EX-99.1 2 a01222020exhibit991.htm EXHIBIT 99.1 EARNINGS RELEASE Exhibit
Exhibit 99.1
tcbilogoa74.jpg
INVESTOR CONTACT
Julie Anderson, 214.932.6773
julie.anderson@texascapitalbank.com
MEDIA CONTACT
Shannon Wherry, 469.399.8527
shannon.wherry@texascapitalbank.com
TEXAS CAPITAL BANCSHARES, INC. ANNOUNCES OPERATING RESULTS FOR 2019
DALLAS - January 22, 2020 - 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 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.

2




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.

3




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.

4




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.

5




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
 %

6




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



7




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.


8




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.

9





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



10




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.

11