases in legal and professional expense included $1.3 million in merger-related expenses, as well as increases related to investment in Bask Bank and new commercial loan verticals, specifically $6.0 million that is not recurring.

Stockholders’ equity increased by 13 percent from $2.5 billion at December 31, 2018 to $2.8 billion at December 31, 2019, primarily due to the retention of net income. Texas Capital Bank is well capitalized under regulatory guidelines. At December 31, 2019, our ratio of tangible common equity to total tangible assets was 8.2 percent.

About Texas Capital Bancshares, Inc.

Texas Capital Bancshares, Inc. (NASDAQ®: TCBI), a member of the Russell 1000® Index and the S&P MidCap 400®, is the parent company of Texas Capital Bank, a commercial bank that delivers highly personalized financial services to businesses and entrepreneurs. Headquartered in Dallas, the bank has full-service locations in Austin, Dallas, Fort Worth, Houston and San Antonio. On December 9, 2019, Texas Capital Bancshares, Inc. (“TCBI”), announced that it had entered into an Agreement and Plan of Merger with Independent Bank Group, Inc. (“IBTX”), which provides that, upon the terms and subject to the conditions set forth therein, TCBI will merge with and into IBTX (the “Merger”), with IBTX as the surviving entity in the Merger. For additional information see the related filings by TCBI with the Securities and Exchange Commission (“SEC”).

Forward Looking Statements

This communication may be deemed to include “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 regarding the financial condition, results of operations, business plans and the future performance of TCBI. These statements are not historical in nature and can generally be identified by such words as “believe,” “expect,” “estimate,” “anticipate,” “plan,” “may,” “will,” “forecast,” “could,” “projects,” “intend” and similar expressions. Because forward-looking statements relate to future results and occurrences, they are subject to inherent uncertainties, risks, and changes in circumstances that are difficult to predict. A number of factors, many of which are beyond our control, could cause actual results to differ materially from future results expressed or implied by such forward-looking statements. These risks and uncertainties include, but are not limited to, the credit quality of our loan portfolio, general economic conditions in the United States and in our markets, including the continued impact on our customers from volatility in oil and gas prices, delays in completing the pending merger between TCBI and IBTX, the failure to obtain necessary regulatory approvals and shareholder approvals or to satisfy any of the other conditions to the merger on a timely basis or at all, the possibility that the anticipated benefits of the merger are not realized when expected or at all, expectations regarding rates of default and loan losses, volatility in the mortgage industry, our business strategies, and our expectations about future financial performance, future growth and earnings, the appropriateness of our allowance for loan losses and provision for credit losses, the impact of changing regulatory requirements and legislative changes on our business, increased competition, interest rate risk, the inability to realize cost savings or improved revenues or to implement integration plans and other consequences associated with the proposed merger or new lines of business, new product or service offerings and new technologies. These and other factors that could cause results to differ materially from those described in the forward-looking statements, as well as a discussion of the risks and uncertainties that may affect our business, can be found in our Annual Report on Form 10-K, our Quarterly Reports on Form 10-Q and in other filings we make with the Securities and Exchange Commission. The information contained in this communication speaks only as of its date. Except to the extent required by applicable law or regulation, TCBI disclaims any obligation to update such factors or to publicly announce the results of any revisions to any of the forward-looking statements included herein to reflect future events or developments.

Additional Information About the Merger and Where to Find It

In connection with the proposed merger between IBTX and TCBI, IBTX filed a registration statement on Form S-4 with the SEC on January 21, 2020 to register the shares of IBTX’s capital stock to be issued in connection with the merger. The registration statement includes a joint proxy statement/prospectus. The registration statement has not yet become effective. After the Form S-4 is effective, a definitive joint proxy statement/prospectus will be sent to the shareholders of IBTX and TCBI seeking their approval of the proposed transaction.

INVESTORS AND SECURITY HOLDERS ARE URGED TO READ THE REGISTRATION STATEMENT ON FORM S-4, THE JOINT PROXY STATEMENT/PROSPECTUS INCLUDED WITHIN THE REGISTRATION STATEMENT ON FORM S-4 AND ANY OTHER RELEVANT DOCUMENTS FILED OR TO BE FILED WITH THE SEC IN CONNECTION WITH THE PROPOSED TRANSACTION BECAUSE THESE DOCUMENTS DO AND WILL CONTAIN IMPORTANT INFORMATION ABOUT IBTX, TCBI AND THE PROPOSED TRANSACTION.

Investors and security holders may obtain copies of these documents free of charge through the website maintained by the SEC at www.sec.gov or from IBTX at its website, www.ibtx.com, or from TCBI at its website, www.texascapitalbank.com. Documents filed with the SEC by IBTX will be available free of charge by accessing the Investor Relations page of IBTX’s website at www.ibtx.com or, alternatively, by directing a request by telephone or mail to Independent Bank Group, Inc., 7777 Henneman Way, McKinney, Texas 75070, (972) 562-9004, and documents filed with the SEC by TCBI will be available free of charge by accessing TCBI’s website at www.texascapitalbank.com under the tab “About Us,” and then under the heading “Investor Relations” or, alternatively, by directing a request by telephone or mail to Texas Capital Bancshares, Inc., 2000 McKinney Avenue, Suite 700, Dallas, Texas 75201, (214) 932-6600.

Participants in the Solicitation

IBTX, TCBI and certain of their respective directors and executive officers may be deemed to be participants in the solicitation of proxies from the shareholders of IBTX and TCBI in connection with the proposed transaction under the rules of the SEC. Certain information regarding the interests of these participants and a description of their direct and indirect interests, by security holdings or otherwise, will be included in the joint proxy statement/prospectus regarding the proposed transaction when it becomes available. Additional information about IBTX, and its directors and executive officers, may be found in IBTX’s definitive proxy statement relating to its 2019 Annual Meeting of Shareholders filed with the SEC on April 23, 2019, and other documents filed by IBTX with the SEC. Additional information about TCBI, and its directors and executive officers, may be found in TCBI’s definitive proxy statement relating to its 2019 Annual Meeting of Shareholders filed with the SEC on March 7, 2019, and other documents filed by TCBI with the SEC. These documents can be obtained free of charge from the sources described above.

TEXAS CAPITAL BANCSHARES, INC.
SELECTED FINANCIAL HIGHLIGHTS (UNAUDITED)
(Dollars in thousands except per share data)
  4th Quarter 3rd Quarter 2nd Quarter 1st Quarter 4th Quarter
  2019 2019 2019 2019 2018
CONSOLIDATED STATEMENTS OF INCOME          
Interest income $ 337,757   $ 355,101   $ 346,893   $ 325,561   $ 321,718  
Interest expense 89,372   102,933   103,340   89,947   81,045  
Net interest income 248,385   252,168   243,553   235,614   240,673  
Provision for credit losses 17,000   11,000   27,000   20,000   35,000  
Net interest income after provision for credit losses 231,385   241,168   216,553   215,614   205,673  
Non-interest income 17,761   20,301   24,364   30,014   15,280  
Non-interest expense 158,690   149,370   141,561   140,378   129,862  
Income before income taxes 90,456   112,099   99,356   105,250   91,091  
Income tax expense 16,539   23,958   21,387   22,411   19,200  
Net income 73,917   88,141   77,969   82,839   71,891  
Preferred stock dividends 2,437   2,438   2,437   2,438   2,437  
Net income available to common stockholders $ 71,480   $ 85,703   $ 75,532   $ 80,401   $ 69,454  
           
Diluted EPS $ 1.42   $ 1.70   $ 1.50   $ 1.60   $ 1.38  
Diluted shares 50,461,723   50,416,402   50,383,870   50,345,399   50,333,412  
CONSOLIDATED BALANCE SHEET DATA          
Total assets $ 32,548,069   $ 33,526,437   $ 29,970,384   $ 28,383,111   $ 28,257,767  
LHI 16,476,413   16,772,824   16,924,535   17,061,590   16,690,550  
LHI, mortgage finance 8,169,849   7,951,432   7,415,363   6,299,710   5,877,524  
LHS 2,577,134   2,674,225   1,057,586   1,901,637   1,969,474  
Liquidity assets(1) 4,263,766   4,993,185   3,480,902   2,154,155   2,865,874  
Investment securities 239,871   238,022   240,851   230,749   120,216  
Demand deposits 9,438,459   10,289,572   7,685,340   6,743,607   7,317,161  
Total deposits 26,478,593   27,413,303   22,999,077   20,650,127   20,606,113  
Other borrowings 2,541,766   2,639,967   3,607,234   4,497,892   4,541,174  
Subordinated notes 282,129   282,038   281,948   281,858   281,767  
Long-term debt 113,406   113,406   113,406   113,406   113,406  
Stockholders’ equity 2,832,258   2,757,433   2,668,452   2,581,942   2,500,394  
           
End of period shares outstanding 50,337,741   50,317,654   50,297,552   50,263,611   50,200,710  
Book value $ 53.29   $ 51.82   $ 50.07   $ 48.38   $ 46.82  
Tangible book value(2) $ 52.93   $ 51.46   $ 49.71   $ 48.02   $ 46.45  
SELECTED FINANCIAL RATIOS          
Net interest margin 2.95 % 3.16 % 3.41 % 3.73 % 3.78 %
Return on average assets 0.85 % 1.06 % 1.05 % 1.26 % 1.09 %
Return on average common equity 10.68 % 13.22 % 12.20 % 13.58 % 11.82 %
Non-interest income to average earning assets 0.21 % 0.25 % 0.34 % 0.47 % 0.24 %
Efficiency ratio(3) 59.6 % 54.8 % 52.8 % 52.8 % 50.7 %
Efficiency ratio, adjusted(4) 57.7 % 51.2 % 49.5 % 50.1 % 48.7 %
Non-interest expense to average earning assets 1.87 % 1.86 % 1.97 % 2.21 % 2.03 %
Tangible common equity to total tangible assets(5) 8.2 % 7.7 % 8.3 % 8.5 % 8.3 %
Common Equity Tier 1 8.9 % 8.6 % 8.7 % 8.6 % 8.6 %
Tier 1 capital 9.8 % 9.5 % 9.6 % 9.6 % 9.5 %
Total capital 11.4 % 11.1 % 11.3 % 11.4 % 11.3 %
Leverage 8.4 % 8.6 % 9.2 % 10.0 % 9.9 %
                     


(1) Liquidity assets include Federal funds sold and interest-bearing deposits in other banks.
(2) Stockholders’ equity excluding preferred stock, less goodwill and intangibles, divided by shares outstanding at period end.
(3) Non-interest expense divided by the sum of net interest income and non-interest income.
(4) Non-interest expense, excluding deposit-related marketing fees and servicing related expenses, divided by the sum of net interest income and non-interest income, net of deposit-related marketing fees and servicing related expenses. Deposit-related marketing fees totaled $9.4 million, $11.9 million, $11.6 million, $9.1 million and $7.7 million for the fourth, third, second and first quarters of 2019, as well as for the fourth quarter of 2018, respectively.
(5) Stockholders’ equity excluding preferred stock and accumulated other comprehensive income, less goodwill and intangibles, divided by total assets, less accumulated other comprehensive income and goodwill and intangibles.
   

 

TEXAS CAPITAL BANCSHARES, INC.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(Dollars in thousands)
  December 31, 2019 December 31, 2018 %
Change
Assets      
Cash and due from banks $ 161,817   $ 214,191   (24 )%
Interest-bearing deposits 4,233,766   2,815,684   50 %
Federal funds sold and securities purchased under resale agreements 30,000   50,190   (40 )%
Securities, available-for-sale 239,871   120,216   100 %
LHS ($2,571.3 million and $1,969.2 million at December 2019 and 2018, respectively, at fair value) 2,577,134   1,969,474   31 %
LHI, mortgage finance 8,169,849   5,877,524   39 %
LHI (net of unearned income) 16,476,413   16,690,550   (1 )%
Less:  Allowance for loan losses 195,047   191,522   2 %
LHI, net 24,451,215   22,376,552   9 %
Mortgage servicing rights, net 64,904   42,474   53 %
Premises and equipment, net 31,212   23,802   31 %
Accrued interest receivable and other assets 740,051   626,614   18 %
Goodwill and intangibles, net 18,099   18,570   (3 )%
Total assets $ 32,548,069   $ 28,257,767   15 %
       
Liabilities and Stockholders’ Equity      
Liabilities:      
Deposits:      
Non-interest bearing $ 9,438,459   $ 7,317,161   29 %
Interest bearing 17,040,134   13,288,952   28 %
Total deposits 26,478,593   20,606,113   28 %
       
Accrued interest payable 12,760   20,675   (38 )%
Other liabilities 287,157   194,238   48 %
Federal funds purchased and repurchase agreements 141,766   641,174   (78 )%
Other borrowings 2,400,000   3,900,000   (38 )%
Subordinated notes, net 282,129   281,767   %
Trust preferred subordinated debentures 113,406   113,406   %
Total liabilities 29,715,811   25,757,373   15 %
       
Stockholders’ equity:      
Preferred stock, $.01 par value, $1,000 liquidation value:      
Authorized shares - 10,000,000      
Issued shares - 6,000,000 shares issued at December 31, 2019 and 2018 150,000   150,000   %
Common stock, $.01 par value:      
Authorized shares - 100,000,000      
Issued shares - 50,338,158 and 50,201,127 at December 31, 2019 and 2018, respectively 503   502   %
Additional paid-in capital 978,205   967,890   1 %
Retained earnings 1,694,608   1,381,492   23 %
Treasury stock (shares at cost: 417 at December 31, 2019 and 2018) (8 ) (8 ) %
Accumulated other comprehensive income, net of taxes 8,950   518   1,628 %
Total stockholders’ equity 2,832,258   2,500,394   13 %
Total liabilities and stockholders’ equity $ 32,548,069   $ 28,257,767   15 %
                 


TEXAS CAPITAL BANCSHARES, INC.        
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)        
(Dollars in thousands except per share data)        
  Three Months Ended December 31, Year Ended December 31,
  2019 2018 2019 2018
Interest income        
Interest and fees on loans $ 312,147   $ 310,470   $ 1,284,036   $ 1,124,970  
Investment securities 2,618   1,274   8,654   2,834  
Federal funds sold and securities purchased under resale agreements 439   984   1,529   3,792  
Interest-bearing deposits in other banks 22,553   8,990   71,093   32,597  
Total interest income 337,757   321,718   1,365,312   1,164,193  
Interest expense        
Deposits 70,987   61,773   293,537   185,116  
Federal funds purchased 1,319   2,097   11,872   6,531  
Other borrowings 11,712   11,726   58,393   36,207  
Subordinated notes 4,191   4,191   16,764   16,764  
Trust preferred subordinated debentures 1,163   1,258   5,026   4,715  
Total interest expense 89,372   81,045   385,592   249,333  
Net interest income 248,385   240,673   979,720   914,860  
Provision for credit losses 17,000   35,000   75,000   87,000  
Net interest income after provision for credit losses 231,385   205,673   904,720   827,860  
Non-interest income        
Service charges on deposit accounts 2,785   3,168   11,320   12,787  
Wealth management and trust fee income 2,342   2,152   8,810   8,148  
Brokered loan fees 8,645   5,408   29,738   22,532  
Servicing income 4,030   2,861   13,439   18,307  
Swap fees 1,559   1,356   4,387   5,625  
Net gain/(loss) on sale of LHS (7,757 ) (8,087 ) (20,259 ) (15,934 )
Other 6,157   8,422   45,005   26,559  
Total non-interest income 17,761   15,280   92,440   78,024  
Non-interest expense        
Salaries and employee benefits 80,262   69,500   315,080   291,768  
Net occupancy expense 9,075   7,390   32,989   30,342  
Marketing 12,807   10,208   53,355   39,335  
Legal and professional 22,402   13,042   53,830   42,990  
Communications and technology 13,801   8,845   44,826   30,056  
FDIC insurance assessment 5,613   5,423   20,093   24,307  
Servicing related expenses 2,960   2,555   22,573   14,934  
Other 11,770   12,899   47,253   51,364  
Total non-interest expense 158,690   129,862   589,999   525,096  
Income before income taxes 90,456   91,091   407,161   380,788  
Income tax expense 16,539   19,200   84,295   79,964  
Net income 73,917   71,891   322,866   300,824  
Preferred stock dividends 2,437   2,437   9,750   9,750  
Net income available to common stockholders $ 71,480   $ 69,454   $ 313,116   $ 291,074  
         
Basic earnings per common share $ 1.42   $ 1.38   $ 6.23   $ 5.83  
Diluted earnings per common share $ 1.42   $ 1.38   $ 6.21   $ 5.79  
                         


TEXAS CAPITAL BANCSHARES, INC.
SUMMARY OF LOAN LOSS EXPERIENCE (UNAUDITED)
(Dollars in thousands)
  4th Quarter 3rd Quarter 2nd Quarter 1st Quarter 4th Quarter
  2019 2019 2019 2019 2018
Allowance for loan losses:          
Beginning balance $ 190,138   $ 214,572   $ 208,573   $ 191,522   $ 190,306  
Loans charged-off:          
Commercial 14,280   37,760   20,053   4,865   34,419  
Real estate 485     177      
Construction          
Consumer          
Leases   19        
Total charge-offs 14,765   37,779   20,230   4,865   34,419  
Recoveries:          
Commercial 1,953   870   201   266   1,399  
Real estate         26  
Construction          
Consumer 9   27   23   10   360  
Leases 1   9     1   1  
Total recoveries 1,963   906   224   277   1,786  
Net charge-offs 12,802   36,873   20,006   4,588   32,633  
Provision for loan losses 17,711   12,439   26,005   21,639   33,849  
Ending balance $ 195,047   $ 190,138   $ 214,572   $ 208,573   $ 191,522  
           
Allowance for off-balance sheet credit losses:          
Beginning balance $ 9,351   $ 10,790   $ 9,795   $ 11,434   $ 10,283  
Provision for off-balance sheet credit losses (711 ) (1,439 ) 995   (1,639 ) 1,151  
Ending balance $ 8,640   $ 9,351   $ 10,790   $ 9,795   $ 11,434  
           
Total allowance for credit losses $ 203,687   $ 199,489   $ 225,362   $ 218,368   $ 202,956  
           
Total provision for credit losses $ 17,000   $ 11,000   $ 27,000   $ 20,000   $ 35,000  
           
Allowance for loan losses to LHI 0.79 % 0.77 % 0.88 % 0.89 % 0.85 %
Allowance for loan losses to average LHI 0.79 % 0.76 % 0.90 % 0.96 % 0.88 %
Net charge-offs to average LHI(1) 0.21 % 0.58 % 0.34 % 0.09 % 0.60 %
Net charge-offs to average LHI for last twelve months(1) 0.31 % 0.41 % 0.27 % 0.36 % 0.37 %
Total provision for credit losses to average LHI(1) 0.27 % 0.17 % 0.45 % 0.37 % 0.64 %
Total allowance for credit losses to LHI 0.83 % 0.81 % 0.93 % 0.93 % 0.90 %
                     


(1) Interim period ratios are annualized.
   

                 

TEXAS CAPITAL BANCSHARES, INC.          
SUMMARY OF NON-PERFORMING ASSETS AND PAST DUE LOANS (UNAUDITED)
(Dollars in thousands)          
  4th Quarter 3rd Quarter 2nd Quarter 1st Quarter 4th Quarter
  2019 2019 2019 2019 2018
           
Non-performing assets (NPAs):          
Non-accrual loans $ 225,384   $ 120,686   $ 114,084   $ 133,690   $ 80,375  
Other real estate owned (OREO)         79  
Total LHI NPAs $ 225,384   $ 120,686   $ 114,084   $ 133,690   $ 80,454  
           
Non-accrual loans to LHI 0.91 % 0.49 % 0.47 % 0.57 % 0.36 %
Total LHI NPAs to LHI plus OREO 0.91 % 0.49 % 0.47 % 0.57 % 0.36 %
Total LHI NPAs to earning assets 0.71 % 0.37 % 0.39 % 0.49 % 0.29 %
Allowance for loan losses to non-accrual loans .9x 1.6x 1.9x 1.6x 2.4x
           
Loans past due 90 days and still accruing(1) $ 17,584   $ 29,648   $ 15,212   $ 12,245   $ 9,353  
Loans past due 90 days to LHI 0.07 % 0.12 % 0.06 % 0.05 % 0.04 %
LHS past due 90 days and still accruing(2) $ 8,207   $ 9,187   $ 11,665   $ 13,693   $ 16,829  
                               


(1) At December 31, 2019, loans past due 90 days and still accruing includes premium finance loans of $8.5 million. These loans are primarily secured by obligations of insurance carriers to refund premiums on canceled insurance policies. The refund of premiums from the insurance carriers can take 180 days or longer from the cancellation date.
(2) Includes loans guaranteed by U.S. government agencies that were repurchased out of Ginnie Mae securities. Loans are recorded as LHS and carried at fair value on the balance sheet. Interest on these past due loans accrues at the debenture rate guaranteed by the U.S. government. Also includes loans that, pursuant to Ginnie Mae servicing guidelines, we have the unilateral right, but not obligation, to repurchase and thus must record as LHS on our balance sheet regardless of whether the repurchase option has been exercised.
   


TEXAS CAPITAL BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(Dollars in thousands)
           
  4th Quarter 3rd Quarter 2nd Quarter 1st Quarter 4th Quarter
  2019 2019 2019 2019 2018
Interest income          
Interest and fees on loans $ 312,147   $ 329,344   $ 329,842   $ 312,703   $ 310,470  
Investment securities 2,618   2,316   2,260   1,460   1,274  
Federal funds sold and securities purchased under resale agreements 439   554   157   379   984  
Interest-bearing deposits in other banks 22,553   22,887   14,634   11,019   8,990  
Total interest income 337,757   355,101   346,893   325,561   321,718  
Interest expense          
Deposits 70,987   80,967   72,529   69,054   61,773  
Federal funds purchased 1,319   1,835   5,202   3,516   2,097  
Other borrowings 11,712   14,703   20,124   11,854   11,726  
Subordinated notes 4,191   4,191   4,191   4,191   4,191  
Trust preferred subordinated debentures 1,163   1,237   1,294   1,332   1,258  
Total interest expense 89,372   102,933   103,340   89,947   81,045  
Net interest income 248,385   252,168   243,553   235,614   240,673  
Provision for credit losses 17,000   11,000   27,000   20,000   35,000  
Net interest income after provision for credit losses 231,385   241,168   216,553   215,614   205,673  
Non-interest income          
Service charges on deposit accounts 2,785   2,707   2,849   2,979   3,168  
Wealth management and trust fee income 2,342   2,330   2,129   2,009   2,152  
Brokered loan fees 8,645   8,691   7,336   5,066   5,408  
Servicing income 4,030   3,549   3,126   2,734   2,861  
Swap fees 1,559   1,196   601   1,031   1,356  
Net gain/(loss) on sale of LHS (7,757 ) (6,011 ) (5,986 ) (505 ) (8,087 )
Other 6,157   7,839   14,309   16,700   8,422  
Total non-interest income 17,761   20,301   24,364   30,014   15,280  
Non-interest expense          
Salaries and employee benefits 80,262   80,106   76,889   77,823   69,500  
Net occupancy expense 9,075   8,125   7,910   7,879   7,390  
Marketing 12,807   14,753   14,087   11,708   10,208  
Legal and professional 22,402   11,394   10,004   10,030   13,042  
Communications and technology 13,801   10,805   11,022   9,198   8,845  
FDIC insurance assessment 5,613   5,220   4,138   5,122   5,423  
Servicing related expenses 2,960   8,165   6,066   5,382   2,555  
Other 11,770   10,802   11,445   13,236   12,899  
Total non-interest expense 158,690   149,370   141,561   140,378   129,862  
Income before income taxes 90,456   112,099   99,356   105,250   91,091  
Income tax expense 16,539   23,958   21,387   22,411   19,200  
Net income 73,917   88,141   77,969   82,839   71,891  
Preferred stock dividends 2,437   2,438   2,437   2,438   2,437  
Net income available to common shareholders $ 71,480   $ 85,703   $ 75,532   $ 80,401   $ 69,454  
                               


TEXAS CAPITAL BANCSHARES, INC.
CONSOLIDATED DAILY AVERAGE BALANCES, AVERAGE YIELDS AND RATES - UNAUDITED
(Dollars in thousands)
  4th Quarter 2019   3rd Quarter 2019   2nd Quarter 2019   1st Quarter 2019   4th Quarter 2018
  Average
Balance
Revenue/
Expense
Yield/
Rate
  Average
Balance
Revenue/
Expense
Yield/
Rate
  Average
Balance
Revenue/
Expense
Yield/
Rate
  Average
Balance
Revenue/
Expense
Yield/
Rate
  Average
Balance
Revenue/
Expense
Yield/
Rate
Assets                                      
Investment securities - Taxable $ 40,904   $ 693   6.72 %   $ 39,744   $ 357   3.56 %   $ 38,887   $ 287   2.96 %   $ 30,625   $ 274   3.62 %   $ 23,977   $ 259   4.29 %
Investment securities - Non-taxable(2) 197,591   2,437   4.89 %   200,090   2,480   4.92 %   192,115   2,498   5.21 %   114,341   1,501   5.33 %   93,394   1,285   5.46 %
Federal funds sold and securities purchased under resale agreements 102,320   439   1.70 %   100,657   554   2.18 %   28,436   157   2.22 %   63,652   379   2.41 %   173,654   984   2.25 %
Interest-bearing deposits in other banks 5,387,000   22,553   1.66 %   4,184,217   22,887   2.17 %   2,491,827   14,634   2.36 %   1,823,106   11,019   2.45 %   1,585,763   8,990   2.25 %
LHS, at fair value 3,567,836   33,411   3.72 %   2,555,269   26,206   4.07 %   2,494,883   27,607   4.44 %   2,122,302   25,303   4.84 %   2,049,395   24,407   4.72 %
LHI, mortgage finance loans 7,870,888   63,114   3.18 %   8,118,025   68,660   3.36 %   7,032,963   63,523   3.62 %   4,931,879   46,368   3.81 %   5,046,540   47,305   3.72 %
LHI(1)(2) 16,667,259   216,686   5.16 %   16,901,391   235,557   5.53 %   16,781,733   239,829   5.73 %   16,866,456   242,155   5.82 %   16,643,559   239,995   5.72 %
Less allowance for loan losses 189,353         212,898         206,654         192,122         182,814      
LHI, net of allowance 24,348,794   279,800   4.56 %   24,806,518   304,217   4.87 %   23,608,042   303,352   5.15 %   21,606,213   288,523   5.42 %   21,507,285   287,300   5.30 %
Total earning assets 33,644,445   339,333   4.00 %   31,886,495   356,701   4.44 %   28,854,190   348,535   4.84 %   25,760,239   326,999   5.15 %   25,433,468   323,225   5.04 %
Cash and other assets 974,866         1,000,117         940,793         894,797         828,156      
Total assets $ 34,619,311         $ 32,886,612         $ 29,794,983         $ 26,655,036         $ 26,261,624      
Liabilities and Stockholders’ Equity                                      
Transaction deposits $ 3,817,294   $ 16,428   1.71 %   $ 3,577,905   $ 18,442   2.04 %   $ 3,475,404   $ 18,037   2.08 %   $ 3,263,976   $ 16,001   1.99 %   $ 3,233,960   $ 15,150   1.86 %
Savings deposits 11,111,326   40,603   1.45 %   10,331,078   45,586   1.75 %   8,896,537   40,994   1.85 %   8,751,200   41,673   1.93 %   8,354,332   36,913   1.75 %
Time deposits 2,453,655   13,956   2.26 %   2,706,434   16,939   2.48 %   2,227,460   13,498   2.43 %   2,010,476   11,380   2.30 %   1,886,016   9,710   2.04 %
Total interest bearing deposits 17,382,275   70,987   1.62 %   16,615,417   80,967   1.93 %   14,599,401   72,529   1.99 %   14,025,652   69,054   2.00 %   13,474,308   61,773   1.82 %
Other borrowings 2,822,465   13,031   1.83 %   2,896,477   16,538   2.27 %   4,018,231   25,326   2.53 %   2,412,254   15,370   2.58 %   2,290,520   13,823   2.39 %
Subordinated notes 282,074   4,191   5.89 %   281,979   4,191   5.90 %   281,889   4,191   5.96 %   281,799   4,191   6.03 %   281,708   4,191   5.90 %
Trust preferred subordinated debentures 113,406   1,163   4.07 %   113,406   1,237   4.33 %   113,406   1,294   4.58 %   113,406   1,332   4.76 %   113,406   1,258   4.40 %
Total interest bearing liabilities 20,600,220   89,372   1.72 %   19,907,279   102,933   2.05 %   19,012,927   103,340   2.18 %   16,833,111   89,947   2.17 %   16,159,942   81,045   1.99 %
Demand deposits 10,933,887         9,992,406         7,929,266         7,047,120         7,462,392      
Other liabilities 278,964         264,506         220,305         223,142         157,278      
Stockholders’ equity 2,806,240         2,722,421         2,632,485         2,551,663         2,482,012      
Total liabilities and stockholders’ equity $ 34,619,311         $ 32,886,612         $ 29,794,983         $ 26,655,036         $ 26,261,624      
Net interest income(2)   $ 249,961         $ 253,768         $ 245,195         $ 237,052         $ 242,180    
Net interest margin     2.95 %       3.16 %       3.41 %       3.73 %       3.78 %
                                                 


(1) The loan averages include loans on which the accrual of interest has been discontinued and are stated net of unearned income.
(2) Taxable equivalent rates used where applicable.
   

INVESTOR CONTACT
Julie Anderson, 214.932.6773
julie.anderson@texascapitalbank.com

MEDIA CONTACT
Shannon Wherry, 469.399.8527
shannon.wherry@texascapitalbank.com