Texas Capital Bancshares, Inc. Announces Operating Results for Q3 2016

DALLAS, Oct. 20, 2016 (GLOBE NEWSWIRE) — Texas Capital Bancshares, Inc. (NASDAQ:TCBI), the parent company of Texas Capital Bank, announced earnings and operating results for the third quarter of 2016.

“We are extremely pleased with our third quarter results, highlighted with continued improvement in core earnings and efficiency,” said Keith Cargill, CEO. “Proactively managing credit is an ongoing focus and key to our continued success. Our ability to attract and develop great talent as well as partner with exceptional clients will drive future risk-appropriate growth in earnings and ROE and solidifies our outlook for a bright future.”

  • Loans held for investment (“LHI”), excluding mortgage finance, increased 1% and total LHI decreased 1% on a linked quarter basis (increased 3% and 3% on an average basis, respectively), growing 10% and 11%, respectively, from the third quarter of 2015.
  • Mortgage finance loans decreased 6% on a linked quarter basis (increased 6% on an average basis) and increased 15% from the third quarter of 2015.
  • Demand deposits increased 10% and total deposits increased 9% on a linked quarter basis (increased 14% and 6% on an average basis, respectively), growing 34% and 20%, respectively, from the third quarter of 2015.
  • Net income increased 10% on a linked quarter basis and increased 15% from the third quarter of 2015.
  • EPS increased 12% on a linked quarter basis and increased 16% from the third quarter of 2015.

FINANCIAL SUMMARY
(dollars and shares in thousands)

     Q3 2016   Q3 2015   % Change
QUARTERLY OPERATING RESULTS            
Net income   $ 42,725     $ 37,114     15 %
Net income available to common stockholders   $ 40,287     $ 34,676     16 %
Diluted EPS   $ 0.87     $ 0.75     16 %
Diluted shares   46,510     46,471     %
ROA   0.78 %   0.79 %    
ROE   10.20 %   9.69 %    
             
BALANCE SHEET            
Loans held for sale   $ 648,684     $ 1,062     N/M  
LHI, mortgage finance   4,961,159     4,312,790     15 %
LHI   12,662,394     11,562,828     10 %
Total LHI   17,623,553     15,875,618     11 %
Total assets   22,216,388     18,665,995     19 %
Demand deposits   8,789,740     6,545,273     34 %
Total deposits   18,145,123     15,165,345     20 %
Stockholders’ equity   1,725,782     1,590,051     9 %
Tangible book value per share   $ 33.82     $ 30.98     9 %
                       

DETAILED FINANCIALS
Texas Capital Bancshares, Inc. reported net income of $42.7 million and net income available to common stockholders of $40.3 million for the quarter ended September 30, 2016 compared to net income of $37.1 million and net income available to common stockholders of $34.7 million for the same period in 2015. On a fully diluted basis, earnings per common share were $0.87 for the quarter ended September 30, 2016 compared to $0.75 for the same period of 2015.

Return on average common equity (“ROE”) was 10.20 percent and return on average assets (“ROA”) was 0.78 percent for the third quarter of 2016, compared to 9.65 percent and 0.77 percent, respectively, for the second quarter of 2016 and 9.69 percent and 0.79 percent, respectively, for the third quarter of 2015. The linked quarter and year-over-year increases in ROE resulted from an increase in net interest income for the third quarter of 2016, despite a higher provision for credit losses. ROA remains low as a result of the increased provision for credit losses and higher liquidity assets. Average liquidity assets for the third quarter of 2016 totaled $3.6 billion, including $3.2 billion in deposits at the Federal Reserve Bank of Dallas, which had an average yield of 51 basis points, compared to $2.5 billion for the third quarter of 2015, which had an average yield of 25 basis points.

Net interest income was $166.7 million for the third quarter of 2016, compared to $157.1 million for the second quarter of 2016 and $142.0 million for the third quarter of 2015. Net interest margin for the third quarter of 2016 was 3.14 percent, a 4 basis point decrease from the second quarter of 2016 and a 2 basis point increase from the third quarter of 2015. The linked quarter decrease in net interest margin is due primarily to the increase in liquidity assets as well as growth in traditional LHI and loans held for sale (“LHFS”) with lower yields. The year-over-year increase in net interest margin is due primarily to growth in total LHI with higher yields.

Average LHI, excluding mortgage finance loans, for the third quarter of 2016 were $12.6 billion, an increase of $315.3 million, or 3 percent, from the second quarter of 2016 and an increase of $1.3 billion, or 11 percent, from the third quarter of 2015. Average mortgage finance loans for the third quarter of 2016 were $4.7 billion, an increase of $246.7 million, or 6 percent, from the second quarter of 2016 and an increase of $677.1 million, or 17 percent, from the third quarter of 2015. Average participations on mortgage finance loans for the third quarter of 2016 were $883.0 million, an increase of $225.6 million, or 34 percent, from the second quarter of 2016 and an increase of $490.4 million, or 125 percent, from the third quarter of 2015. Average loans held for sale generated from our Mortgage Correspondent Aggregation business increased to $430.9 million for the third quarter of 2016 from $157.9 million for the second quarter of 2016 as we continue to gain traction in that business.

Average total deposits for the third quarter of 2016 increased $980.3 million from the second quarter of 2016 and increased $2.9 billion from the third quarter of 2015. Average demand deposits for the third quarter of 2016 increased $1.1 billion, or 14 percent, to $8.8 billion from $7.8 billion from the second quarter of 2016, and increased $2.2 billion, or 34 percent, from $6.6 billion during the third quarter of 2015.

We recorded a $22.0 million provision for credit losses for the third quarter of 2016 compared to $16.0 million for the second quarter of 2016 and $13.8 million for the third quarter of 2015. The provision for the third quarter of 2016 was driven by the application of our methodology. The year-over-year increase was primarily related to a change in applied risk weights, which are based in part on historical loss experience, as well as changes in the composition of our pass-rated and classified loan portfolios, primarily related to energy loans, and growth in traditional LHI, excluding mortgage finance loans. The combined allowance for credit losses at September 30, 2016 increased to 1.51 percent of LHI excluding mortgage finance loans compared to 1.41 percent at June 30, 2016 and 1.19 percent at September 30, 2015. The year-over-year increase resulted from increases in the provision for credit losses primarily related to energy as well as continuing loan growth in 2016. In management’s opinion, the allowance is appropriate and is derived from consistent application of the methodology for establishing reserves for Texas Capital Bank’s loan portfolio.

We experienced a slight increase in non-performing assets in the third quarter of 2016 on a linked quarter basis, bringing the ratio of total non-performing assets to total LHI plus other real estate owned (“OREO”) to 1.07 percent compared 1.04 percent for the second quarter of 2016 and 0.69 percent for the third quarter of 2015. The year-over-year increase is primarily related to energy loans, which was expected as energy prices remained low through 2015 and the first nine months of 2016. Net charge-offs for the third quarter of 2016 were $7.4 million compared to $12.0 million for the second quarter of 2016 and $2.3 million for the third quarter of 2015. The year-over-year increase in net charge-offs resulted from realizing losses for which reserves had been provided in previous quarters. For the third quarter of 2016, net charge-offs related to energy loans were $1.8 million compared to $12.1 million for the second quarter of 2016 and none for the third quarter of 2015. For the third quarter of 2016, net charge-offs were 0.17 percent of total LHI, compared to 0.29 percent for the second quarter of 2016 and 0.06 percent for the same period in 2015. At September 30, 2016, total OREO was $19.0 million compared to $18.7 million at June 30, 2016 and $187,000 at September 30, 2015. The year-over-year increase was due primarily to the foreclosure of a commercial property during the first quarter of 2016.

Non-interest income increased $5.3 million, or 47 percent, during the third quarter of 2016 compared to the same period of 2015, and increased $2.8 million, or 20 percent, compared to the second quarter of 2016. The year-over-year increase primarily related to an increase in brokered loan fees, service charges and swap fees. Brokered loan fees increased $2.7 million during the third quarter of 2016 compared to the same period of 2015 as a result of an increase in mortgage finance and LHFS volumes. Service charges increased $784,000 during the third quarter of 2016 compared to the same period of 2015 as a result of the increase in deposit balances and improved pricing. Swap fees increased $664,000 during the third quarter of 2016 compared to the same period of 2015. These fees fluctuate from quarter to quarter based on the number and volume of transactions closed during the quarter. The linked-quarter increase in non-interest income primarily related to a $1.7 million, or 29 percent, increase in brokered loan fees and a $469,000, or 19 percent, increase in service charges.

Non-interest expense for the third quarter of 2016 increased $13.1 million, or 16 percent, compared to the third quarter of 2015, and increased $544,000, or 1 percent, compared to the second quarter of 2016. The year-over-year increase is primarily related to an $8.1 million increase in salaries and employee benefits expense and a $1.4 million increase in communications and technology expense, all of which were due to general business growth. FDIC insurance assessment expense for the third quarter of 2016 increased $1.9 million compared to the same quarter in 2015 as a result of the increase in total assets from September 30, 2015 to September 30, 2016.

Stockholders’ equity increased by 9 percent from $1.5 billion at September 30, 2015 to $1.7 billion at September 30, 2016, primarily due to retention of net income. Texas Capital Bank is well capitalized under regulatory guidelines and at September 30, 2016, our ratio of tangible common equity to total tangible assets was 7.0 percent.

ABOUT TEXAS CAPITAL BANCSHARES, INC.
Texas Capital Bancshares, Inc. (NASDAQ®: TCBI), a member of the Russell 2000® Index and the S&P SmallCap 600®, 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, 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.

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
    2016 2016 2016 2015 2015
CONSOLIDATED STATEMENTS OF INCOME            
Interest income   $ 182,492   $ 172,442   $ 159,803   $ 154,820   $ 153,856  
Interest expense   15,753   15,373   15,020   12,632   11,808  
Net interest income   166,739   157,069   144,783   142,188   142,048  
Provision for credit losses   22,000   16,000   30,000   14,000   13,750  
Net interest income after provision for credit losses   144,739   141,069   114,783   128,188   128,298  
Non-interest income   16,716   13,932   11,297   11,320   11,380  
Non-interest expense   94,799   94,255   86,820   87,042   81,688  
Income before income taxes   66,656   60,746   39,260   52,466   57,990  
Income tax expense   23,931   21,866   14,132   17,713   20,876  
Net income   42,725   38,880   25,128   34,753   37,114  
Preferred stock dividends   2,438   2,437   2,438   2,437   2,438  
Net income available to common stockholders   $ 40,287   $ 36,443   $ 22,690   $ 32,316   $ 34,676  
             
Diluted EPS   $ 0.87   $ 0.78   $ 0.49   $ 0.70   $ 0.75  
Diluted shares   46,509,683   46,438,132   46,354,378   46,479,845   46,471,390  
             
CONSOLIDATED BALANCE SHEET DATA            
Total assets   $ 22,216,388   $ 21,080,994   $ 20,210,893   $ 18,903,821   $ 18,666,708  
LHI   12,662,394   12,502,513   12,059,849   11,745,674   11,562,828  
LHI, mortgage finance   4,961,159   5,260,027   4,981,304   4,966,276   4,312,790  
Loans held for sale, at fair value   648,684   221,347   94,702   86,075   1,062  
Liquidity assets   3,471,074   2,624,170   2,644,418   1,681,374   2,345,192  
Securities   26,356   27,372   28,461   29,992   31,998  
Demand deposits   8,789,740   7,984,208   7,455,107   6,386,911   6,545,273  
Total deposits   18,145,123   16,703,565   16,298,847   15,084,619   15,165,345  
Other borrowings   1,751,420   2,115,445   1,704,859   1,643,051   1,353,834  
Subordinated notes   280,954   280,863   280,773   280,682   280,592  
Long-term debt   113,406   113,406   113,406   113,406   113,406  
Stockholders’ equity   1,725,782   1,684,735   1,647,088   1,623,533   1,590,051  
             
End of period shares outstanding   46,009,495   45,952,911   45,902,489   45,873,807   45,839,364  
Book value   $ 34.25   $ 33.40   $ 32.61   $ 32.12   $ 31.42  
Tangible book value(1)   $ 33.82   $ 32.97   $ 32.18   $ 31.69   $ 30.98  
             
SELECTED FINANCIAL RATIOS            
Net interest margin   3.14 % 3.18 % 3.13 % 3.01 % 3.12 %
Return on average assets   0.78 % 0.77 % 0.53 % 0.72 % 0.79 %
Return on average common equity   10.20 % 9.65 % 6.13 % 8.82 % 9.69 %
Non-interest income to earning assets   0.32 % 0.28 % 0.24 % 0.24 % 0.25 %
Efficiency ratio(2)   51.7 % 55.1 % 55.6 % 56.7 % 53.2 %
Non-interest expense to earning assets   1.79 % 1.91 % 1.88 % 1.84 % 1.80 %
Tangible common equity to total tangible assets(3)   7.0 % 7.2 % 7.3 % 7.7 % 7.6 %
Common Equity Tier 1   7.6 % 7.4 % 7.5 % 7.5 % 7.7 %
Tier 1 capital   8.8 % 8.6 % 8.8 % 8.8 % 9.1 %
Total capital   11.1 % 10.9 % 11.1 % 11.1 % 11.4 %
Leverage   8.4 % 8.7 % 9.1 % 8.9 % 9.1 %
 
(1)   Stockholders’ equity excluding preferred stock, less goodwill and intangibles, divided by shares outstanding at period end.
(2)  Non-interest expense divided by the sum of net interest income and non-interest income.
(3)  Stockholders’ equity excluding preferred stock and accumulated other comprehensive income less goodwill and intangibles divided by total assets less accumulated other comprehensive income and goodwill and intangibles.
 
TEXAS CAPITAL BANCSHARES, INC.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(Dollars in thousands)
    September 30,
2016
September 30,
2015
%
Change
Assets        
Cash and due from banks   $ 117,345   $ 101,758   15 %
Interest-bearing deposits   3,441,074   2,320,192   48 %
Federal funds sold and securities purchased under resale agreements   30,000   25,000   100 %
Securities, available-for-sale   26,356   31,998   (18 )%
Loans held for sale, at fair value   648,684   1,062   100 %
LHI, mortgage finance   4,961,159   4,312,790   15 %
LHI (net of unearned income)   12,662,394   11,562,828   10 %
Less:  Allowance for loan losses   180,436   130,540   38 %
LHI, net   17,443,117   15,745,078   11 %
Mortgage servicing rights, net   15,462     100 %
Premises and equipment, net   20,604   23,894   (14 )%
Accrued interest receivable and other assets   454,116   397,631   14 %
Goodwill and intangibles, net   19,630   20,095   (2 )%
Total assets   $ 22,216,388   $ 18,666,708   19 %
         
Liabilities and Stockholders’ Equity        
Liabilities:        
Deposits:        
Non-interest bearing   $ 8,789,740   $ 6,545,273   34 %
Interest bearing   9,355,383   8,620,072   9 %
Total deposits   18,145,123   15,165,345   20 %
         
Accrued interest payable   3,124   2,694   16 %
Other liabilities   196,579   160,786   22 %
Federal funds purchased and repurchase agreements   81,420   103,834   (22 )%
Other borrowings   1,670,000   1,250,000   34 %
Subordinated notes, net   280,954   280,592    
Trust preferred subordinated debentures   113,406   113,406    
Total liabilities   20,490,606   17,076,657   20 %
         
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, 2016 and 2015   150,000   150,000    
Common stock, $.01 par value:        
Authorized shares – 100,000,000        
Issued shares – 46,009,912 and 45,839,781 at September 30, 2016 and 2015, respectively   460   458   %
Additional paid-in capital   717,452   713,209   1 %
Retained earnings   857,238   725,502   18 %
Treasury stock (shares at cost: 417 at September 30, 2016 and 2015)   (8 ) (8 )  
Accumulated other comprehensive income, net of taxes   640   890   (28 )%
Total stockholders’ equity   1,725,782   1,590,051   9 %
Total liabilities and stockholders’ equity   $ 22,216,388   $ 18,666,708   19 %
                   

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
    2016 2015 2016 2015
Interest income          
Interest and fees on loans   $ 177,724   $ 151,749   $ 501,673   $ 442,529  
Securities   232   298   739   979  
Federal funds sold   455   193   1,209   427  
Deposits in other banks   4,081   1,616   11,116   4,203  
Total interest income   182,492   153,856   514,737   448,138  
Interest expense          
Deposits   8,950   6,240   26,743   17,510  
Federal funds purchased   126   56   362   217  
Repurchase agreements   3   6   8   14  
Other borrowings   1,730   672   4,257   1,590  
Subordinated notes   4,191   4,191   12,573   12,573  
Trust preferred subordinated debentures   753   643   2,203   1,892  
Total interest expense   15,753   11,808   46,146   33,796  
Net interest income   166,739   142,048   468,591   414,342  
Provision for credit losses   22,000   13,750   68,000   39,250  
Net interest income after provision for credit losses   144,739   128,298   400,591   375,092  
Non-interest income          
Service charges on deposit accounts   2,880   2,096   7,401   6,339  
Trust fee income   1,113   1,222   3,024   3,709  
Bank owned life insurance (BOLI) income   520   484   1,592   1,444  
Brokered loan fees   7,581   4,885   18,090   14,394  
Swap fees   918   254   2,330   3,275  
Other   3,704   2,439   9,508   7,257  
Total non-interest income   16,716   11,380   41,945   36,418  
Non-interest expense          
Salaries and employee benefits   56,722   48,583   162,904   142,611  
Net occupancy expense   5,634   5,874   17,284   17,373  
Marketing   4,292   3,999   12,686   12,142  
Legal and professional   5,333   5,510   16,883   15,176  
Communications and technology   6,620   5,180   19,228   15,905  
FDIC insurance assessment   6,355   4,489   17,867   12,490  
Allowance and other carrying costs for OREO   269   1   765   16  
Other   9,574   8,052   28,257   23,768  
Total non-interest expense   94,799   81,688   275,874   239,481  
Income before income taxes   66,656   57,990   166,662   172,029  
Income tax expense   23,931   20,876   59,929   61,928  
Net income   42,725   37,114   106,733   110,101  
Preferred stock dividends   2,438   2,438   7,313   7,313  
Net income available to common stockholders   $ 40,287   $ 34,676   $ 99,420   $ 102,788  
           
Basic earnings per common share   $ 0.88   $ 0.76   $ 2.16   $ 2.24  
Diluted earnings per common share   $ 0.87   $ 0.75   $ 2.14   $ 2.21  
                           

TEXAS CAPITAL BANCSHARES, INC.
SUMMARY OF LOAN LOSS EXPERIENCE
(Dollars in thousands)
    3rd Quarter 2nd Quarter 1st Quarter 4th Quarter 3rd Quarter
    2016 2016 2016 2015 2015
Allowance for loan losses:            
Beginning balance   $ 167,397   $ 162,510   $ 141,111   $ 130,540   $ 118,770  
Loans charged-off:            
Commercial   9,945   15,791   8,496   4,976   2,758  
Real estate     528     43    
Consumer   40          
Leases           25  
Total charge-offs   9,985   16,319   8,496   5,019   2,783  
Recoveries:            
Commercial   2,495   4,294   1,040   2,846   388  
Real estate   15   13   8   5   8  
Construction     34     3   42  
Consumer   5   4   7   154   9  
Leases   26     45   11   4  
Total recoveries   2,541   4,345   1,100   3,019   451  
Net charge-offs   7,444   11,974   7,396   2,000   2,332  
Provision for loan losses   20,483   16,861   28,795   12,571   14,102  
Ending balance   $ 180,436   $ 167,397   $ 162,510   $ 141,111   $ 130,540  
             
Allowance for off-balance sheet credit losses:            
Beginning balance   $ 9,355   $ 10,216   $ 9,011   $ 7,582   $ 7,934  
Provision for off-balance sheet credit losses   1,517   (861 ) 1,205   1,429   (352 )
Ending balance   $ 10,872   $ 9,355   $ 10,216   $ 9,011   $ 7,582  
             
Total allowance for credit losses   $ 191,308   $ 176,752   $ 172,726   $ 150,122   $ 138,122  
             
Total provision for credit losses   $ 22,000   $ 16,000   $ 30,000   $ 14,000   $ 13,750  
             
Allowance for loan losses to LHI   1.02 % 0.94 % 0.95 % 0.84 % 0.82 %
Allowance for loan losses to LHI excluding mortgage finance loans(2)   1.42 % 1.34 % 1.35 % 1.20 % 1.13 %
Allowance for loan losses to average LHI   1.05 % 1.00 % 1.04 % 0.92 % 0.85 %
Allowance for loan losses to average LHI excluding mortgage finance loans(2)   1.43 % 1.36 % 1.36 % 1.21 % 1.15 %
Net charge-offs to average LHI(1)   0.17 % 0.29 % 0.19 % 0.05 % 0.06 %
Net charge-offs to average LHI excluding mortgage finance loans(1)(2)   0.24 % 0.39 % 0.25 % 0.07 % 0.08 %
Net charge-offs to average LHI for last twelve months(1)   0.18 % 0.15 % 0.10 % 0.07 % 0.07 %
Net charge-offs to average LHI, excluding mortgage finance loans, for last twelve months(1)(2)   0.24 % 0.20 % 0.14 % 0.10 % 0.10 %
Total provision for credit losses to average LHI(1)   0.51 % 0.39 % 0.77 % 0.36 % 0.36 %
Total provision for credit losses to average LHI excluding mortgage finance loans(1)(2)   0.70 % 0.52 % 1.01 % 0.47 % 0.48 %
Combined allowance for credit losses to LHI   1.09 % 1.00 % 1.01 % 0.90 % 0.87 %
Combined allowance for credit losses to LHI, excluding mortgage finance loans(2)   1.51 % 1.41 % 1.43 % 1.28 % 1.19 %
             
Non-performing assets (NPAs):            
Non-accrual loans   $ 169,113   $ 165,429   $ 173,156   $ 179,788   $ 109,674  
Other real estate owned (OREO)   19,009   18,727   17,585   278   187  
Total   $ 188,122   $ 184,156   $ 190,741   $ 180,066   $ 109,861  
             
Non-accrual loans to LHI     0.96 %   0.93 %   1.02 %   1.08 %   0.69 %
Non-accrual loans to LHI excluding mortgage finance loans(2)     1.34 %   1.32 %   1.44 %   1.53 %   0.95 %
Total NPAs to LHI plus OREO     1.07 %   1.04 %   1.12 %   1.08 %   0.69 %
Total NPAs to LHI excluding mortgage finance loans plus OREO(2)     1.48 %   1.47 %   1.58 %   1.53 %   0.95 %
Total NPAs to earning assets     0.87 %   0.90 %   0.97 %   0.99 %   0.61 %
Allowance for loan losses to non-accrual loans     1.1x     1.0x     0.9x     0.8x     1.2x  
                                 
Restructured loans   $   $ 249   $ 249   $ 249   $ 249  
Loans past due 90 days and still accruing(3)   $ 9,706   $ 7,743   $ 10,100   $ 7,013   $ 7,558  
                                 
Loans past due 90 days to LHI     0.06 %   0.04 %   0.06 %   0.04 %   0.05 %
Loans past due 90 days to LHI excluding mortgage finance loans(2)     0.08 %   0.06 %   0.08 %   0.06 %   0.07 %
 
(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.
(3) At September 30, 2016, loans past due 90 days and still accruing includes premium finance loans of $7.1 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.
 

TEXAS CAPITAL BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(Dollars in thousands)
             
    3rd Quarter   2nd Quarter   1st Quarter   4th Quarter   3rd Quarter  
    2016   2016   2016   2015   2015  
Interest income                                
Interest and fees on loans   $ 177,724   $ 168,064   $ 155,885   $ 152,200   $ 151,749  
Securities   232   246   261   275   298  
Federal funds sold   455   382   372   255   193  
Deposits in other banks   4,081   3,750   3,285   2,090   1,616  
Total interest income   182,492   172,442   159,803   154,820   153,856  
Interest expense            
Deposits   8,950   8,971   8,822   7,068   6,240  
Federal funds purchased   126   110   126   67   56  
Repurchase agreements   3   2   3   5   6  
Other borrowings   1,730   1,365   1,162   642   672  
Subordinated notes   4,191   4,191   4,191   4,191   4,191  
Trust preferred subordinated debentures   753   734   716   659   643  
Total interest expense   15,753   15,373   15,020   12,632   11,808  
Net interest income   166,739   157,069   144,783   142,188   142,048  
Provision for credit losses   22,000   16,000   30,000   14,000   13,750  
Net interest income after provision for credit losses   144,739   141,069   114,783   128,188   128,298  
Non-interest income            
Service charges on deposit accounts   2,880   2,411   2,110   1,984   2,096  
Trust fee income   1,113   1,098   813   1,313   1,222  
Bank owned life insurance (BOLI) income   520   536   536   567   484  
Brokered loan fees   7,581   5,864   4,645   4,267   4,885  
Swap fees   918   1,105   307   1,000   254  
Other   3,704   2,918   2,886   2,189   2,439  
Total non-interest income   16,716   13,932   11,297   11,320   11,380  
Non-interest expense            
Salaries and employee benefits   56,722   54,810   51,372   49,999   48,583  
Net occupancy expense   5,634   5,838   5,812   5,809   5,874  
Marketing   4,292   4,486   3,908   4,349   3,999  
Legal and professional   5,333   6,226   5,324   6,974   5,510  
Communications and technology   6,620   6,391   6,217   5,520   5,180  
FDIC insurance assessment   6,355   6,043   5,469   4,741   4,489  
Allowance and other carrying costs for OREO   269   260   236   6   1  
Other   9,574   10,201   8,482   9,644   8,052  
Total non-interest expense   94,799   94,255   86,820   87,042   81,688  
Income before income taxes   66,656   60,746   39,260   52,466   57,990  
Income tax expense   23,931   21,866   14,132   17,713   20,876  
Net income   42,725   38,880   25,128   34,753   37,114  
Preferred stock dividends   2,438   2,437   2,438   2,437   2,438  
Net income available to common shareholders   $ 40,287   $ 36,443   $ 22,690   $ 32,316   $ 34,676  
                                 

TEXAS CAPITAL BANCSHARES, INC.
QUARTERLY FINANCIAL SUMMARY – UNAUDITED
Consolidated Daily Average Balances, Average Yields and Rates
(Dollars in thousands)
  3rd Quarter 2016   2nd Quarter 2016   1st Quarter 2016   4th Quarter 2015   3rd Quarter 2015
  Average
Balance
Revenue/
Expense(1)
Yield/
Rate
  Average
Balance
Revenue/
Expense(1)
Yield/
Rate
  Average
Balance
Revenue/
Expense(1)
Yield/
Rate
  Average
Balance
Revenue/
Expense(1)
Yield/
Rate
  Average
Balance
Revenue/
Expense(1)
Yield/
Rate
Assets                                      
Securities – Taxable $ 26,051   $ 228   3.47 %   $ 27,097   $ 240   3.57 %   $ 28,343   $ 254   3.60 %   $ 29,973   $ 267   3.53 %   $ 32,358   $ 287   3.52 %
Securities – Non-taxable(2) 564   8   5.82 %   564   8   5.87 %   759   11   5.70 %   829   12   5.74 %   1,162   17   5.80 %
Federal funds sold and securities purchased under resale agreements 369,215   455   0.49 %   312,832   382   0.49 %   304,425   372   0.49 %   375,181   255   0.27 %   308,822   193   0.25 %
Interest-bearing deposits in other banks 3,192,141   4,080   0.51 %   2,871,295   3,750   0.53 %   2,649,164   3,285   0.50 %   3,081,882   2,090   0.27 %   2,537,033   1,616   0.25 %
Loans held for sale, at fair value 430,869   3,662   3.38 %   157,898   1,350   3.44 %   126,084   1,094   3.49 %   24,658   237   0.04     570   6   4.18 %
LHI, mortgage finance loans 4,658,804   36,655   3.13 %   4,412,091   33,974   3.10 %   3,724,513   29,037   3.14 %   3,669,022   27,846   3.01 %   3,981,731   30,427   3.03 %
LHI 12,591,561   137,407   4.34 %   12,276,272   132,740   4.35 %   11,910,788   125,754   4.25 %   11,693,464   124,117   4.21 %   11,302,248   121,316   4.26 %
Less allowance for loan
  losses
168,086         164,316         141,125         130,822         118,543      
LHI, net of allowance 17,082,279   174,062   4.05 %   16,524,047   166,714   4.06 %   15,494,176   154,791   4.02 %   15,231,664   151,963   3.96 %   15,165,436   151,743   3.97 %
Total earning assets 21,101,119   182,495   3.44 %   19,893,733   172,444   3.49 %   18,602,951   159,807   3.46 %   18,744,187   154,824   3.28 %   18,045,381   153,862   3.38 %
Cash and other assets 588,440         544,737         506,025         499,712         481,378      
Total assets $ 21,689,559         $ 20,438,470         $ 19,108,976         $ 19,243,899         $ 18,526,759      
Liabilities and Stockholders’ Equity                                      
Transaction deposits $ 2,301,362   $ 1,960   0.34 %   $ 2,207,726   $ 1,749   0.32 %   $ 2,004,817   $ 1,381   0.28 %   $ 2,150,740   $ 950   0.18 %   $ 1,754,940   $ 763   0.17 %
Savings deposits 6,177,681   6,228   0.40 %   6,388,133   6,494   0.41 %   6,335,425   6,714   0.43 %   6,316,191   5,370   0.34 %   5,858,381   4,616   0.31 %
Time deposits 501,701   763   0.61 %   486,610   727   0.60 %   509,762   727   0.57 %   539,421   748   0.55 %   536,531   723   0.53 %
Deposits in foreign branches     %       %       %       %   179,731   138   0.30 %
Total interest bearing deposits 8,980,744   8,951   0.40 %   9,082,469   8,970   0.40 %   8,850,004   8,822   0.40 %   9,006,352   7,068   0.31 %   8,329,583   6,240   0.30 %
Other borrowings 1,607,613   1,860   0.46 %   1,411,387   1,476   0.42 %   1,346,998   1,292   0.39 %   1,327,087   714   0.21 %   1,459,864   734   0.20 %
Subordinated notes 280,895   4,191   5.94 %   280,805   4,191   6.00 %   280,713   4,191   6.00 %   280,622   4,191   5.93 %   280,532   4,191   5.93 %
Trust preferred subordinated debentures 113,406   752   2.64 %   113,406   735   2.61 %   113,406   716   2.54 %   113,406   659   2.31 %   113,406   643   2.25 %
Total interest bearing liabilities 10,982,658   15,754   0.57 %   10,888,067   15,372   0.57 %   10,591,121   15,021   0.57 %   10,727,467   12,632   0.47 %   10,183,385   11,808   0.46 %
Demand deposits 8,849,725         7,767,693         6,730,586         6,755,615         6,621,159      
Other liabilities 135,141         113,927         148,418         157,425         152,154      
Stockholders’ equity 1,722,035         1,668,783         1,638,851         1,603,392         1,570,061      
Total liabilities and stockholders’ equity $ 21,689,559         $ 20,438,470         $ 19,108,976         $ 19,243,899         $ 18,526,759      
Net interest income(2)   $ 166,741         $ 157,072         $ 144,786         $ 142,192         $ 142,054    
Net interest margin     3.14 %       3.18 %       3.13 %       3.01 %       3.12 %
                                                 
(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.
                                                 
CONTACT: MEDIA & INVESTOR CONTACT
Heather Worley, 214.932.6646
heather.worley@texascapitalbank.com

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