Texas Capital Bancshares, Inc. Announces Operating Results for Q3 2017

DALLAS, Oct. 18, 2017 (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 2017.

“We are extremely pleased to report results for another great quarter, with record earnings, continued core loan and deposit growth and seasonally strong mortgage finance balances. We continue to be optimistic about our earnings power for the remainder of 2017,” said Keith Cargill, CEO. “While we remain well positioned to take advantage of future business opportunities, we also remain cautious as we are late in a recovery cycle.”

  • Loans held for investment (“LHI”), excluding mortgage finance, increased 4% on a linked quarter basis, growing 17% from the third quarter of 2016.
  • Total mortgage finance loans, including MCA, increased 9% on a linked quarter basis and increased 18% from the third quarter of 2016.
  • Demand deposits increased 1% and total deposits increased 10% on a linked quarter basis, decreasing 6% and increasing 5%, respectively, from the third quarter of 2016.
  • Net income increased 15% on a linked quarter basis and increased 37% from the third quarter of 2016.
  • EPS increased 15% on a linked quarter basis and increased 29% from the third quarter of 2016.
  • ROE increased to 11.20% compared to 10.08% for the second quarter of 2017 and 10.20% for the third quarter of 2016.

FINANCIAL SUMMARY
(dollars and shares in thousands)

   Q3 2017   Q3 2016   % Change
QUARTERLY OPERATING RESULTS          
Net income $ 58,684     $ 42,725     37 %
Net income available to common stockholders $ 56,246     $ 40,287     40 %
Diluted EPS $ 1.12     $ 0.87     29 %
Diluted shares 50,251     46,510     8 %
ROA 0.99 %   0.78 %      
ROE 11.20 %   10.20 %      
             
BALANCE SHEET            
Loans held for sale (MCA) $ 955,983     $ 648,684     47 %
LHI, mortgage finance 5,642,285     4,961,159     14 %
LHI 14,828,406     12,662,394     17 %
Total LHI 20,470,691     17,623,553     16 %
Total loans 21,426,674     18,272,237     17 %
Total assets 24,400,998     22,216,388     10 %
Demand deposits 8,263,202     8,789,740     (6 )%
Total deposits 19,081,257     18,145,123     5 %
Stockholders’ equity 2,158,363     1,725,782     25 %

DETAILED FINANCIALS

Texas Capital Bancshares, Inc. reported net income of $58.7 million and net income available to common stockholders of $56.2 million for the quarter ended September 30, 2017 compared to net income of $42.7 million and net income available to common stockholders of $40.3 million for the same period in 2016. On a fully diluted basis, earnings per common share were $1.12 for the quarter ended September 30, 2017 compared to $0.87 for the same period of 2016. The increase reflects the $16.0 million year over year increase in net income offset by the $0.07 per share dilutive effect of the common stock offering in the fourth quarter 2016.

Return on average common equity (“ROE”) was 11.20 percent and return on average assets (“ROA”) was 0.99 percent for the third quarter of 2017, compared to 10.08 percent and 0.96 percent, respectively, for the second quarter of 2017 and 10.20 percent and 0.78 percent, respectively, for the third quarter of 2016. The linked quarter increase in ROE and ROA resulted from increases in net interest income and non-interest income in the third quarter of 2017 that exceeded growth in the provision for credit losses and non-interest expense. ROA also benefited from more effective utilization of liquidity balances in the past two quarters as balances were deployed into higher yielding loan categories.

Net interest income was $204.4 million for the third quarter of 2017, compared to $183.0 million for the second quarter of 2017 and $166.7 million for the third quarter of 2016. The linked quarter and year-over-year increases in net interest income are due primarily to improved earning asset composition and the effect of increases in interest rates on loan yields attributable to our asset-sensitive balance sheet. The benefit of mortgage finance balances is also most impactful in the seasonally strong second and third quarters. Net interest margin for the third quarter of 2017 was 3.59 percent, an increase of 2 basis points from the second quarter of 2017 and an increase of 45 basis points from the third quarter of 2016. We experienced significant improvement in traditional LHI yields with a 20 basis point increase for the third quarter of 2017 compared to the second quarter of 2017 and a 58 basis point increase compared to the third quarter of 2016. In contrast, total cost of deposits for the third quarter of 2017 was up only 9 basis points to 0.47 percent compared to 0.38 percent for the second quarter of 2017 and up 27 basis points compared to the third quarter of 2016.  Net interest margin for the third quarter of 2017 was also adversely affected by increases in mortgage and liquidity assets, which produced significant growth in net interest income.

Average LHI, excluding mortgage finance loans, for the third quarter of 2017 were $14.4 billion, an increase of $709.2 million, or 5 percent, from the second quarter of 2017 and an increase of $1.8 billion, or 15 percent, from the third quarter of 2016. Average total mortgage finance loans (including Mortgage Correspondent Aggregation (“MCA”)) for the third quarter of 2017 were $5.9 billion, an increase of $1.2 billion, or 26 percent, from the second quarter of 2017 and an increase of $767.6 million, or 15 percent, from the third quarter of 2016.

Average total deposits for the third quarter of 2017 increased $1.7 billion from the second quarter of 2017 and increased $1.2 billion from the third quarter of 2016. Average demand deposits for the third quarter of 2017 increased $900.9 million, or 11 percent, to $8.8 billion from $7.9 billion during the second quarter of 2017, and decreased $85.5 million, or 1 percent, from the third quarter of 2016.

We recorded a $20.0 million provision for credit losses for the third quarter of 2017 compared to $13.0 million for the second quarter of 2017 and $22.0 million for the third quarter of 2016. The provision for the third quarter of 2017 was driven by the consistent application of our methodology, and includes a $4.5 million provision related to Hurricanes Harvey and Irma. The linked-quarter increase was primarily related to the hurricane provision as well as loan growth and the year-over-year decrease was primarily related to improvements in the composition of our pass-rated and classified loan portfolios, including energy loans. The combined allowance for credit losses at September 30, 2017 increased to 1.30 percent of LHI excluding mortgage finance loans compared to 1.28 percent at June 30, 2017 and decreased from 1.51 percent at September 30, 2016. In management’s opinion, the allowance is appropriate and is derived from consistent application of the methodology for establishing reserves for the loan portfolio.

We experienced a decrease in non-performing assets in the third quarter of 2017 compared to levels reported in the second quarter of 2017 and third quarter of 2016, reducing the ratio of total non-performing assets to total LHI plus other real estate owned (“OREO”) to 0.67 percent compared to 0.73 percent for the second quarter of 2017 and 1.07 percent for the third quarter of 2016. The linked-quarter and year-over-year decreases are primarily related to the decrease in energy non-accrual loans from $129.3 million at September 30, 2016 and $82.6 million at June 30, 2017 to $81.6 million at September 30, 2017. Net charge-offs for the third quarter of 2017 were $10.7 million compared to $12.4 million for the second quarter of 2017 and $7.4 million for the third quarter of 2016. For the third quarter of 2017, net charge-offs related to energy loans were $6.3 million compared to $6.4 million for the second quarter of 2017 and $1.8 million for the third quarter of 2016. For the third quarter of 2017, net charge-offs were 0.22 percent of average total LHI, compared to 0.28 percent for the second quarter of 2017 and 0.17 percent for the same period in 2016. At September 30, 2017, total OREO was $18.1 million compared to $18.7 million at June 30, 2017 and $19.0 million at September 30, 2016. We recorded a $101,000 OREO valuation allowance during the third quarter of 2017.

Non-interest income increased $2.3 million, or 14 percent, during the third quarter of 2017 compared to the same period of 2016, and increased $234,000, or 1 percent, compared to the second quarter of 2017. The year-over-year increase primarily related to a $4.2 million increase in servicing income during the third quarter of 2017 compared to the same period of 2016 primarily attributable to an increase in mortgage servicing rights. Offsetting this increase was a $1.4 million decrease in brokered loan fees resulting from a decrease in mortgage finance volumes.

Non-interest expense for the third quarter of 2017 increased $20.0 million, or 21 percent, compared to the third quarter of 2016, and increased $3.0 million, or 3 percent, compared to the second quarter of 2017. The year-over-year increase is primarily related to an $11.2 million increase in salaries and employee benefits expense and a $3.0 million increase in marketing expense, both of which were due to general business growth, and a $3.3 million increase in servicing related expenses, resulting from an increase in mortgage servicing rights, which are being amortized. The linked quarter increase is primarily related to a $4.7 million increase in salaries and employee benefits, a $1.6 million increase in the FDIC assessment, a $1.2 million increase in servicing related expenses and a $1.1 million increase in marketing expense, offset by a $5.9 million decrease in communications and technology expense. The linked quarter decrease in communications and technology expense relates to the technology write-off recorded in the second quarter of 2017.

Stockholders’ equity increased by 25 percent from $1.7 billion at September 30, 2016 to $2.2 billion at September 30, 2017, primarily due to retention of net income and proceeds from the fourth quarter 2016 common stock offering. Texas Capital Bank is well capitalized under regulatory guidelines and at September 30, 2017, 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 2000® Index and the S&P MidCap 400®, is the parent company of Texas Capital Bank, a commercial bank that delivers highly personalized financial services to businesses and entrepreneurs. Headquartered in Dallas, the bank has full-service locations in Austin, Dallas, Fort Worth, Houston and San Antonio.

This news release may be deemed to include forward-looking statements which are based on management’s current estimates or expectations of future events or future results. These statements are not historical in nature and can generally be identified by such words as “believe,” “expect,” “estimate,” “anticipate,” “plan,” “may,” “will,” “intend” and similar expressions. A number of factors, many of which are beyond our control, could cause actual results to differ materially from future results expressed or implied by such forward-looking statements. These risks and uncertainties include, but are not limited to, the credit quality of our loan portfolio, general economic conditions in the United States and in our markets, including the continued impact on our customers from declines and volatility in oil and gas prices, the impact on our loan and deposit portfolios as a result of Hurricanes Harvey and Irma, rates of default or loan losses, volatility in the mortgage industry, the success or failure of our business strategies, future financial performance, future growth and earnings, the appropriateness of our allowance for loan losses and provision for credit losses, the impact of increased regulatory requirements and legislative changes on our business, increased competition, interest rate risk, the success or failure of new lines of business and new product or service offerings and the impact of new technologies. These and other factors that could cause results to differ materially from those described in the forward-looking statements, as well as a discussion of the risks and uncertainties that may affect our business, can be found in our Annual Report on Form 10-K and in other filings we make with the Securities and Exchange Commission. The information contained in this release speaks only as of its date. We are under no obligation, and expressly disclaim such obligation, to update, alter or revise our forward-looking statements, whether as a result of new information, future events, or otherwise.

 
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
  2017 2017 2017 2016 2016
CONSOLIDATED STATEMENTS OF INCOME          
Interest income $ 237,643   $ 208,191   $ 183,946   $ 188,671   $ 182,492  
Interest expense 33,282   25,232   20,587   17,448   15,753  
Net interest income 204,361   182,959   163,359   171,223   166,739  
Provision for credit losses 20,000   13,000   9,000   9,000   22,000  
Net interest income after provision for credit losses 184,361   169,959   154,359   162,223   144,739  
Non-interest income 19,003   18,769   17,110   18,835   16,716  
Non-interest expense 114,830   111,814   106,094   106,523   94,799  
Income before income taxes 88,534   76,914   65,375   74,535   66,656  
Income tax expense 29,850   25,819   22,833   26,149   23,931  
Net income 58,684   51,095   42,542   48,386   42,725  
Preferred stock dividends 2,438   2,437   2,438   2,437   2,438  
Net income available to common stockholders $ 56,246   $ 48,658   $ 40,104   $ 45,949   $ 40,287  
           
Diluted EPS $ 1.12   $ 0.97   $ 0.80   $ 0.96   $ 0.87  
Diluted shares 50,250,866   50,229,670   50,234,230   47,759,548   46,509,683  
           
CONSOLIDATED BALANCE SHEET DATA          
Total assets $ 24,400,998   $ 23,119,713   $ 20,864,874   $ 21,697,134   $ 22,216,388  
LHI 14,828,406   14,280,353   13,298,918   13,001,011   12,662,394  
LHI, mortgage finance 5,642,285   5,183,600   3,371,598   4,497,338   4,961,159  
Loans held for sale (MCA) 955,983   843,164   884,647   968,929   648,684  
Liquidity assets 2,357,537   2,142,658   2,804,921   2,725,645   3,471,074  
Securities 24,224   119,043   42,203   24,874   26,356  
Demand deposits 8,263,202   8,174,830   7,094,696   7,994,201   8,789,740  
Total deposits 19,081,257   17,292,223   16,605,380   17,016,831   18,145,123  
Other borrowings 2,583,496   3,162,224   1,641,834   2,109,575   1,751,420  
Subordinated notes 281,315   281,225   281,134   281,044   280,954  
Long-term debt 113,406   113,406   113,406   113,406   113,406  
Stockholders’ equity 2,158,363   2,100,553   2,050,442   2,009,557   1,725,782  
           
End of period shares outstanding 49,621,825   49,595,252   49,560,100   49,503,662   46,009,495  
Book value $ 40.47   $ 39.33   $ 38.35   $ 37.56   $ 34.25  
Tangible book value(1) $ 40.09   $ 38.94   $ 37.95   $ 37.17   $ 33.82  
           
SELECTED FINANCIAL RATIOS          
Net interest margin 3.59 % 3.57 % 3.29 % 3.11 % 3.14 %
Return on average assets 0.99 % 0.96 % 0.83 % 0.85 % 0.78 %
Return on average common equity 11.20 % 10.08 % 8.60 % 10.82 % 10.20 %
Non-interest income to earning assets 0.33 % 0.36 % 0.34 % 0.34 % 0.32 %
Efficiency ratio(2) 51.4 % 55.4 % 58.8 % 56.0 % 51.7 %
Non-interest expense to earning assets 2.00 % 2.17 % 2.12 % 1.93 % 1.79 %
Tangible common equity to total tangible assets(3) 8.2 % 8.4 % 9.0 % 8.5 % 7.0 %
Common Equity Tier 1 8.4 % 8.6 % 9.6 % 9.0 % 7.6 %
Tier 1 capital 9.4 % 9.8 % 10.9 % 10.2 % 8.8 %
Total capital 11.4 % 11.8 % 13.3 % 12.5 % 11.1 %
Leverage 9.6 % 10.3 % 10.3 % 9.3 % 8.4 %

(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,
2017
September 30,
2016
%
Change
Assets      
Cash and due from banks $ 143,616   $ 117,345   22 %
Interest-bearing deposits 2,332,537   3,441,074   (32 )%
Federal funds sold and securities purchased under resale agreements 25,000   30,000   (17 )%
Securities, available-for-sale 24,224   26,356   (8 )%
Loans held for sale, at fair value 955,983   648,684   47 %
LHI, mortgage finance 5,642,285   4,961,159   14 %
LHI (net of unearned income) 14,828,406   12,662,394   17 %
Less:  Allowance for loan losses 182,929   180,436   1 %
LHI, net 20,287,762   17,443,117   16 %
Mortgage servicing rights, net 77,630   15,462   402 %
Premises and equipment, net 23,882   20,604   16 %
Accrued interest receivable and other assets 511,207   454,116   13 %
Goodwill and intangibles, net 19,157   19,630   (2 )%
Total assets $ 24,400,998   $ 22,216,388   10 %
         
Liabilities and Stockholders’ Equity        
Liabilities:        
Deposits:        
Non-interest bearing $ 8,263,202   $ 8,789,740   (6 )%
Interest bearing 10,818,055   9,355,383   16 %
Total deposits 19,081,257   18,145,123   5 %
         
Accrued interest payable 4,562   3,124   46 %
Other liabilities 178,599   196,579   (9 )%
Federal funds purchased and repurchase agreements 83,496   81,420   3 %
Other borrowings 2,500,000   1,670,000   50 %
Subordinated notes, net 281,315   280,954    
Trust preferred subordinated debentures 113,406   113,406    
Total liabilities 22,242,635   20,490,606   9 %
       
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, 2017 and 2016 150,000   150,000    
Common stock, $.01 par value:      
Authorized shares – 100,000,000      
Issued shares – 49,622,242 and 46,009,912 at September 30, 2017 and 2016, respectively 496   460   8 %
Additional paid-in capital 959,251   717,452   34 %
Retained earnings 1,048,195   857,238   22 %
Treasury stock (shares at cost: 417 at September 30, 2017 and 2016) (8 ) (8 )  
Accumulated other comprehensive income, net of taxes 429   640   (33 )%
Total stockholders’ equity 2,158,363   1,725,782   25 %
Total liabilities and stockholders’ equity $ 24,400,998   $ 22,216,388   10 %
                 

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
  2017 2016 2017 2016
Interest income        
Interest and fees on loans $ 229,116   $ 177,724   $ 607,386   $ 501,673  
Securities 341   232   853   739  
Federal funds sold and securities purchased under resale agreements 642   455   1,606   1,209  
Deposits in other banks 7,544   4,081   19,935   11,116  
Total interest income 237,643   182,492   629,780   514,737  
Interest expense        
Deposits 22,435   8,950   52,261   26,743  
Federal funds purchased 891   126   1,869   362  
Other borrowings 4,835   1,733   9,757   4,265  
Subordinated notes 4,191   4,191   12,573   12,573  
Trust preferred subordinated debentures 930   753   2,641   2,203  
Total interest expense 33,282   15,753   79,101   46,146  
Net interest income 204,361   166,739   550,679   468,591  
Provision for credit losses 20,000   22,000   42,000   68,000  
Net interest income after provision for credit losses 184,361   144,739   508,679   400,591  
Non-interest income        
Service charges on deposit accounts 3,211   2,880   9,323   7,401  
Wealth management and trust fee income 1,627   1,113   4,386   3,024  
Bank owned life insurance (BOLI) income 615   520   1,562   1,592  
Brokered loan fees 6,152   7,581   17,639   18,090  
Servicing income 4,486   310   10,387   305  
Swap fees 647   918   3,404   2,330  
Other 2,265   3,394   8,181   9,203  
Total non-interest income 19,003   16,716   54,882   41,945  
Non-interest expense        
Salaries and employee benefits 67,882   56,722   194,039   162,904  
Net occupancy expense 6,436   5,634   19,062   17,284  
Marketing 7,242   4,292   18,349   12,686  
Legal and professional 6,395   5,333   20,975   16,883  
Communications and technology 6,002   6,620   24,414   19,228  
FDIC insurance assessment 6,203   6,355   16,800   17,867  
Servicing related expenses 3,897   620   8,329   1,305  
Other 10,773   9,223   30,770   27,717  
Total non-interest expense 114,830   94,799   332,738   275,874  
Income before income taxes 88,534   66,656   230,823   166,662  
Income tax expense 29,850   23,931   78,502   59,929  
Net income 58,684   42,725   152,321   106,733  
Preferred stock dividends 2,438   2,438   7,313   7,313  
Net income available to common stockholders $ 56,246   $ 40,287   $ 145,008   $ 99,420  
         
Basic earnings per common share $ 1.13   $ 0.88   $ 2.93   $ 2.16  
Diluted earnings per common share $ 1.12   $ 0.87   $ 2.89   $ 2.14  

TEXAS CAPITAL BANCSHARES, INC.
SUMMARY OF LOAN LOSS EXPERIENCE
(Dollars in thousands)
  3rd Quarter 2nd Quarter 1st Quarter 4th Quarter 3rd Quarter
  2017 2017 2017 2016 2016
Allowance for loan losses:          
Beginning balance $ 174,225   $ 172,013   $ 168,126   $ 180,436   $ 167,397  
Loans charged-off:          
Commercial 10,603   12,310   9,233   22,326   9,945  
Real estate 250   40        
Construction 59          
Consumer   180     7   40  
Total charge-offs 10,912   12,530   9,233   22,333   9,985  
Recoveries:          
Commercial 132   61   3,381   1,535   2,495  
Real estate 21   3   50   27   15  
Construction 3     101      
Consumer 15   36   5   5   5  
Leases 1     8   6   26  
Total recoveries 172   100   3,545   1,573   2,541  
Net charge-offs 10,740   12,430   5,688   20,760   7,444  
Provision for loan losses 19,444   14,642   9,575   8,450   20,483  
Ending balance $ 182,929   $ 174,225   $ 172,013   $ 168,126   $ 180,436  
           
Allowance for off-balance sheet credit losses:          
Beginning balance $ 9,205   $ 10,847   $ 11,422   $ 10,872   $ 9,355  
Provision for off-balance sheet credit losses 556   (1,642 ) (575 ) 550   1,517  
Ending balance $ 9,761   $ 9,205   $ 10,847   $ 11,422   $ 10,872  
           
Total allowance for credit losses $ 192,690   $ 183,430   $ 182,860   $ 179,548   $ 191,308  
           
Total provision for credit losses $ 20,000   $ 13,000   $ 9,000   $ 9,000   $ 22,000  
           
Allowance for loan losses to LHI 0.89 % 0.90 % 1.03 % 0.96 % 1.02 %
Allowance for loan losses to LHI excluding mortgage finance loans(2) 1.23 % 1.22 % 1.29 % 1.29 % 1.42 %
Allowance for loan losses to average LHI 0.95 % 0.99 % 1.09 % 0.98 % 1.05 %
Allowance for loan losses to average LHI excluding mortgage finance loans(2) 1.27 % 1.27 % 1.33 % 1.32 % 1.43 %
Net charge-offs to average LHI(1) 0.22 % 0.28 % 0.15 % 0.48 % 0.17 %
Net charge-offs to average LHI excluding mortgage finance loans(1)(2) 0.30 % 0.36 % 0.18 % 0.65 % 0.24 %
Net charge-offs to average LHI for last twelve months(1) 0.29 % 0.27 % 0.28 % 0.29 % 0.18 %
Net charge-offs to average LHI excluding mortgage finance loans for last twelve months(1)(2) 0.37 % 0.36 % 0.36 % 0.38 % 0.24 %
Total provision for credit losses to average LHI(1) 0.41 % 0.30 % 0.23 % 0.21 % 0.51 %
Total provision for credit losses to average LHI excluding mortgage finance loans(1)(2) 0.55 % 0.38 % 0.28 % 0.28 % 0.70 %
Combined allowance for credit losses to LHI 0.94 % 0.94 % 1.10 % 1.03 % 1.09 %
Combined allowance for credit losses to LHI excluding mortgage finance loans(2) 1.30 % 1.28 % 1.37 % 1.38 % 1.51 %
           
Non-performing assets (NPAs):          
Non-accrual loans $ 118,205   $ 123,730   $ 146,549   $ 167,791   $ 169,113  
Other real estate owned (OREO) 18,131   18,689   18,833   18,961   19,009  
Total $ 136,336   $ 142,419   $ 165,382   $ 186,752   $ 188,122  
           

  3rd Quarter 2nd Quarter 1st Quarter 4th Quarter 3rd Quarter
  2017 2017 2017 2016 2016
           
Non-accrual loans to LHI 0.58 % 0.64 % 0.88 % 0.96 % 0.96 %
Non-accrual loans to LHI excluding mortgage finance loans(2) 0.80 % 0.87 % 1.10 % 1.29 % 1.34 %
Total NPAs to LHI plus OREO 0.67 % 0.73 % 0.99 % 1.07 % 1.07 %
Total NPAs to LHI excluding mortgage finance loans plus OREO(2) 0.92 % 1.00 % 1.24 % 1.43 % 1.48 %
Total NPAs to earning assets 0.58 % 0.64 % 0.82 % 0.89 % 0.87 %
Allowance for loan losses to non-accrual loans 1.5x 1.4x 1.2x 1.0x 1.1x
           
Restructured loans $   $   $   $   $  
Loans past due 90 days and still accruing(3) $ 8,892   $ 11,077   $ 8,799   $ 10,729   $ 9,706  
           
Loans past due 90 days to LHI 0.04 % 0.06 % 0.05 % 0.06 % 0.06 %
Loans past due 90 days to LHI excluding mortgage finance loans(2) 0.06 % 0.08 % 0.07 % 0.08 % 0.08 %

(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, 2017, loans past due 90 days and still accruing includes premium finance loans of $8.4 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
  2017 2017 2017 2016 2016
Interest income          
Interest and fees on loans $ 229,116   $ 201,646   $ 176,624   $ 182,909   $ 177,724  
Securities 341   287   225   228   232  
Federal funds sold and securities purchased under resale agreements 642   434   530   338   455  
Deposits in other banks 7,544   5,824   6,567   5,196   4,081  
Total interest income 237,643   208,191   183,946   188,671   182,492  
Interest expense          
Deposits 22,435   16,533   13,293   10,432   8,950  
Federal funds purchased 891   726   252   156   126  
Other borrowings 4,835   2,901   2,021   1,863   1,733  
Subordinated notes 4,191   4,191   4,191   4,191   4,191  
Trust preferred subordinated debentures 930   881   830   806   753  
Total interest expense 33,282   25,232   20,587   17,448   15,753  
Net interest income 204,361   182,959   163,359   171,223   166,739  
Provision for credit losses 20,000   13,000   9,000   9,000   22,000  
Net interest income after provision for credit losses 184,361   169,959   154,359   162,223   144,739  
Non-interest income          
Service charges on deposit accounts 3,211   3,067   3,045   2,940   2,880  
Wealth management and trust fee income 1,627   1,402   1,357   1,244   1,113  
Bank owned life insurance (BOLI) income 615   481   466   481   520  
Brokered loan fees 6,152   5,809   5,678   7,249   7,581  
Servicing income 4,486   3,700   2,201   1,410   310  
Swap fees 647   954   1,803   536   918  
Other 2,265   3,356   2,560   4,975   3,394  
Total non-interest income 19,003   18,769   17,110   18,835   16,716  
Non-interest expense          
Salaries and employee benefits 67,882   63,154   63,003   66,081   56,722  
Net occupancy expense 6,436   6,515   6,111   5,937   5,634  
Marketing 7,242   6,157   4,950   4,617   4,292  
Legal and professional 6,395   7,127   7,453   6,443   5,333  
Communications and technology 6,002   11,906   6,506   6,334   6,620  
FDIC insurance assessment 6,203   4,603   5,994   6,573   6,355  
Servicing related expenses 3,897   2,682   1,750   398   620  
Other 10,773   9,670   10,327   10,140   9,223  
Total non-interest expense 114,830   111,814   106,094   106,523   94,799  
Income before income taxes 88,534   76,914   65,375   74,535   66,656  
Income tax expense 29,850   25,819   22,833   26,149   23,931  
Net income 58,684   51,095   42,542   48,386   42,725  
Preferred stock dividends 2,438   2,437   2,438   2,437   2,438  
Net income available to common shareholders $ 56,246   $ 48,658   $ 40,104   $ 45,949   $ 40,287  
                               

TEXAS CAPITAL BANCSHARES, INC.
QUARTERLY FINANCIAL SUMMARY – UNAUDITED
Consolidated Daily Average Balances, Average Yields and Rates
(Dollars in thousands)
  3rd Quarter 2017   2nd Quarter 2017   1st Quarter 2017   4th Quarter 2016   3rd Quarter 2016
  Average
Balance
Revenue/
Expense
Yield/
Rate
  Average
Balance
Revenue/
Expense
Yield/
Rate
  Average
Balance
Revenue/
Expense
Yield/
Rate
  Average
Balance
Revenue/
Expense
Yield/
Rate
  Average
Balance
Revenue/
Expense
Yield/
Rate
Assets                                      
Securities – Taxable $ 86,087   $ 340   1.57 %   $ 65,049   $ 287   1.77 %   $ 31,905   $ 224   2.84 %   $ 25,008   $ 221   3.53 %   $ 26,051   $ 228   3.47 %
Securities – Non-taxable(2)     %       %   224   3   4.85 %   531   9   6.37 %   564   8   5.82 %
Federal funds sold and securities purchased under resale agreements 205,938   642   1.24 %   174,264   434   1.00 %   276,910   530   0.78 %   254,008   338   0.53 %   369,215   455   0.49 %
Interest-bearing deposits in other banks 2,383,060   7,544   1.26 %   2,250,330   5,824   1.04 %   3,312,256   6,567   0.80 %   3,812,076   5,197   0.54 %   3,192,141   4,080   0.51 %
Loans held for sale, at fair value 1,009,703   9,882   3.88 %   845,623   8,235   3.91 %   1,064,322   9,535   3.63 %   944,484   7,903   3.33 %   430,869   3,662   3.38 %
LHI, mortgage finance loans 4,847,530   42,294   3.46 %   3,805,831   33,399   3.52 %   2,757,566   23,105   3.40 %   4,371,475   35,081   3.19 %   4,658,804   36,655   3.13 %
LHI(1)(2) 14,427,980   178,839   4.92 %   13,718,739   161,369   4.72 %   12,980,544   145,018   4.53 %   12,701,868   140,130   4.39 %   12,591,561   137,407   4.34 %
Less allowance for loan
  losses
172,774         170,957         169,318         180,727         168,086      
LHI, net of allowance 19,102,736   221,133   4.59 %   17,353,613   194,768   4.50 %   15,568,792   168,123   4.38 %   16,892,616   175,211   4.13 %   17,082,279   174,062   4.05 %
Total earning assets 22,787,524   239,541   4.17 %   20,688,879   209,548   4.06 %   20,254,409   184,982   3.70 %   21,928,723   188,879   3.43 %   21,101,119   182,495   3.44 %
Cash and other assets 713,778           632,097           606,762           595,671           588,440        
Total assets $ 23,501,302           $ 21,320,976           $ 20,861,171           $ 22,524,394           $ 21,689,559        
Liabilities and Stockholders’ Equity                                                
Transaction deposits $ 2,145,324   $ 4,359   0.81 %   $ 2,008,872   $ 2,893   0.58 %   $ 2,008,401   $ 2,193   0.44 %   $ 2,281,240   $ 2,129   0.37 %   $ 2,301,362   $ 1,960   0.34 %
Savings deposits 7,618,843   17,152   0.89 %   6,952,317   12,940   0.75 %   6,989,748   10,483   0.61 %   6,711,083   7,592   0.45 %   6,177,681   6,228   0.40 %
Time deposits 496,076   924   0.74 %   455,542   700   0.62 %   427,770   617   0.59 %   474,548   711   0.60 %   501,701   763   0.61 %
Total interest bearing deposits 10,260,243   22,435   0.87 %   9,416,731   16,533   0.70 %   9,425,919   13,293   0.57 %   9,466,871   10,432   0.44 %   8,980,744   8,951   0.40 %
Other borrowings 1,821,837   5,726   1.25 %   1,456,737   3,627   1.00 %   1,333,685   2,273   0.69 %   1,553,010   2,017   0.52 %   1,607,613   1,860   0.46 %
Subordinated notes 281,256   4,191   5.91 %   281,167   4,191   5.98 %   281,076   4,191   6.05 %   280,985   4,191   5.93 %   280,895   4,191   5.94 %
Trust preferred subordinated debentures 113,406   930   3.25 %   113,406   881   3.12 %   113,406   830   2.97 %   113,406   806   2.83 %   113,406   752   2.64 %
Total interest bearing liabilities 12,476,742   33,282   1.06 %   11,268,041   25,232   0.90 %   11,154,086   20,587   0.75 %   11,414,272   17,446   0.61 %   10,982,658   15,754   0.57 %
Demand deposits 8,764,263           7,863,402           7,547,338           9,129,668           8,849,725        
Other liabilities 116,998           102,653           117,877           141,153           135,141        
Stockholders’ equity 2,143,299           2,086,880           2,041,870           1,839,301           1,722,035        
Total liabilities and stockholders’ equity $ 23,501,302           $ 21,320,976           $ 20,861,171           $ 22,524,394           $ 21,689,559        
Net interest income(2)   $ 206,259           $ 184,316           $ 164,395           $ 171,433           $ 166,741      
Net interest margin     3.59 %       3.57 %       3.29 %       3.11 %       3.14 %

(1) The loan averages include non-accrual loans and are stated net of unearned income.
(2) Taxable equivalent rates used where applicable.

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