EX-99.1 2 a10172018exhibit991.htm EXHIBIT 99.1 EARNINGS RELEASE Exhibit
Exhibit 99.1
tcbilogoa53.jpg

INVESTOR CONTACT
Heather Worley, 214.932.6646
heather.worley@texascapitalbank.com

TEXAS CAPITAL BANCSHARES, INC. ANNOUNCES OPERATING RESULTS FOR Q3 2018
DALLAS - October 17, 2018 - Texas Capital Bancshares, Inc. (NASDAQ: TCBI), the parent company of Texas Capital Bank, announced earnings and operating results for the third quarter of 2018.
“We continue to focus on strategic initiatives to position ourselves for the future while delivering record financial results," said Keith Cargill, CEO. "Positioning for through-the-cycle credit quality, broadening our funding profile and driving efficiencies, as we enhance the client experience, are top of mind."
•
Loans held for investment ("LHI"), excluding mortgage finance, remained flat on a linked quarter basis, growing 12% from the third quarter of 2017.
•
Total mortgage finance loans, including mortgage correspondent aggregation ("MCA") loans, decreased 1% on a linked quarter basis, and increased 8% from the third quarter of 2017.
•
Demand deposits decreased 8% and total deposits remained flat on a linked quarter basis, decreasing 15% and increasing 7%, respectively, from the third quarter of 2017.
•
Net income increased 20% on a linked quarter basis and increased 46% from the third quarter of 2017.
•
EPS increased 20% on a linked quarter basis and increased 47% from the third quarter of 2017.

FINANCIAL SUMMARY
(dollars and shares in thousands)
 
Q3 2018
 
Q3 2017
 
% Change
QUARTERLY OPERATING RESULTS
 
 
 
 
 
Net income
$
85,552

 
$
58,684

 
46
 %
Net income available to common stockholders
$
83,114

 
$
56,246

 
48
 %
Diluted EPS
$
1.65

 
$
1.12

 
47
 %
Diluted shares
50,381

 
50,251

 
—
 %
ROA
1.31
%
 
0.99
%
 
 
ROE
14.68
%
 
11.20
%
 
 
 
 
 
 
 
 
BALANCE SHEET
 
 
 
 
 
Loans held for sale (LHS), MCA
$
1,651,930

 
$
955,983

 
73
 %
LHI, mortgage finance
5,477,787

 
5,642,285

 
(3
)%
LHI
16,569,538

 
14,828,406

 
12
 %
Total LHI
22,047,325

 
20,470,691

 
8
 %
Total loans
23,699,255

 
21,426,674

 
11
 %
Total assets
27,127,107

 
24,400,998

 
11
 %
Demand deposits
7,031,460

 
8,263,202

 
(15
)%
Total deposits
20,385,637

 
19,081,257

 
7
 %
Stockholders’ equity
2,426,442

 
2,158,363

 
12
 %



DETAILED FINANCIALS
Texas Capital Bancshares, Inc. reported net income of $85.6 million and net income available to common stockholders of $83.1 million for the quarter ended September 30, 2018 compared to net income of $58.7 million and net income available to common stockholders of $56.2 million for the same period in 2017. On a fully diluted basis, earnings per common share were $1.65 for the quarter ended September 30, 2018 compared to $1.12 for the same period of 2017. The increase reflects a $26.9 million year-over-year increase in net income caused by increases in net interest income and non-interest income for the third quarter of 2018 compared to the third quarter of 2017, as well as a decrease in the provision for credit losses and a decrease in income tax rates as a result of the Tax Cuts and Jobs Act which became effective on January 1, 2018, offset by an increase in non-interest expense.

Return on average common equity (“ROE”) was 14.68 percent and return on average assets (“ROA”) was 1.31 percent for the third quarter of 2018, compared to 12.72 percent and 1.16 percent, respectively, for the second quarter of 2018 and 11.20 percent and 0.99 percent, respectively, for the third quarter of 2017. The linked quarter increases in ROE and ROA resulted primarily from the decrease in the provision for credit losses.

Net interest income was $232.2 million for the third quarter of 2018, compared to $231.7 million for the second quarter of 2018 and $204.4 million for the third quarter of 2017. The linked quarter increase in net interest income was primarily due to an increase in average total loans. Net interest margin for the third quarter of 2018 was 3.70 percent, a decrease of 23 basis points from the second quarter of 2018 and an increase of 11 basis points from the third quarter of 2017. Traditional LHI yields for the third quarter of 2018 increased 1 basis point compared to the second quarter of 2018 and 56 basis points compared to the third quarter of 2017. Mortgage finance, excluding MCA, yields for the third quarter of 2018 decreased 23 basis points compared to the second quarter of 2018 and increased 16 basis points compared to the third quarter of 2017. Total cost of deposits for the third quarter of 2018 increased 18 basis points to 0.99 percent compared to 0.81 percent for the second quarter of 2018, and increased 52 basis points from 0.47 percent for the third quarter of 2017.

Average LHI, excluding mortgage finance loans, for the third quarter of 2018 were $16.3 billion, an increase of $448.3 million, or 3 percent, from the second quarter of 2018 and an increase of $1.9 billion, or 13 percent, from the third quarter of 2017. Average total mortgage finance loans for the third quarter of 2018 were $6.9 billion, an increase of $513.8 million, or 8 percent, from the second quarter of 2018 and an increase of $1.1 billion, or 18 percent, from the third quarter of 2017.

Average total deposits for the third quarter of 2018 increased $1.1 billion from the second quarter of 2018 and increased $1.8 billion from the third quarter of 2017. Average demand deposits for the third quarter of 2018 decreased $77.1 million, or 1 percent, to $7.9 billion from $8.0 billion during the second quarter of 2018, and decreased $823.8 million, or 9 percent, from the third quarter of 2017 as a result of the rising interest rate environment and the shift to interest-bearing deposits.

We recorded a $13.0 million provision for credit losses for the third quarter of 2018 compared to $27.0 million for the second quarter of 2018 and $20.0 million for the third quarter of 2017. The provision for the third quarter of 2018 was driven by the consistent application of our methodology. The linked-quarter decrease was primarily related to flat traditional LHI balances, as well as a higher second quarter provision related to credit deterioration in four loans, offset by an increase in non-accrual loans from the second quarter of 2018. The total allowance for credit losses increased to 1.21 percent of LHI excluding mortgage finance loans at September 30, 2018 compared to 1.15 percent at June 30, 2018 and decreased from 1.30 percent at September 30, 2017. 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 an increase in non-performing assets ("NPAs") in the third quarter of 2018, increasing the ratio of total non-performing assets to total LHI plus other real estate owned (“OREO”) to 0.49 percent compared to 0.41 percent for the second quarter of 2018 and decreasing from 0.67 percent for the third quarter of 2017. Net charge-offs for the third quarter of 2018 were $2.0 million compared to $38.0 million for the second quarter of 2018 and $10.7 million for the third quarter of 2017. For the third quarter of 2018, net charge-offs were 0.04 percent of average total LHI, compared to 0.73 percent for the second quarter of 2018 and 0.22 percent for the same period in 2017. At September 30, 2018, total OREO was $79,000 compared to $9.5 million at June 30, 2018 and $18.1 million at September 30, 2017. During the third quarter of 2018, we sold our largest OREO property and recorded a $2.0 million gain on sale, as well as a reversal of a $2.0 million valuation allowance that was recorded on the property during the first quarter of 2018.

Non-interest income for the third quarter of 2018 increased $8.2 million, or 48 percent, compared to the second quarter of 2018, and increased $6.5 million, or 34 percent compared to the same period of 2017. The linked quarter and year-over-year increases are primarily related to increases in other non-interest income attributable to increases in gain on sale of MCA loans and the above-mentioned gain on sale of OREO.

Non-interest expense for the third quarter of 2018 increased $4.0 million, or 3 percent, compared to the second quarter of 2018, and increased $21.3 million, or 19 percent, compared to the third quarter of 2017. The linked quarter increase in non-interest expense is primarily related to increases in salaries and employee benefits, which includes $2.8 million in severance payments, and net occupancy expenses. Offsetting these increases was a $2.0 million decrease in allowance and other carrying costs for OREO expense related to the above-mentioned sale of OREO. The year-over-year increase is primarily related to increases in salaries and employee benefits,

2



net occupancy, marketing, legal and professional, communications and technology and other non-interest expenses, all of which were attributable to general business growth, offset by a decrease in allowance and other carrying costs for OREO.

Stockholders’ equity increased by 12 percent from $2.2 billion at September 30, 2017 to $2.4 billion at September 30, 2018, due to retention of net income. Texas Capital Bank is well capitalized under regulatory guidelines and at September 30, 2018, our ratio of tangible common equity to total tangible assets was 8.3 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.

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, 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)
 
3rd Quarter
2nd Quarter
1st Quarter
4th Quarter
3rd Quarter
 
2018
2018
2018
2017
2017
CONSOLIDATED STATEMENTS OF INCOME
 
 
 
 
 
Interest income
$
301,754

$
286,852

$
253,869

$
249,519

$
237,643

Interest expense
69,579

55,140

43,569

38,870

33,282

Net interest income
232,175

231,712

210,300

210,649

204,361

Provision for credit losses
13,000

27,000

12,000

2,000

20,000

Net interest income after provision for credit losses
219,175

204,712

198,300

208,649

184,361

Non-interest income
25,518

17,279

19,947

19,374

19,003

Non-interest expense
136,143

132,131

126,960

133,138

114,830

Income before income taxes
108,550

89,860

91,287

94,885

88,534

Income tax expense
22,998

18,424

19,342

50,143

29,850

Net income
85,552

71,436

71,945

44,742

58,684

Preferred stock dividends
2,438

2,437

2,438

2,437

2,438

Net income available to common stockholders
$
83,114

$
68,999

$
69,507

$
42,305

$
56,246

 
 
 
 
 
 
Diluted EPS
$
1.65

$
1.38

$
1.38

$
0.84

$
1.12

Diluted shares
50,381,349

50,096,015

50,353,497

50,311,962

50,250,866

 
 
 
 
 
 
CONSOLIDATED BALANCE SHEET DATA
 
 
 
 
 
Total assets
$
27,127,107

$
27,781,910

$
24,449,147

$
25,075,645

$
24,400,998

LHI
16,569,538

16,536,721

15,741,772

15,366,252

14,828,406

LHI, mortgage finance
5,477,787

5,923,058

4,689,938

5,308,160

5,642,285

LHS
1,651,930

1,276,768

1,088,565

1,011,004

955,983

Liquidity assets(1)
2,615,570

3,288,107

2,296,673

2,727,581

2,357,537

Investment securities
117,389

24,408

24,929

23,511

24,224

Demand deposits
7,031,460

7,648,125

7,413,340

7,812,660

8,263,202

Total deposits
20,385,637

20,334,871

18,764,533

19,123,180

19,081,257

Other borrowings
3,686,818

4,520,849

2,835,540

3,165,040

2,583,496

Subordinated notes
281,677

281,586

281,496

281,406

281,315

Long-term debt
113,406

113,406

113,406

113,406

113,406

Stockholders’ equity
2,426,442

2,343,530

2,273,429

2,202,721

2,158,363

 
 
 
 
 
 
End of period shares outstanding
50,177,260

50,151,064

49,669,774

49,643,344

49,621,825

Book value
$
45.37

$
43.74

$
42.75

$
41.35

$
40.47

Tangible book value(2)
$
45.00

$
43.36

$
42.37

$
40.97

$
40.09

 
 
 
 
 
 
SELECTED FINANCIAL RATIOS
 
 
 
 
 
Net interest margin
3.70
%
3.93
%
3.71
%
3.47
%
3.59
%
Return on average assets
1.31
%
1.16
%
1.22
%
0.71
%
0.99
%
Return on average common equity
14.68
%
12.72
%
13.39
%
8.18
%
11.20
%
Non-interest income to average earning assets
0.40
%
0.29
%
0.35
%
0.32
%
0.33
%
Efficiency ratio(3)
52.8
%
53.1
%
55.1
%
57.9
%
51.4
%
Efficiency ratio, excluding OREO write-down(3)
53.6
%
53.1
%
54.3
%
55.2
%
51.4
%
Non-interest expense to average earning assets
2.15
%
2.23
%
2.23
%
2.17
%
2.00
%
Tangible common equity to total tangible assets(4)
8.3
%
7.8
%
8.6
%
8.1
%
8.2
%
Common Equity Tier 1
8.6
%
8.3
%
8.8
%
8.5
%
8.4
%
Tier 1 capital
9.6
%
9.3
%
9.9
%
9.5
%
9.4
%
Total capital
11.5
%
11.1
%
11.9
%
11.5
%
11.4
%
Leverage
9.7
%
9.9
%
9.9
%
9.2
%
9.6
%
(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)
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)
 
September 30, 2018
September 30, 2017
%
Change
Assets
 
 
 
Cash and due from banks
$
169,481

$
143,616

18
 %
Interest-bearing deposits in other banks
2,585,570

2,332,537

11
 %
Federal funds sold and securities purchased under resale agreements
30,000

25,000

20
 %
Investment securities
117,389

24,224

385
 %
LHS, at fair value
1,651,930

955,983

73
 %
LHI, mortgage finance
5,477,787

5,642,285

(3
)%
LHI (net of unearned income)
16,569,538

14,828,406

12
 %
Less: Allowance for loan losses
190,306

182,929

4
 %
LHI, net
21,857,019

20,287,762

8
 %
Mortgage servicing rights, net
86,359

77,630

11
 %
Premises and equipment, net
24,004

23,882

1
 %
Accrued interest receivable and other assets
586,668

511,207

15
 %
Goodwill and intangibles, net
18,687

19,157

(2
)%
Total assets
$
27,127,107

$
24,400,998

11
 %
 
 
 
 
Liabilities and Stockholders’ Equity
 
 
 
Liabilities:
 
 
 
Deposits:
 
 
 
Non-interest bearing
$
7,031,460

$
8,263,202

(15
)%
Interest bearing
13,354,177

10,818,055

23
 %
Total deposits
20,385,637

19,081,257

7
 %
 
 
 


Accrued interest payable
17,218

4,562

277
 %
Other liabilities
215,909

178,599

21
 %
Federal funds purchased and repurchase agreements
486,818

83,496

483
 %
Other borrowings
3,200,000

2,500,000

28
 %
Subordinated notes, net
281,677

281,315

—

Trust preferred subordinated debentures
113,406

113,406

—

Total liabilities
24,700,665

22,242,635

11
 %
 
 
 
 
Stockholders’ equity:
 
 
 
Preferred stock, $.01 par value, $1,000 liquidation value:
 
 
 
Authorized shares - 10,000,000
 
 
 
Issued shares - 6,000,000 shares issued at September 30, 2018 and 2017
150,000

150,000

−

Common stock, $.01 par value:
 
 
 
Authorized shares - 100,000,000
 
 
 
Issued shares - 50,177,677 and 49,622,242 at September 30, 2018 and 2017, respectively
502

496

1
 %
Additional paid-in capital
965,286

959,251

1
 %
Retained earnings
1,312,038

1,048,195

25
 %
Treasury stock (shares at cost: 417 at September 30, 2018 and 2017)
(8
)
(8
)
—

Accumulated other comprehensive income, net of taxes
(1,376
)
429

(421
)%
Total stockholders’ equity
2,426,442

2,158,363

12
 %
Total liabilities and stockholders’ equity
$
27,127,107

$
24,400,998

11
 %

5



TEXAS CAPITAL BANCSHARES, INC.
 
 
 
 
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
 
 
 
 
(Dollars in thousands except per share data)
 
 
 
 
 
Three Months Ended September 30
Nine Months Ended
September 30
 
2018
2017
2018
2017
Interest income
 
 
 
 
Interest and fees on loans
$
291,189

$
229,116

$
814,500

$
607,386

Investment securities
1,161

341

1,560

853

Federal funds sold and securities purchased under resale agreements
1,018

642

2,808

1,606

Interest-bearing deposits in other banks
8,386

7,544

23,607

19,935

Total interest income
301,754

237,643

842,475

629,780

Interest expense
 
 
 
 
Deposits
52,034

22,435

123,343

52,261

Federal funds purchased
1,800

891

4,434

1,869

Other borrowings
10,317

4,835

24,481

9,757

Subordinated notes
4,191

4,191

12,573

12,573

Trust preferred subordinated debentures
1,237

930

3,457

2,641

Total interest expense
69,579

33,282

168,288

79,101

Net interest income
232,175

204,361

674,187

550,679

Provision for credit losses
13,000

20,000

52,000

42,000

Net interest income after provision for credit losses
219,175

184,361

622,187

508,679

Non-interest income
 
 
 
 
Service charges on deposit accounts
3,477

3,211

9,619

9,323

Wealth management and trust fee income
2,065

1,627

5,996

4,386

Bank owned life insurance (BOLI) income
643

615

1,959

1,562

Brokered loan fees
6,141

6,152

17,124

17,639

Servicing income
4,987

4,486

15,446

10,387

Swap fees
1,355

647

4,269

3,404

Other
6,850

2,265

8,331

8,181

Total non-interest income
25,518

19,003

62,744

54,882

Non-interest expense
 
 
 
 
Salaries and employee benefits
77,327

67,882

222,268

194,039

Net occupancy expense
8,362

6,436

22,952

19,062

Marketing
10,214

7,242

29,127

18,349

Legal and professional
10,764

6,395

29,948

20,975

Communications and technology
7,435

6,002

21,211

24,414

FDIC insurance assessment
6,524

6,203

18,884

16,800

Servicing related expenses
4,207

3,897

12,379

8,329

Allowance and other carrying costs for OREO
(1,864
)
105

467

315

Other
13,174

10,668

37,998

30,455

Total non-interest expense
136,143

114,830

395,234

332,738

Income before income taxes
108,550

88,534

289,697

230,823

Income tax expense
22,998

29,850

60,764

78,502

Net income
85,552

58,684

228,933

152,321

Preferred stock dividends
2,438

2,438

7,313

7,313

Net income available to common stockholders
$
83,114

$
56,246

$
221,620

$
145,008

 
 
 
 
 
Basic earnings per common share
$
1.66

$
1.13

$
4.45

$
2.93

Diluted earnings per common share
$
1.65

$
1.12

$
4.41

$
2.89



6



TEXAS CAPITAL BANCSHARES, INC.
SUMMARY OF LOAN LOSS EXPERIENCE
(Dollars in thousands)
 
3rd Quarter
2nd Quarter
1st Quarter
4th Quarter
3rd Quarter
 
2018
2018
2018
2017
2017
Allowance for loan losses:
 
 
 
 
 
Beginning balance
$
179,096

$
190,898

$
184,655

$
182,929

$
174,225

Loans charged-off:
 
 
 
 
 
Commercial
1,301

38,305

5,667

1,999

10,603

Real estate
—

—

—

—

250

Construction
—

—

—

—

59

Consumer
767

—

—

—

—

Leases
319

—

—

—

—

Total charge-offs
2,387

38,305

5,667

1,999

10,912

Recoveries:
 
 
 
 
 
Commercial
389

320

360

1,019

132

Real estate
11

8

24

1

21

Construction
—

—

—

—

3

Consumer
10

9

59

14

15

Leases
12

1

19

1

1

Total recoveries
422

338

462

1,035

172

Net charge-offs
1,965

37,967

5,205

964

10,740

Provision for loan losses
13,175

26,165

11,448

2,690

19,444

Ending balance
$
190,306

$
179,096

$
190,898

$
184,655

$
182,929

 
 
 
 
 
 
Allowance for off-balance sheet credit losses:
 
 
 
 
 
Beginning balance
$
10,458

$
9,623

$
9,071

$
9,761

$
9,205

Provision for off-balance sheet credit losses
(175
)
835

552

(690
)
556

Ending balance
$
10,283

$
10,458

$
9,623

$
9,071

$
9,761

 
 
 
 
 
 
Total allowance for credit losses
$
200,589

$
189,554

$
200,521

$
193,726

$
192,690

 
 
 
 
 
 
Total provision for credit losses
$
13,000

$
27,000

$
12,000

$
2,000

$
20,000

 
 
 
 
 
 
Allowance for loan losses to LHI
0.86
%
0.80
%
0.93
%
0.89
%
0.89
%
Allowance for loan losses to LHI excluding mortgage finance loans(2)
1.15
%
1.08
%
1.21
%
1.20
%
1.23
%
Allowance for loan losses to average LHI
0.87
%
0.86
%
0.98
%
0.92
%
0.95
%
Allowance for loan losses to average LHI excluding mortgage finance loans(2)
1.17
%
1.13
%
1.24
%
1.23
%
1.27
%
Net charge-offs to average LHI(1)
0.04
%
0.73
%
0.11
%
0.02
%
0.22
%
Net charge-offs to average LHI excluding mortgage finance loans(1)(2)
0.05
%
0.96
%
0.14
%
0.03
%
0.30
%
Net charge-offs to average LHI for last twelve months(1)
0.22
%
0.28
%
0.15
%
0.16
%
0.29
%
Net charge-offs to average LHI excluding mortgage finance loans for last twelve months(1)(2)
0.29
%
0.36
%
0.20
%
0.21
%
0.37
%
Total provision for credit losses to average LHI(1)
0.24
%
0.52
%
0.25
%
0.04
%
0.41
%
Total provision for credit losses to average LHI excluding mortgage finance loans(1)(2)
0.32
%
0.68
%
0.32
%
0.05
%
0.55
%
Total allowance for credit losses to LHI
0.91
%
0.84
%
0.98
%
0.94
%
0.94
%
Total allowance for credit losses to LHI excluding mortgage finance loans(1)(2)
1.21
%
1.15
%
1.27
%
1.26
%
1.30
%
(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 LOAN LOSS EXPERIENCE
 
 
 
 
 
(Dollars in thousands)
 
 
 
 
 
 
3rd Quarter
2nd Quarter
1st Quarter
4th Quarter
3rd Quarter
 
2018
2018
2018
2017
2017
 
 
 
 
 
 
Non-accrual loans
$
107,532

$
83,295

$
123,542

$
101,444

$
118,205

Other real estate owned (OREO)
79

9,526

9,558

11,742

18,131

Total LHI NPAs
$
107,611

$
92,821

$
133,100

$
113,186

$
136,336

 
 
 
 
 
 
Non-accrual loans to LHI
0.49
%
0.37
%
0.60
%
0.49
%
0.58
%
Non-accrual loans to LHI excluding mortgage finance loans(1)
0.65
%
0.50
%
0.78
%
0.66
%
0.80
%
Total NPAs to LHI plus OREO
0.49
%
0.41
%
0.65
%
0.55
%
0.67
%
Total NPAs to LHI excluding mortgage finance loans plus OREO(1)
0.65
%
0.56
%
0.85
%
0.74
%
0.92
%
Total NPAs to earning assets
0.41
%
0.35
%
0.56
%
0.47
%
0.58
%
Allowance for loan losses to non-accrual loans
1.8x

2.2x

1.5x

1.8x

1.5x

 
 
 
 
 
 
Loans past due 90 days and still accruing(2)
$
11,295

$
7,357

$
13,563

$
8,429

$
8,892

 
 
 
 
 
 
Loans past due 90 days to LHI
0.05
%
0.03
%
0.07
%
0.14
%
0.04
%
Loans past due 90 days to LHI excluding mortgage finance loans(1)
0.07
%
0.04
%
0.09
%
0.18
%
0.06
%
 
 
 
 
 
 
LHS past due 90 days and still accruing(3)
$
25,238

$
27,858

$
35,226

$
19,737

$
—

(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 September 30, 2018, loans past due 90 days and still accruing includes premium finance loans of $8.2 million. These loans are primarily secured by obligations of insurance carriers to refund premiums on cancelled insurance policies. The refund of premiums from the insurance carriers can take 180 days or longer from the cancellation date.
(3)
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 the balance sheet regardless of whether the repurchase option has been exercised.


8



TEXAS CAPITAL BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(Dollars in thousands)
 
3rd Quarter
2nd Quarter
1st Quarter
4th Quarter
3rd Quarter
 
2018
2018
2018
2017
2017
Interest income
 
 
 
 
 
Interest and fees on loans
$
291,189

$
279,447

$
243,864

$
238,906

$
229,116

Investment securities
1,161

193

206

213

341

Federal funds sold and securities purchased under resale agreements
1,018

745

1,045

936

642

Interest-bearing deposits in other banks
8,386

6,467

8,754

9,464

7,544

Total interest income
301,754

286,852

253,869

249,519

237,643

Interest expense
 
 
 
 
 
Deposits
52,034

39,607

31,702

27,625

22,435

Federal funds purchased
1,800

1,665

969

723

891

Other borrowings
10,317

8,484

5,680

5,380

4,835

Subordinated notes
4,191

4,191

4,191

4,191

4,191

Trust preferred subordinated debentures
1,237

1,193

1,027

951

930

Total interest expense
69,579

55,140

43,569

38,870

33,282

Net interest income
232,175

231,712

210,300

210,649

204,361

Provision for credit losses
13,000

27,000

12,000

2,000

20,000

Net interest income after provision for credit losses
219,175

204,712

198,300

208,649

184,361

Non-interest income
 
 
 
 
 
Service charges on deposit accounts
3,477

3,005

3,137

3,109

3,211

Wealth management and trust fee income
2,065

2,007

1,924

1,767

1,627

Bank owned life insurance (BOLI) income
643

657

659

698

615

Brokered loan fees
6,141

5,815

5,168

5,692

6,152

Servicing income
4,987

4,967

5,492

5,270

4,486

Swap fees
1,355

1,352

1,562

586

647

Other
6,850

(524
)
2,005

2,252

2,265

Total non-interest income
25,518

17,279

19,947

19,374

19,003

Non-interest expense
 
 
 
 
 
Salaries and employee benefits
77,327

72,404

72,537

70,192

67,882

Net occupancy expense
8,362

7,356

7,234

6,749

6,436

Marketing
10,214

10,236

8,677

8,438

7,242

Legal and professional
10,764

11,654

7,530

8,756

6,395

Communications and technology
7,435

7,143

6,633

6,590

6,002

FDIC insurance assessment
6,524

6,257

6,103

6,710

6,203

Servicing related expenses
4,207

4,367

3,805

7,177

3,897

Allowance and other carrying costs for OREO
(1,864
)
176

2,155

6,122

105

Other
13,174

12,538

12,286

12,404

10,668

Total non-interest expense
136,143

132,131

126,960

133,138

114,830

Income before income taxes
108,550

89,860

91,287

94,885

88,534

Income tax expense
22,998

18,424

19,342

50,143

29,850

Net income
85,552

71,436

71,945

44,742

58,684

Preferred stock dividends
2,438

2,437

2,438

2,437

2,438

Net income available to common shareholders
$
83,114

$
68,999

$
69,507

$
42,305

$
56,246





9



TEXAS CAPITAL BANCSHARES, INC.
QUARTERLY FINANCIAL SUMMARY - UNAUDITED
Consolidated Daily Average Balances, Average Yields and Rates
(Dollars in thousands)
 
3rd Quarter 2018
 
2nd Quarter 2018
 
1st Quarter 2018
 
4th Quarter 2017
 
3rd Quarter 2017
 
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
$
24,221

$
191

3.14
%
 
$
24,514

$
193

3.15
%
 
$
23,854

$
206

3.50
%
 
$
23,678

$
213

3.57
%
 
$
86,087

$
340

1.57
%
Investment securities - Non-taxable(2)
91,298

1,228

5.33
%
 
—

—

—
%
 
—

—

—
%
 
—

—

—
%
 
—

—

—
%
Federal funds sold and securities purchased under resale agreements
203,972

1,018

1.98
%
 
166,613

745

1.79
%
 
261,641

1,045

1.62
%
 
292,544

936

1.27
%
 
205,938

642

1.24
%
Interest-bearing deposits in other banks
1,697,787

8,386

1.96
%
 
1,498,474

6,467

1.73
%
 
2,302,938

8,754

1.54
%
 
2,924,942

9,464

1.28
%
 
2,383,060

7,544

1.26
%
LHS, at fair value
1,484,459

17,272

4.62
%
 
1,516,047

17,026

4.50
%
 
1,187,594

12,535

4.28
%
 
1,144,124

11,507

3.99
%
 
1,009,703

9,882

3.88
%
LHI, mortgage finance loans
5,443,829

49,715

3.62
%
 
4,898,411

47,056

3.85
%
 
4,097,995

37,362

3.70
%
 
5,102,107

44,477

3.46
%
 
4,847,530

42,294

3.46
%
LHI(1)(2)
16,331,622

225,604

5.48
%
 
15,883,317

216,755

5.47
%
 
15,425,323

195,333

5.14
%
 
15,010,041

185,039

4.89
%
 
14,427,980

178,839

4.92
%
Less allowance for loan
       losses
179,227

—

—

 
189,238

—

—

 
184,238

—

—

 
183,233

—

—

 
172,774

—

—

LHI, net of allowance
21,596,224

275,319

5.06
%
 
20,592,490

263,811

5.14
%
 
19,339,080

232,695

4.88
%
 
19,928,915

229,516

4.57
%
 
19,102,736

221,133

4.59
%
Total earning assets
25,097,961

303,414

4.80
%
 
23,798,138

288,242

4.86
%
 
23,115,107

255,235

4.48
%
 
24,314,203

251,636

4.11
%
 
22,787,524

239,541

4.17
%
Cash and other assets
877,954

 
 
 
808,099

 
 
 
797,506

 
 
 
766,622

 
 
 
713,778

 
 
Total assets
$
25,975,915

 
 
 
$
24,606,237

 
 
 
$
23,912,613

 
 
 
$
25,080,825

 
 
 
$
23,501,302

 
 
Liabilities and Stockholders’ Equity
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Transaction deposits
$
3,253,310

$
13,642

1.66
%
 
$
2,889,834

$
10,295

1.43
%
 
$
2,792,954

$
8,651

1.26
%
 
$
2,469,984

$
5,845

0.94
%
 
$
2,145,324

$
4,359

0.81
%
Savings deposits
7,820,742

29,930

1.52
%
 
7,784,937

25,454

1.31
%
 
7,982,256

21,958

1.12
%
 
8,403,473

20,655

0.98
%
 
7,618,843

17,152

0.89
%
Time deposits
1,778,831

8,462

1.89
%
 
979,735

3,858

1.58
%
 
506,375

1,093

0.88
%
 
533,312

1,125

0.84
%
 
496,076

924

0.74
%
Total interest bearing deposits
12,852,883

52,034

1.61
%
 
11,654,506

39,607

1.36
%
 
11,281,585

31,702

1.14
%
 
11,406,769

27,625

0.96
%
 
10,260,243

22,435

0.87
%
Other borrowings
2,275,640

12,117

2.11
%
 
2,113,391

10,149

1.93
%
 
1,721,914

6,649

1.57
%
 
1,852,750

6,103

1.31
%
 
1,821,837

5,726

1.25
%
Subordinated notes
281,619

4,191

5.90
%
 
281,527

4,191

5.97
%
 
281,437

4,191

6.04
%
 
281,348

4,191

5.91
%
 
281,256

4,191

5.91
%
Trust preferred subordinated debentures
113,406

1,237

4.33
%
 
113,406

1,193

4.22
%
 
113,406

1,027

3.67
%
 
113,406

951

3.33
%
 
113,406

930

3.25
%
Total interest bearing liabilities
15,523,548

69,579

1.78
%
 
14,162,830

55,140

1.56
%
 
13,398,342

43,569

1.32
%
 
13,654,273

38,870

1.13
%
 
12,476,742

33,282

1.06
%
Demand deposits
7,940,503

 
 
 
8,017,578

 
 
 
8,147,721

 
 
 
9,085,819

 
 
 
8,764,263

 
 
Other liabilities
116,302

 
 
 
100,074

 
 
 
110,698

 
 
 
138,050

 
 
 
116,998

 
 
Stockholders’ equity
2,395,562

 
 
 
2,325,755

 
 
 
2,255,852

 
 
 
2,202,683

 
 
 
2,143,299

 
 
Total liabilities and stockholders’ equity
$
25,975,915

 
 
 
$
24,606,237

 
 
 
$
23,912,613

 
 
 
$
25,080,825

 
 
 
$
23,501,302

 
 
Net interest income(2)


$
233,835

 
 
 
$
233,102

 
 
 
$
211,666

 
 
 
$
212,766

 
 
 
$
206,259

 
Net interest margin
 
 
3.70
%
 
 
 
3.93
%
 
 
 
3.71
%
 
 
 
3.47
%
 
 
 
3.59
%
(1)
The loan averages include non-accrual loans and are stated net of unearned income.
(2)
Taxable equivalent rates used where applicable.

10