EX-99.1 2 a01242018exhibit991.htm EXHIBIT 99.1 EARNINGS RELEASE Exhibit
Exhibit 99.1
tcbilogoa43.jpg
January 24, 2018
INVESTOR CONTACT
Heather Worley, 214.932.6646
heather.worley@texascapitalbank.com

TEXAS CAPITAL BANCSHARES, INC. ANNOUNCES OPERATING RESULTS FOR 2017

DALLAS - January 24, 2018 - Texas Capital Bancshares, Inc. (NASDAQ: TCBI), the parent company of Texas Capital Bank, announced earnings and operating results for the fourth quarter and full year of 2017.

“We are pleased to finish 2017 with strong operating results, including record earnings. The strong loan and deposit growth in 2017 positions us well as we move into 2018," said Keith Cargill, CEO. "We are focused on developing our talent and leveraging our people with improved technology as we gain efficiencies and improve client experience."

Q4 2017 was negatively impacted by a $17.6 million ($0.35 per share) write-off of our deferred tax asset ("DTA") as a result of the Tax Cuts and Jobs Act (the "Tax Act"). The amount of the write-off is expected to be recovered during 2018 from cash tax savings resulting from the Tax Act.
Net income decreased 24% on a linked quarter basis and decreased 8% from the fourth quarter of 2016.
EPS decreased 25% on a linked quarter basis and decreased 13% from the fourth quarter of 2016.
Loans held for investment ("LHI"), excluding mortgage finance, increased 4% on a linked quarter basis and 18% from the fourth quarter of 2016.
Total mortgage finance loans, including mortgage correspondent loans ("MCA loans"), decreased 4% on a linked quarter basis and increased 16% from the fourth quarter of 2016.
Demand deposits decreased 5% and total deposits remained flat on a linked quarter basis (increased 4% and 8% on an average basis, respectively), and decreased 2% and increased 12%, respectively, from the fourth quarter of 2016.

FINANCIAL SUMMARY
(dollars and shares in thousands)
 
2017
 
2016
 
% Change
ANNUAL OPERATING RESULTS
 
 
 
 
 
Net income
$
197,063

 
$
155,119

 
27
 %
Net income available to common stockholders
$
187,313

 
$
145,369

 
29
 %
Diluted EPS
$
3.73

 
$
3.11

 
20
 %
Diluted shares
50,260

 
46,766

 
7
 %
ROA
0.87
%
 
0.74
%
 
 
ROE
9.51
%
 
9.27
%
 
 
QUARTERLY OPERATING RESULTS
 
 
 
 
 
Net income
$
44,742

 
$
48,386

 
(8
)%
Net income available to common stockholders
$
42,305

 
$
45,949

 
(8
)%
Diluted EPS
$
0.84

 
$
0.96

 
(13
)%
Diluted shares
50,312

 
47,760

 
5
 %
ROA
0.71
%
 
0.85
%
 
 
ROE
8.18
%
 
10.82
%
 
 
BALANCE SHEET
 
 
 
 
 
Loans held for sale (MCA)
$
1,007,695

 
$
968,929

 
4
 %
LHI, mortgage finance
5,308,160

 
4,497,338

 
18
 %
LHI
15,366,252

 
13,001,011

 
18
 %
Total LHI
20,674,412

 
17,498,349

 
18
 %
Total loans
21,685,416

 
18,467,278

 
17
 %
Total assets
25,075,645

 
21,697,134

 
16
 %
Demand deposits
7,812,660

 
7,994,201

 
(2
)%
Total deposits
19,123,180

 
17,016,831

 
12
 %
Stockholders’ equity
2,202,721

 
2,009,557

 
10
 %





DETAILED FINANCIALS
Texas Capital Bancshares, Inc. reported net income of $197.1 million and net income available to common stockholders of $187.3 million for the year ended December 31, 2017, compared to net income of $155.1 million and net income available to common stockholders of $145.4 million for the year ended December 31, 2016. For the fourth quarter of 2017, net income was $44.7 million and net income available to common stockholders was $42.3 million, compared to net income of $48.4 million and net income available to common stockholders of $45.9 million for the same period in 2016. On a fully diluted basis, earnings per common share were $3.73 for the year ended December 31, 2017 compared to $3.11 for the same period in 2016. Diluted earnings per common share were $0.84 for the quarter ended December 31, 2017 compared to $0.96 for the same period of 2016. The decrease reflects a $17.6 million write-off of our DTA in response to enactment of the Tax Act, which was recorded as additional income tax expense during the fourth quarter. The write-off had an adverse effect of $0.35 on earnings per common share for the 2017 fourth quarter and full year. The federal corporate income tax rates declined from 35% to 21% effective January 1, 2018 as a result of the Tax Act. The amount of the DTA write-off is expected to be recovered in 2018 from cash tax savings attributable to the Tax Act.

Return on common equity ("ROE") was 9.51 percent and return on average assets ("ROA") was 0.87 percent for the year ended December 31, 2017, compared to 9.27 percent and 0.74 percent, respectively, for the year ended December 31, 2016. ROE was 8.18 percent and ROA was 0.71 percent for the fourth quarter of 2017, compared to 11.20 percent and 0.99 percent, respectively, for the third quarter of 2017 and 10.82 percent and 0.85 percent, respectively, for the fourth quarter of 2016. The linked quarter and year-over-year decreases in ROE and ROA for the fourth quarter of 2017 resulted primarily from the DTA write-off, which outpaced the increases in net-interest income and decreases in the provision for credit losses. Excluding the DTA write-off, year-to-date and quarter-to-date December 31, 2017 ROE would have been 10.41% and 11.58%, respectively.

Net interest income was $210.6 million for the fourth quarter of 2017, compared to $204.4 million for the third quarter of 2017 and $171.2 million for the fourth quarter of 2016. The linked quarter and year-over-year increases in net interest income are due primarily to the growth in total LHI. Net interest margin for the fourth quarter of 2017 was 3.47% percent, a decrease of 12 basis points from the third quarter of 2017 and an increase of 36 basis points from the fourth quarter of 2016. Traditional LHI yields were down 3 basis points from the third quarter of 2017, but were up 50 basis points compared to the fourth quarter of 2016. In contrast, total cost of deposits for the fourth quarter of 2017 was up only 6 basis points to 0.53 percent compared to the third quarter of 2017 and up 31 basis points compared to the fourth quarter of 2016. Net interest margin for the fourth quarter of 2017 was adversely affected by increases in mortgage and liquidity assets which are at lower yields than traditional LHI, but produced significant growth in net interest income.

Average LHI, excluding mortgage finance loans, for the year ended December 31, 2017 were $14.0 billion, an increase of $1.7 billion, or 13 percent, from 2016. Average LHI, excluding mortgage finance loans, for the fourth quarter of 2017 were $15.0 billion, an increase of $582.1 million, or 4 percent, from the third quarter of 2017 and an increase of $2.3 billion, or 18 percent, from the fourth quarter of 2016. Average total mortgage finance loans (including MCA) for the fourth quarter of 2017 were $6.2 billion, an increase of $388.9 million, or 7 percent, from the third quarter of 2017 and an increase of $930.2 million, or 17 percent, from the fourth quarter of 2016.

Average total deposits for the year ended December 31, 2017 were $18.5 billion, an increase of $1.2 billion, or 7 percent, from 2016. Average demand deposits for the year ended December 31, 2017 were $8.3 billion, an increase of $196.5 billion, or 2 percent, from 2016. Average total deposits for the fourth quarter of 2017 increased $1.5 billion from the third quarter of 2017 and increased $1.9 billion from the fourth quarter of 2016. Average demand deposits for the fourth quarter of 2017 increased $321.6 million, or 4 percent, to $9.1 billion from $8.8 billion from the third quarter of 2017, and decreased $43.8 million, or 0.48 percent, from the third quarter of 2017.

We recorded a $2.0 million provision for credit losses for the fourth quarter of 2017 compared to $20.0 million for the third quarter of 2017 and $9.0 million for the fourth quarter of 2016. The provision for the fourth quarter of 2017 was driven by the consistent application of our methodology. The linked quarter and year-over-year decreases were primarily related to improvements in the composition of our pass-rated and classified loan portfolios, including energy loans. The combined allowance for credit losses at December 31, 2017 decreased to 1.26 percent of LHI excluding mortgage finance loans compared to 1.30 percent at September 30, 2017 and 1.38 percent at December 31, 2016. In management’s opinion, the allowance is appropriate and is derived from consistent application of the methodology for establishing reserves for the loan portfolio.

We experienced a decrease in non-performing assets in the fourth quarter of 2017 compared to levels reported in the third quarter of 2017 and fourth quarter of 2016, reducing the ratio or total non-performing assets to total LHI plus other real estate owned ("OREO") to 0.55 percent compared to 0.67 percent for the third quarter of 2017 and 1.07 percent for the fourth quarter of 2016. The linked quarter and year-over-year decreases are primarily related to the decrease in energy non-accrual loans from $81.6 million at September 30, 2017 and $121.5 at December 31, 2016 to $65.2 million at December 31, 2017. Net charge-offs for the fourth quarter of 2017 were $964,000 compared to $10.7 million for the third quarter of 2017 and $20.8 million for the fourth quarter of 2016. For the fourth quarter of 2017, net charge-offs related to energy loans were $175,000 compared to net charge-offs of $6.3 million for the third quarter of 2017 and $16.3 million for the fourth quarter of 2016. For the fourth quarter of 2017, net charge-offs were 0.02 percent of average total LHI, compared to 0.22 percent for the third quarter of 2017 and 0.48 percent for the same period in 2016. At December 31, 2017, OREO was $11.7 million compared to $18.1 million at September 30, 2017 and $19.0 at December 31, 2016. The linked quarter and year-over-year decreases were due to a $6.1 million permanent write down of a commercial property during the fourth quarter of 2017.

2





Non-interest income increased $539,000, or 3 percent, during the fourth quarter of 2017 compared to the same period of 2016, and increased $371,000, or 2 percent, compared to the third quarter of 2017. The year-over-year increase primarily related to a $3.9 million increase in servicing income during the fourth quarter of 2017 compared to the same period of 2016 primarily attributable to an increase in mortgage servicing rights ("MSRs"). Offsetting this increase was a $2.7 million decrease in other non-interest income and a $1.6 million decrease in brokered loan fees, which resulted from a decrease in mortgage finance volumes.

Non-interest expense for the fourth quarter of 2017 increased $26.6 million, or 25 percent, compared to the fourth quarter of 2016, and increased $18.3 million, or 16 percent, compared to the third quarter of 2017. The year-over-year increase is primarily related to a $6.1 million write-down of OREO taken during the fourth quarter of 2017 and a $6.8 million increase in servicing related expenses resulting from a $2.8 million impairment charge primarily due to an anticipated sale of Ginnie Mae MSRs in the first quarter of 2018 and an increase in MSRs, which are being amortized. Non-interest expense for the fourth quarter of 2017 was also affected by increases in salaries and employee benefits, marketing expense and legal and professional expense of $4.1 million, $3.8 million and $2.3 million, respectively, all of which were due to general business growth. The linked quarter increase in non-interest expense was primarily related to the $6.1 million write-down of OREO, as well as a $3.3 million increase in servicing related expenses, which included a $2.8 million impairment charge on MSRs, a $2.4 million increase in legal and professional expense and a $2.3 million increase in salaries and employee benefits.

Stockholders’ equity increased by 10 percent from $2.0 billion at December 31, 2016 to $2.2 billion at December 31, 2017, primarily due to retention of net income. Texas Capital Bank is well capitalized under regulatory guidelines. At December 31, 2017, our ratio of tangible common equity to total tangible assets was 8.1 percent.
    

ABOUT TEXAS CAPITAL BANCSHARES, INC.
Texas Capital Bancshares, Inc. (NASDAQ®: TCBI), a member of the Russell 2000® 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.

This news release may be deemed to include forward-looking statements which are based on management’s current estimates or expectations of future events or future results. These statements are not historical in nature and can generally be identified by such words as “believe,” “expect,” “estimate,” “anticipate,” “plan,” “may,” “will,” “intend” and similar expressions. 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 declines and volatility in oil and gas prices, the financial impact of the Tax Cuts and Jobs Act on our results of operations, the impact on our loan and deposit portfolios as a result of Hurricanes Harvey and Irma, rates of default or loan losses, volatility in the mortgage industry, the success or failure of our business strategies, future financial performance, future growth and earnings, the appropriateness of our allowance for loan losses and provision for credit losses, the impact of increased regulatory requirements and legislative changes on our business, increased competition, interest rate risk, the success or failure of new lines of business and new product or service offerings and the impact of 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 and in other filings we make with the Securities and Exchange Commission. The information contained in this release speaks only as of its date. We are under no obligation, and expressly disclaim such obligation, to update, alter or revise our forward-looking statements, whether as a result of new information, future events, or otherwise.

3




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
 
2017
2017
2017
2017
2016
CONSOLIDATED STATEMENTS OF INCOME
 
 
 
 
 
Interest income
$
249,519

$
237,643

$
208,191

$
183,946

$
188,671

Interest expense
38,870

33,282

25,232

20,587

17,448

Net interest income
210,649

204,361

182,959

163,359

171,223

Provision for credit losses
2,000

20,000

13,000

9,000

9,000

Net interest income after provision for credit losses
208,649

184,361

169,959

154,359

162,223

Non-interest income
19,374

19,003

18,769

17,110

18,835

Non-interest expense
133,138

114,830

111,814

106,094

106,523

Income before income taxes
94,885

88,534

76,914

65,375

74,535

Income tax expense
50,143

29,850

25,819

22,833

26,149

Net income
44,742

58,684

51,095

42,542

48,386

Preferred stock dividends
2,437

2,438

2,437

2,438

2,437

Net income available to common stockholders
$
42,305

$
56,246

$
48,658

$
40,104

$
45,949

 
 
 
 
 
 
Diluted EPS
$
0.84

$
1.12

$
0.97

$
0.80

$
0.96

Diluted shares
50,311,962

50,250,866

50,229,670

50,234,230

47,759,548

CONSOLIDATED BALANCE SHEET DATA
 
 
 
 
 
Total assets
$
25,075,645

$
24,400,998

$
23,119,713

$
20,864,874

$
21,697,134

LHI
15,366,252

14,828,406

14,280,353

13,298,918

13,001,011

LHI, mortgage finance
5,308,160

5,642,285

5,183,600

3,371,598

4,497,338

Loans held for sale, MCA
1,007,695

955,983

843,164

884,647

968,929

Liquidity assets(1)
2,727,581

2,357,537

2,142,658

2,804,921

2,725,645

Securities
23,511

24,224

119,043

42,203

24,874

Demand deposits
7,812,660

8,263,202

8,174,830

7,094,696

7,994,201

Total deposits
19,123,180

19,081,257

17,292,223

16,605,380

17,016,831

Other borrowings
3,165,040

2,583,496

3,162,224

1,641,834

2,109,575

Subordinated notes
281,406

281,315

281,225

281,134

281,044

Long-term debt
113,406

113,406

113,406

113,406

113,406

Stockholders’ equity
2,202,721

2,158,363

2,100,553

2,050,442

2,009,557

 
 
 
 
 
 
End of period shares outstanding
49,643,344

49,621,825

49,595,252

49,560,100

49,503,662

Book value
$
41.35

$
40.47

$
39.33

$
38.35

$
37.56

Tangible book value(2)
$
40.97

$
40.09

$
38.94

$
37.95

$
37.17

SELECTED FINANCIAL RATIOS
 
 
 
 
 
Net interest margin
3.47
%
3.59
%
3.57
%
3.29
%
3.11
%
Return on average assets
0.71
%
0.99
%
0.96
%
0.83
%
0.85
%
Return on average common equity
8.18
%
11.20
%
10.08
%
8.60
%
10.82
%
Non-interest income to average earning assets
0.32
%
0.33
%
0.36
%
0.34
%
0.34
%
Efficiency ratio(3)
57.9
%
51.4
%
55.4
%
58.8
%
56.0
%
Efficiency ratio, excluding OREO write-down(3)
55.2
%
51.4
%
55.4
%
58.8
%
56.0
%
Non-interest expense to average earning assets
2.17
%
2.00
%
2.17
%
2.12
%
1.93
%
Tangible common equity to total tangible assets(4)
8.1
%
8.2
%
8.4
%
9.0
%
8.5
%
Common Equity Tier 1
8.5
%
8.4
%
8.6
%
9.6
%
9.0
%
Tier 1 capital
9.5
%
9.4
%
9.8
%
10.9
%
10.2
%
Total capital
11.5
%
11.4
%
11.8
%
13.3
%
12.5
%
Leverage
9.2
%
9.6
%
10.3
%
10.3
%
9.3
%
(1)
Liquidity assets include Federal funds sold and 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)
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.

4




TEXAS CAPITAL BANCSHARES, INC.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(Dollars in thousands)
 
December 31, 2017
December 31, 2016
%
Change
Assets
 
 
 
Cash and due from banks
$
178,010

$
113,707

57
 %
Interest-bearing deposits
2,697,581

2,700,645

 %
Federal funds sold and securities purchased under resale agreements
30,000

25,000

20
 %
Securities, available-for-sale
23,511

24,874

(5
)%
Loans held for sale ($1,007.7 million and $968.9 million at December 31, 2017 and 2016, respectively, at fair value)
1,011,004

968,929

4
 %
LHI, mortgage finance
5,308,160

4,497,338

18
 %
LHI (net of unearned income)
15,366,252

13,001,011

18
 %
Less: Allowance for loan losses
184,655

168,126

10
 %
LHI, net
20,489,757

17,330,223

18
 %
Mortgage servicing rights, net
85,327

28,536

199
 %
Premises and equipment, net
25,176

19,775

27
 %
Accrued interest receivable and other assets
516,239

465,933

11
 %
Goodwill and intangibles, net
19,040

19,512

(2
)%
Total assets
$
25,075,645

$
21,697,134

16
 %
 
 
 
 
Liabilities and Stockholders’ Equity
 
 
 
Liabilities:
 
 
 
Deposits:
 
 
 
Non-interest bearing
$
7,812,660

$
7,994,201

(2
)%
Interest bearing
11,310,520

9,022,630

25
 %
Total deposits
19,123,180

17,016,831

12
 %
 
 
 


Accrued interest payable
7,680

5,498

40
 %
Other liabilities
182,212

161,223

13
 %
Federal funds purchased and repurchase agreements
365,040

109,575

233
 %
Other borrowings
2,800,000

2,000,000

40
 %
Subordinated notes, net
281,406

281,044

 %
Trust preferred subordinated debentures
113,406

113,406

 %
Total liabilities
22,872,924

19,687,577

16
 %
 
 
 
 
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, 2017 and 2016
150,000

150,000

 %
Common stock, $.01 par value:
 
 
 
Authorized shares - 100,000,000
 
 
 
Issued shares - 49,643,761 and 49,504,079 at December 31, 2017 and 2016, respectively
496

495

 %
Additional paid-in capital
961,305

955,468

1
 %
Retained earnings
1,090,500

903,187

21
 %
Treasury stock (shares at cost: 417 at December 31, 2017 and 2016)
(8
)
(8
)
 %
Accumulated other comprehensive income, net of taxes
428

415

3
 %
Total stockholders’ equity
2,202,721

2,009,557

10
 %
Total liabilities and stockholders’ equity
$
25,075,645

$
21,697,134

16
 %

5




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
 
2017
2016
2017
2016
Interest income
 
 
 
 
Interest and fees on loans
$
238,906

$
182,909

$
846,292

$
684,582

Securities
213

228

1,066

967

Federal funds sold and securities purchased under resale agreements
936

338

2,542

1,547

Deposits in other banks
9,464

5,196

29,399

16,312

Total interest income
249,519

188,671

879,299

703,408

Interest expense
 
 
 
 
Deposits
27,625

10,432

79,886

37,175

Federal funds purchased
723

156

2,592

518

Other borrowings
5,380

1,863

15,137

6,128

Subordinated notes
4,191

4,191

16,764

16,764

Trust preferred subordinated debentures
951

806

3,592

3,009

Total interest expense
38,870

17,448

117,971

63,594

Net interest income
210,649

171,223

761,328

639,814

Provision for credit losses
2,000

9,000

44,000

77,000

Net interest income after provision for credit losses
208,649

162,223

717,328

562,814

Non-interest income
 
 
 
 
Service charges on deposit accounts
3,109

2,940

12,432

10,341

Wealth management and trust fee income
1,767

1,244

6,153

4,268

Bank owned life insurance (BOLI) income
698

481

2,260

2,073

Brokered loan fees
5,692

7,249

23,331

25,339

Servicing income
5,270

1,410

15,657

1,715

Swap fees
586

536

3,990

2,866

Other
2,252

4,975

10,433

14,178

Total non-interest income
19,374

18,835

74,256

60,780

Non-interest expense
 
 
 
 
Salaries and employee benefits
70,192

66,081

264,231

228,985

Net occupancy expense
6,749

5,937

25,811

23,221

Marketing
8,438

4,617

26,787

17,303

Legal and professional
8,756

6,443

29,731

23,326

Communications and technology
6,590

6,334

31,004

25,562

FDIC insurance assessment
6,710

6,573

23,510

24,440

Servicing related expenses
7,177

398

15,506

1,703

Allowance and other carrying costs for OREO
6,122

59

6,437

824

Other
12,404

10,081

42,859

37,033

Total non-interest expense
133,138

106,523

465,876

382,397

Income before income taxes
94,885

74,535

325,708

241,197

Income tax expense
50,143

26,149

128,645

86,078

Net income
44,742

48,386

197,063

155,119

Preferred stock dividends
2,437

2,437

9,750

9,750

Net income available to common stockholders
$
42,305

$
45,949

$
187,313

$
145,369

 
 
 
 
 
Basic earnings per common share
$
0.85

$
0.97

$
3.78

$
3.14

Diluted earnings per common share
$
0.84

$
0.96

$
3.73

$
3.11



6




TEXAS CAPITAL BANCSHARES, INC.
SUMMARY OF LOAN LOSS EXPERIENCE
(Dollars in thousands)
 
4th Quarter
3rd Quarter
2nd Quarter
1st Quarter
4th Quarter
 
2017
2017
2017
2017
2016
Allowance for loan losses:
 
 
 
 
 
Beginning balance
$
182,929

$
174,225

$
172,013

$
168,126

$
180,436

Loans charged-off:
 
 
 
 
 
Commercial
1,999

10,603

12,310

9,233

22,326

Real estate

250

40



Construction

59




Consumer


180


7

Leases





Total charge-offs
1,999

10,912

12,530

9,233

22,333

Recoveries:
 
 
 
 
 
Commercial
1,019

132

61

3,381

1,535

Real estate
1

21

3

50

27

Construction

3


101


Consumer
14

15

36

5

5

Leases
1

1


8

6

Total recoveries
1,035

172

100

3,545

1,573

Net charge-offs
964

10,740

12,430

5,688

20,760

Provision for loan losses
2,690

19,444

14,642

9,575

8,450

Ending balance
$
184,655

$
182,929

$
174,225

$
172,013

$
168,126

 
 
 
 
 
 
Allowance for off-balance sheet credit losses:
 
 
 
 
 
Beginning balance
$
9,761

$
9,205

$
10,847

$
11,422

$
10,872

Provision for off-balance sheet credit losses
(690
)
556

(1,642
)
(575
)
550

Ending balance
$
9,071

$
9,761

$
9,205

$
10,847

$
11,422

 
 
 
 
 
 
Total allowance for credit losses
$
193,726

$
192,690

$
183,430

$
182,860

$
179,548

 
 
 
 
 
 
Total provision for credit losses
$
2,000

$
20,000

$
13,000

$
9,000

$
9,000

 
 
 
 
 
 
Allowance for loan losses to LHI
0.89
%
0.89
%
0.90
%
1.03
%
0.96
%
Allowance for loan losses to LHI excluding mortgage finance loans(2)
1.20
%
1.23
%
1.22
%
1.29
%
1.29
%
Allowance for loan losses to average LHI
0.92
%
0.95
%
0.99
%
1.09
%
0.98
%
Allowance for loan losses to average LHI excluding mortgage finance loans(2)
1.23
%
1.27
%
1.27
%
1.33
%
1.32
%
Net charge-offs to average LHI(1)
0.02
%
0.22
%
0.28
%
0.15
%
0.48
%
Net charge-offs to average LHI excluding mortgage finance loans(1)(2)
0.03
%
0.30
%
0.36
%
0.18
%
0.65
%
Net charge-offs to average LHI for last twelve months(1)
0.16
%
0.29
%
0.27
%
0.28
%
0.29
%
Net charge-offs to average LHI, excluding mortgage finance loans, for last twelve months(1)(2)
0.21
%
0.37
%
0.36
%
0.36
%
0.38
%
Total provision for credit losses to average LHI(1)
0.04
%
0.41
%
0.30
%
0.23
%
0.21
%
Total provision for credit losses to average LHI excluding mortgage finance loans(1)(2)
0.05
%
0.55
%
0.38
%
0.28
%
0.28
%
Combined allowance for credit losses to LHI
0.94
%
0.94
%
0.94
%
1.10
%
1.03
%
Combined allowance for credit losses to LHI, excluding mortgage finance loans(2)
1.26
%
1.30
%
1.28
%
1.37
%
1.38
%
(1)
Interim period ratios are annualized.
(2)
The indicated ratios are presented with and excluding the mortgage finance loans because the risk profile of our mortgage finance loans is different than our other loans held for investment. No provision for credit losses is allocated to these loans based on the internal risk grade assigned.


7




TEXAS CAPITAL BANCSHARES, INC.
 
 
 
 
 
SUMMARY OF NON-PERFORMING ASSETS AND PAST DUE LOANS
 
 
 
(Dollars in thousands)
 
 
 
 
 
 
4th Quarter
3rd Quarter
2nd Quarter
1st Quarter
4th Quarter
 
2017
2017
2017
2017
2016
 
 
 
 
 
 
Non-performing assets (NPAs):
 
 
 
 
 
Non-accrual loans
$
101,444

$
118,205

$
123,730

$
146,549

$
167,791

Other real estate owned (OREO)
11,742

18,131

18,689

18,833

18,961

Total
$
113,186

$
136,336

$
142,419

$
165,382

$
186,752

 
 
 
 
 
 
Non-accrual loans to LHI
0.49
%
0.58
%
0.64
%
0.88
%
0.96
%
Non-accrual loans to LHI excluding mortgage finance loans(1)
0.66
%
0.80
%
0.87
%
1.10
%
1.29
%
Total NPAs to LHI plus OREO
0.55
%
0.67
%
0.73
%
0.99
%
1.07
%
Total NPAs to LHI excluding mortgage finance loans plus OREO(1)
0.74
%
0.92
%
1.00
%
1.24
%
1.43
%
Total NPAs to earning assets
0.47
%
0.58
%
0.64
%
0.82
%
0.89
%
Allowance for loan losses to non-accrual loans
1.8x

1.5x

1.4x

1.2x

1.0x

 
 
 
 
 
 
Restructured loans
$

$

$

$

$

Loans past due 90 days and still accruing(2)(3)
$
28,166

$
8,892

$
11,077

$
8,799

$
10,729

 
 
 
 
 
 
Loans past due 90 days to LHI
0.14
%
0.04
%
0.06
%
0.05
%
0.06
%
Loans past due 90 days to LHI excluding mortgage finance loans(2)
0.18
%
0.06
%
0.08
%
0.07
%
0.08
%
(1)
The indicated ratios are presented with and excluding the mortgage finance loans because the risk profile of our mortgage finance loans is different than our other loans held for investment. No provision for credit losses is allocated to these loans based on the internal risk grade assigned.
(2)
At December 31, 2017, loans past due 90 days and still accruing includes premium finance loans of $5.5 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.
(3)
At December 31, 2017, loans past due 90 days and still accruing includes $19.7 million in loans held for sale, of which $19.0 million are loans with government guarantees that we purchased and sold into Ginnie Mae pools. Pursuant to Ginnie Mae servicing guidelines we have the unilateral right to repurchase these loans, and therefore must record them as loans held for sale on our balance sheet regardless of whether the repurchase option has been exercised.

8





TEXAS CAPITAL BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(Dollars in thousands)
 
 
 
 
 
 
 
4th Quarter
3rd Quarter
2nd Quarter
1st Quarter
4th Quarter
 
2017
2017
2017
2017
2016
Interest income
 
 
 
 
 
Interest and fees on loans
$
238,906

$
229,116

$
201,646

$
176,624

$
182,909

Securities
213

341

287

225

228

Federal funds sold and securities purchased under resale agreements
936

642

434

530

338

Deposits in other banks
9,464

7,544

5,824

6,567

5,196

Total interest income
249,519

237,643

208,191

183,946

188,671

Interest expense
 
 
 
 
 
Deposits
27,625

22,435

16,533

13,293

10,432

Federal funds purchased
723

891

726

252

156

Other borrowings
5,380

4,835

2,901

2,021

1,863

Subordinated notes
4,191

4,191

4,191

4,191

4,191

Trust preferred subordinated debentures
951

930

881

830

806

Total interest expense
38,870

33,282

25,232

20,587

17,448

Net interest income
210,649

204,361

182,959

163,359

171,223

Provision for credit losses
2,000

20,000

13,000

9,000

9,000

Net interest income after provision for credit losses
208,649

184,361

169,959

154,359

162,223

Non-interest income
 
 
 
 
 
Service charges on deposit accounts
3,109

3,211

3,067

3,045

2,940

Wealth management and trust fee income
1,767

1,627

1,402

1,357

1,244

Bank owned life insurance (BOLI) income
698

615

481

466

481

Brokered loan fees
5,692

6,152

5,809

5,678

7,249

Servicing income
5,270

4,486

3,700

2,201

1,410

Swap fees
586

647

954

1,803

536

Other
2,252

2,265

3,356

2,560

4,975

Total non-interest income
19,374

19,003

18,769

17,110

18,835

Non-interest expense
 
 
 
 
 
Salaries and employee benefits
70,192

67,882

63,154

63,003

66,081

Net occupancy expense
6,749

6,436

6,515

6,111

5,937

Marketing
8,438

7,242

6,157

4,950

4,617

Legal and professional
8,756

6,395

7,127

7,453

6,443

Communications and technology
6,590

6,002

11,906

6,506

6,334

FDIC insurance assessment
6,710

6,203

4,603

5,994

6,573

Servicing related expenses
7,177

3,897

2,682

1,750

398

Allowance and other carrying costs for OREO
6,122

105

71

139

59

Other
12,404

10,668

9,599

10,188

10,081

Total non-interest expense
133,138

114,830

111,814

106,094

106,523

Income before income taxes
94,885

88,534

76,914

65,375

74,535

Income tax expense
50,143

29,850

25,819

22,833

26,149

Net income
44,742

58,684

51,095

42,542

48,386

Preferred stock dividends
2,437

2,438

2,437

2,438

2,437

Net income available to common shareholders
$
42,305

$
56,246

$
48,658

$
40,104

$
45,949



9




TEXAS CAPITAL BANCSHARES, INC.
QUARTERLY FINANCIAL SUMMARY - UNAUDITED
Consolidated Daily Average Balances, Average Yields and Rates
(Dollars in thousands)
 
4th Quarter 2017
 
3rd Quarter 2017
 
2nd Quarter 2017
 
1st Quarter 2017
 
4th Quarter 2016
 
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
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Securities - Taxable
$
23,678

$
213

3.57
%
 
$
86,087

$
340

1.57
%
 
$
65,049

$
287

1.77
%
 
$
31,905

$
224

2.84
%
 
$
25,008

$
221

3.53
%
Securities - Non-taxable(2)


%
 


%
 


%
 
224

3

4.85
%
 
531

9

6.37
%
Federal funds sold and securities purchased under resale agreements
292,544

936

1.27
%
 
205,938

642

1.24
%
 
174,264

434

1.00
%
 
276,910

530

0.78
%
 
254,008

338

0.53
%
Interest-bearing deposits in other banks
2,924,942

9,464

1.28
%
 
2,383,060

7,544

1.26
%
 
2,250,330

5,824

1.04
%
 
3,312,256

6,567

0.80
%
 
3,812,076

5,197

0.54
%
Loans held for sale, at fair value
1,144,124

11,507

3.99
%
 
1,009,703

9,882

3.88
%
 
845,623

8,235

3.91
%
 
1,064,322

9,535

3.63
%
 
944,484

7,903

3.33
%
LHI, mortgage finance loans
5,102,107

44,477

3.46
%
 
4,847,530

42,294

3.46
%
 
3,805,831

33,399

3.52
%
 
2,757,566

23,105

3.40
%
 
4,371,475

35,081

3.19
%
LHI(1)(2)
15,010,041

185,039

4.89
%
 
14,427,980

178,839

4.92
%
 
13,718,739

161,369

4.72
%
 
12,980,544

145,018

4.53
%
 
12,701,868

140,130

4.39
%
Less allowance for loan
       losses
183,233



 
172,774



 
170,957



 
169,318



 
180,727



LHI, net of allowance
19,928,915

229,516

4.57
%
 
19,102,736

221,133

4.59
%
 
17,353,613

194,768

4.50
%
 
15,568,792

168,123

4.38
%
 
16,892,616

175,211

4.13
%
Total earning assets
24,314,203

251,636

4.11
%
 
22,787,524

239,541

4.17
%
 
20,688,879

209,548

4.06
%
 
20,254,409

184,982

3.70
%
 
21,928,723

188,879

3.43
%
Cash and other assets
766,622

 
 
 
713,778

 
 
 
632,097

 
 
 
606,762

 
 
 
595,671

 
 
Total assets
$
25,080,825

 
 
 
$
23,501,302

 
 
 
$
21,320,976

 
 
 
$
20,861,171

 
 
 
$
22,524,394

 
 
Liabilities and Stockholders’ Equity
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Transaction deposits
$
2,469,984

$
5,845

0.94
%
 
$
2,145,324

$
4,359

0.81
%
 
$
2,008,872

$
2,893

0.58
%
 
$
2,008,401

$
2,193

0.44
%
 
$
2,281,240

$
2,129

0.37
%
Savings deposits
8,403,473

20,655

0.98
%
 
7,618,843

17,152

0.89
%
 
6,952,317

12,940

0.75
%
 
6,989,748

10,483

0.61
%
 
6,711,083

7,592

0.45
%
Time deposits
533,312

1,125

0.84
%
 
496,076

924

0.74
%
 
455,542

700

0.62
%
 
427,770

617

0.59
%
 
474,548

711

0.60
%
Total interest bearing deposits
11,406,769

27,625

0.96
%
 
10,260,243

22,435

0.87
%
 
9,416,731

16,533

0.70
%
 
9,425,919

13,293

0.57
%
 
9,466,871

10,432

0.44
%
Other borrowings
1,852,750

6,103

1.31
%
 
1,821,837

5,726

1.25
%
 
1,456,737

3,627

1.00
%
 
1,333,685

2,273

0.69
%
 
1,553,010

2,017

0.52
%
Subordinated notes
281,348

4,191

5.91
%
 
281,256

4,191

5.91
%
 
281,167

4,191

5.98
%
 
281,076

4,191

6.05
%
 
280,985

4,191

5.93
%
Trust preferred subordinated debentures
113,406

951

3.33
%
 
113,406

930

3.25
%
 
113,406

881

3.12
%
 
113,406

830

2.97
%
 
113,406

806

2.83
%
Total interest bearing liabilities
13,654,273

38,870

1.13
%
 
12,476,742

33,282

1.06
%
 
11,268,041

25,232

0.90
%
 
11,154,086

20,587

0.75
%
 
11,414,272

17,446

0.61
%
Demand deposits
9,085,819

 
 
 
8,764,263

 
 
 
7,863,402

 
 
 
7,547,338

 
 
 
9,129,668

 
 
Other liabilities
138,050

 
 
 
116,998

 
 
 
102,653

 
 
 
117,877

 
 
 
141,153

 
 
Stockholders’ equity
2,202,683

 
 
 
2,143,299

 
 
 
2,086,880

 
 
 
2,041,870

 
 
 
1,839,301

 
 
Total liabilities and stockholders’ equity
$
25,080,825

 
 
 
$
23,501,302

 
 
 
$
21,320,976

 
 
 
$
20,861,171

 
 
 
$
22,524,394

 
 
Net interest income(2)
 
$
212,766

 
 
 
$
206,259

 
 
 
$
184,316

 
 
 
$
164,395

 
 
 
$
171,433

 
Net interest margin
 
 
3.47
%
 
 
 
3.59
%
 
 
 
3.57
%
 
 
 
3.29
%
 
 
 
3.11
%
(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.

10