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Texas Capital Bancshares, Inc. Announces Operating Results for Q3 2018

October 17, 2018 4:02 PM

DALLAS, Oct. 17, 2018 (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 2018.

“We continue to focus on strategic initiatives to position ourselves for the future while delivering record financial results," said Keith Cargill, CEO. "Positioning for through-the-cycle credit quality, broadening our funding profile and driving efficiencies, as we enhance the client experience, are top of mind."

FINANCIAL SUMMARY
(dollars and shares in thousands)
Q3 2018 Q3 2017 % Change
QUARTERLY OPERATING RESULTS
Net income$85,552 $58,684 46%
Net income available to common stockholders$83,114 $56,246 48%
Diluted EPS$1.65 $1.12 47%
Diluted shares50,381 50,251 —%
ROA1.31% 0.99%
ROE14.68% 11.20%
BALANCE SHEET
Loans held for sale (LHS), MCA$1,651,930 $955,983 73%
LHI, mortgage finance5,477,787 5,642,285 (3)%
LHI16,569,538 14,828,406 12%
Total LHI22,047,325 20,470,691 8%
Total loans23,699,255 21,426,674 11%
Total assets27,127,107 24,400,998 11%
Demand deposits7,031,460 8,263,202 (15)%
Total deposits20,385,637 19,081,257 7%
Stockholders’ equity2,426,442 2,158,363 12%

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

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

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

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

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

We recorded a $13.0 million provision for credit losses for the third quarter of 2018 compared to $27.0 million for the second quarter of 2018 and $20.0 million for the third quarter of 2017. The provision for the third quarter of 2018 was driven by the consistent application of our methodology. The linked-quarter decrease was primarily related to flat traditional LHI balances, as well as a higher second quarter provision related to credit deterioration in four loans, offset by an increase in non-accrual loans from the second quarter of 2018. The total allowance for credit losses increased to 1.21 percent of LHI excluding mortgage finance loans at September 30, 2018 compared to 1.15 percent at June 30, 2018 and decreased from 1.30 percent at September 30, 2017. In management’s opinion, the allowance is appropriate and is derived from consistent application of the methodology for establishing reserves for the loan portfolio.

We experienced an increase in non-performing assets ("NPAs") in the third quarter of 2018, increasing the ratio of total non-performing assets to total LHI plus other real estate owned (“OREO”) to 0.49 percent compared to 0.41 percent for the second quarter of 2018 and decreasing from 0.67 percent for the third quarter of 2017. Net charge-offs for the third quarter of 2018 were $2.0 million compared to $38.0 million for the second quarter of 2018 and $10.7 million for the third quarter of 2017. For the third quarter of 2018, net charge-offs were 0.04 percent of average total LHI, compared to 0.73 percent for the second quarter of 2018 and 0.22 percent for the same period in 2017. At September 30, 2018, total OREO was $79,000 compared to $9.5 million at June 30, 2018 and $18.1 million at September 30, 2017. During the third quarter of 2018, we sold our largest OREO property and recorded a $2.0 million gain on sale, as well as a reversal of a $2.0 million valuation allowance that was recorded on the property during the first quarter of 2018.

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

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

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

ABOUT TEXAS CAPITAL BANCSHARES, INC.Texas Capital Bancshares, Inc. (NASDAQ®: TCBI), a member of the Russell 1000® Index and the S&P MidCap 400®, is the parent company of Texas Capital Bank, a commercial bank that delivers highly personalized financial services to businesses and entrepreneurs. Headquartered in Dallas, the bank has full-service locations in Austin, Dallas, Fort Worth, Houston and San Antonio.

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

TEXAS CAPITAL BANCSHARES, INC.
SELECTED FINANCIAL HIGHLIGHTS (UNAUDITED)
(Dollars in thousands except per share data)
3rd Quarter2nd Quarter1st Quarter4th Quarter3rd Quarter
20182018201820172017
CONSOLIDATED STATEMENTS OF INCOME
Interest income$301,754 $286,852 $253,869 $249,519 $237,643
Interest expense69,579 55,140 43,569 38,870 33,282
Net interest income232,175 231,712 210,300 210,649 204,361
Provision for credit losses13,000 27,000 12,000 2,000 20,000
Net interest income after provision for credit losses219,175 204,712 198,300 208,649 184,361
Non-interest income25,518 17,279 19,947 19,374 19,003
Non-interest expense136,143 132,131 126,960 133,138 114,830
Income before income taxes108,550 89,860 91,287 94,885 88,534
Income tax expense22,998 18,424 19,342 50,143 29,850
Net income85,552 71,436 71,945 44,742 58,684
Preferred stock dividends2,438 2,437 2,438 2,437 2,438
Net income available to common stockholders$83,114 $68,999 $69,507 $42,305 $56,246
Diluted EPS$1.65 $1.38 $1.38 $0.84 $1.12
Diluted shares50,381,349 50,096,015 50,353,497 50,311,962 50,250,866
CONSOLIDATED BALANCE SHEET DATA
Total assets$27,127,107 $27,781,910 $24,449,147 $25,075,645 $24,400,998
LHI16,569,538 16,536,721 15,741,772 15,366,252 14,828,406
LHI, mortgage finance5,477,787 5,923,058 4,689,938 5,308,160 5,642,285
LHS1,651,930 1,276,768 1,088,565 1,011,004 955,983
Liquidity assets(1)2,615,570 3,288,107 2,296,673 2,727,581 2,357,537
Investment securities117,389 24,408 24,929 23,511 24,224
Demand deposits7,031,460 7,648,125 7,413,340 7,812,660 8,263,202
Total deposits20,385,637 20,334,871 18,764,533 19,123,180 19,081,257
Other borrowings3,686,818 4,520,849 2,835,540 3,165,040 2,583,496
Subordinated notes281,677 281,586 281,496 281,406 281,315
Long-term debt113,406 113,406 113,406 113,406 113,406
Stockholders’ equity2,426,442 2,343,530 2,273,429 2,202,721 2,158,363
End of period shares outstanding50,177,260 50,151,064 49,669,774 49,643,344 49,621,825
Book value$45.37 $43.74 $42.75 $41.35 $40.47
Tangible book value(2)$45.00 $43.36 $42.37 $40.97 $40.09
SELECTED FINANCIAL RATIOS
Net interest margin3.70%3.93%3.71%3.47%3.59%
Return on average assets1.31%1.16%1.22%0.71%0.99%
Return on average common equity14.68%12.72%13.39%8.18%11.20%
Non-interest income to average earning assets0.40%0.29%0.35%0.32%0.33%
Efficiency ratio(3)52.8%53.1%55.1%57.9%51.4%
Efficiency ratio, excluding OREO write-down(3)53.6%53.1%54.3%55.2%51.4%
Non-interest expense to average earning assets2.15%2.23%2.23%2.17%2.00%
Tangible common equity to total tangible assets(4)8.3%7.8%8.6%8.1%8.2%
Common Equity Tier 18.6%8.3%8.8%8.5%8.4%
Tier 1 capital9.6%9.3%9.9%9.5%9.4%
Total capital11.5%11.1%11.9%11.5%11.4%
Leverage9.7%9.9%9.9%9.2%9.6%
(1) Liquidity assets include Federal funds sold and interest-bearing deposits in other banks.
(2) Stockholders’ equity excluding preferred stock, less goodwill and intangibles, divided by shares outstanding at period end.
(3) Non-interest expense divided by the sum of net interest income and non-interest income.
(4) Stockholders’ equity excluding preferred stock and accumulated other comprehensive income less goodwill and intangibles divided by total assets less accumulated other comprehensive income and goodwill and intangibles.

TEXAS CAPITAL BANCSHARES, INC.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(Dollars in thousands)
September 30,2018September 30,2017%Change
Assets
Cash and due from banks$169,481 $143,616 18%
Interest-bearing deposits in other banks2,585,570 2,332,537 11%
Federal funds sold and securities purchased under resale agreements30,000 25,000 20%
Investment securities117,389 24,224 385%
LHS, at fair value1,651,930 955,983 73%
LHI, mortgage finance5,477,787 5,642,285 (3)%
LHI (net of unearned income)16,569,538 14,828,406 12%
Less: Allowance for loan losses190,306 182,929 4%
LHI, net21,857,019 20,287,762 8%
Mortgage servicing rights, net86,359 77,630 11%
Premises and equipment, net24,004 23,882 1%
Accrued interest receivable and other assets586,668 511,207 15%
Goodwill and intangibles, net18,687 19,157 (2)%
Total assets$27,127,107 $24,400,998 11%
Liabilities and Stockholders’ Equity
Liabilities:
Deposits:
Non-interest bearing$7,031,460 $8,263,202 (15)%
Interest bearing13,354,177 10,818,055 23%
Total deposits20,385,637 19,081,257 7%
Accrued interest payable17,218 4,562 277%
Other liabilities215,909 178,599 21%
Federal funds purchased and repurchase agreements486,818 83,496 483%
Other borrowings3,200,000 2,500,000 28%
Subordinated notes, net281,677 281,315 —
Trust preferred subordinated debentures113,406 113,406 —
Total liabilities24,700,665 22,242,635 11%
Stockholders’ equity:
Preferred stock, $.01 par value, $1,000 liquidation value:
Authorized shares - 10,000,000
Issued shares - 6,000,000 shares issued at September 30, 2018 and 2017150,000 150,000 −
Common stock, $.01 par value:
Authorized shares - 100,000,000
Issued shares - 50,177,677 and 49,622,242 at September 30, 2018 and 2017, respectively502 496 1%
Additional paid-in capital965,286 959,251 1%
Retained earnings1,312,038 1,048,195 25%
Treasury stock (shares at cost: 417 at September 30, 2018 and 2017)(8)(8)—
Accumulated other comprehensive income, net of taxes(1,376)429 (421)%
Total stockholders’ equity2,426,442 2,158,363 12%
Total liabilities and stockholders’ equity$27,127,107 $24,400,998 11%

TEXAS CAPITAL BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(Dollars in thousands except per share data)
Three Months EndedSeptember 30Nine Months EndedSeptember 30
2018201720182017
Interest income
Interest and fees on loans$291,189 $229,116 $814,500 $607,386
Investment securities1,161 341 1,560 853
Federal funds sold and securities purchased under resale agreements1,018 642 2,808 1,606
Interest-bearing deposits in other banks8,386 7,544 23,607 19,935
Total interest income301,754 237,643 842,475 629,780
Interest expense
Deposits52,034 22,435 123,343 52,261
Federal funds purchased1,800 891 4,434 1,869
Other borrowings10,317 4,835 24,481 9,757
Subordinated notes4,191 4,191 12,573 12,573
Trust preferred subordinated debentures1,237 930 3,457 2,641
Total interest expense69,579 33,282 168,288 79,101
Net interest income232,175 204,361 674,187 550,679
Provision for credit losses13,000 20,000 52,000 42,000
Net interest income after provision for credit losses219,175 184,361 622,187 508,679
Non-interest income
Service charges on deposit accounts3,477 3,211 9,619 9,323
Wealth management and trust fee income2,065 1,627 5,996 4,386
Bank owned life insurance (BOLI) income643 615 1,959 1,562
Brokered loan fees6,141 6,152 17,124 17,639
Servicing income4,987 4,486 15,446 10,387
Swap fees1,355 647 4,269 3,404
Other6,850 2,265 8,331 8,181
Total non-interest income25,518 19,003 62,744 54,882
Non-interest expense
Salaries and employee benefits77,327 67,882 222,268 194,039
Net occupancy expense8,362 6,436 22,952 19,062
Marketing10,214 7,242 29,127 18,349
Legal and professional10,764 6,395 29,948 20,975
Communications and technology7,435 6,002 21,211 24,414
FDIC insurance assessment6,524 6,203 18,884 16,800
Servicing related expenses4,207 3,897 12,379 8,329
Allowance and other carrying costs for OREO(1,864)105 467 315
Other13,174 10,668 37,998 30,455
Total non-interest expense136,143 114,830 395,234 332,738
Income before income taxes108,550 88,534 289,697 230,823
Income tax expense22,998 29,850 60,764 78,502
Net income85,552 58,684 228,933 152,321
Preferred stock dividends2,438 2,438 7,313 7,313
Net income available to common stockholders$83,114 $56,246 $221,620 $145,008
Basic earnings per common share$1.66 $1.13 $4.45 $2.93
Diluted earnings per common share$1.65 $1.12 $4.41 $2.89

TEXAS CAPITAL BANCSHARES, INC.
SUMMARY OF LOAN LOSS EXPERIENCE
(Dollars in thousands)
3rd Quarter2nd Quarter1st Quarter4th Quarter3rd Quarter
20182018201820172017
Allowance for loan losses:
Beginning balance$179,096 $190,898 $184,655 $182,929 $174,225
Loans charged-off:
Commercial1,301 38,305 5,667 1,999 10,603
Real estate— — — — 250
Construction— — — — 59
Consumer767 — — — —
Leases319 — — — —
Total charge-offs2,387 38,305 5,667 1,999 10,912
Recoveries:
Commercial389 320 360 1,019 132
Real estate11 8 24 1 21
Construction— — — — 3
Consumer10 9 59 14 15
Leases12 1 19 1 1
Total recoveries422 338 462 1,035 172
Net charge-offs1,965 37,967 5,205 964 10,740
Provision for loan losses13,175 26,165 11,448 2,690 19,444
Ending balance$190,306 $179,096 $190,898 $184,655 $182,929
Allowance for off-balance sheet credit losses:
Beginning balance$10,458 $9,623 $9,071 $9,761 $9,205
Provision for off-balance sheet credit losses(175)835 552 (690)556
Ending balance$10,283 $10,458 $9,623 $9,071 $9,761
Total allowance for credit losses$200,589 $189,554 $200,521 $193,726 $192,690
Total provision for credit losses$13,000 $27,000 $12,000 $2,000 $20,000
Allowance for loan losses to LHI0.86%0.80%0.93%0.89%0.89%
Allowance for loan losses to LHI excluding mortgage finance loans(2)1.15%1.08%1.21%1.20%1.23%
Allowance for loan losses to average LHI0.87%0.86%0.98%0.92%0.95%
Allowance for loan losses to average LHI excluding mortgage finance loans(2)1.17%1.13%1.24%1.23%1.27%
Net charge-offs to average LHI(1)0.04%0.73%0.11%0.02%0.22%
Net charge-offs to average LHI excluding mortgage finance loans(1)(2)0.05%0.96%0.14%0.03%0.30%
Net charge-offs to average LHI for last twelve months(1)0.22%0.28%0.15%0.16%0.29%
Net charge-offs to average LHI excluding mortgage finance loans for last twelve months(1)(2)0.29%0.36%0.20%0.21%0.37%
Total provision for credit losses to average LHI(1)0.24%0.52%0.25%0.04%0.41%
Total provision for credit losses to average LHI excluding mortgage finance loans(1)(2)0.32%0.68%0.32%0.05%0.55%
Total allowance for credit losses to LHI0.91%0.84%0.98%0.94%0.94%
Total allowance for credit losses to LHI excluding mortgage finance loans(1)(2)1.21%1.15%1.27%1.26%1.30%
(1) Interim period ratios are annualized.
(2) The indicated ratios are presented with and excluding the mortgage finance loans because the risk profile of our mortgage finance loans is different than our other loans held for investment. No provision for credit losses is allocated to these loans based on the internal risk grade assigned.

TEXAS CAPITAL BANCSHARES, INC.
SUMMARY OF LOAN LOSS EXPERIENCE
(Dollars in thousands)
3rd Quarter2nd Quarter1st Quarter4th Quarter3rd Quarter
20182018201820172017
Non-accrual loans$107,532 $83,295 $123,542 $101,444 $118,205
Other real estate owned (OREO)79 9,526 9,558 11,742 18,131
Total LHI NPAs$107,611 $92,821 $133,100 $113,186 $136,336
Non-accrual loans to LHI0.49%0.37%0.60%0.49%0.58%
Non-accrual loans to LHI excluding mortgage finance loans(1)0.65%0.50%0.78%0.66%0.80%
Total NPAs to LHI plus OREO0.49%0.41%0.65%0.55%0.67%
Total NPAs to LHI excluding mortgage finance loans plus OREO(1)0.65%0.56%0.85%0.74%0.92%
Total NPAs to earning assets0.41%0.35%0.56%0.47%0.58%
Allowance for loan losses to non-accrual loans1.8x 2.2x 1.5x 1.8x 1.5x
Loans past due 90 days and still accruing(2)$11,295 $7,357 $13,563 $8,429 $8,892
Loans past due 90 days to LHI0.05%0.03%0.07%0.14%0.04%
Loans past due 90 days to LHI excluding mortgage finance loans(1)0.07%0.04%0.09%0.18%0.06%
LHS past due 90 days and still accruing(3)$25,238 $27,858 $35,226 $19,737 $—
(1) The indicated ratios are presented with and excluding the mortgage finance loans because the risk profile of our mortgage finance loans is different than our other loans held for investment. No provision for credit losses is allocated to these loans based on the internal risk grade assigned.
(2) At September 30, 2018, loans past due 90 days and still accruing includes premium finance loans of $8.2 million. These loans are primarily secured by obligations of insurance carriers to refund premiums on cancelled insurance policies. The refund of premiums from the insurance carriers can take 180 days or longer from the cancellation date.
(3) Includes loans guaranteed by U.S. government agencies that were repurchased out of Ginnie Mae securities. Loans are recorded as LHS and carried at fair value on the balance sheet. Interest on these past due loans accrues at the debenture rate guaranteed by the U.S. government. Also includes loans that, pursuant to Ginnie Mae servicing guidelines, we have the unilateral right, but not obligation, to repurchase and thus must record as LHS on the balance sheet regardless of whether the repurchase option has been exercised.

TEXAS CAPITAL BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(Dollars in thousands)
3rd Quarter2nd Quarter1st Quarter4th Quarter3rd Quarter
20182018201820172017
Interest income
Interest and fees on loans$291,189 $279,447 $243,864 $238,906 $229,116
Investment securities1,161 193 206 213 341
Federal funds sold and securities purchased under resale agreements 1,018 745 1,045 936 642
Interest-bearing deposits in other banks8,386 6,467 8,754 9,464 7,544
Total interest income301,754 286,852 253,869 249,519 237,643
Interest expense
Deposits52,034 39,607 31,702 27,625 22,435
Federal funds purchased1,800 1,665 969 723 891
Other borrowings10,317 8,484 5,680 5,380 4,835
Subordinated notes4,191 4,191 4,191 4,191 4,191
Trust preferred subordinated debentures1,237 1,193 1,027 951 930
Total interest expense69,579 55,140 43,569 38,870 33,282
Net interest income232,175 231,712 210,300 210,649 204,361
Provision for credit losses13,000 27,000 12,000 2,000 20,000
Net interest income after provision for credit losses219,175 204,712 198,300 208,649 184,361
Non-interest income
Service charges on deposit accounts3,477 3,005 3,137 3,109 3,211
Wealth management and trust fee income2,065 2,007 1,924 1,767 1,627
Bank owned life insurance (BOLI) income643 657 659 698 615
Brokered loan fees6,141 5,815 5,168 5,692 6,152
Servicing income4,987 4,967 5,492 5,270 4,486
Swap fees1,355 1,352 1,562 586 647
Other6,850 (524)2,005 2,252 2,265
Total non-interest income25,518 17,279 19,947 19,374 19,003
Non-interest expense
Salaries and employee benefits77,327 72,404 72,537 70,192 67,882
Net occupancy expense8,362 7,356 7,234 6,749 6,436
Marketing10,214 10,236 8,677 8,438 7,242
Legal and professional10,764 11,654 7,530 8,756 6,395
Communications and technology7,435 7,143 6,633 6,590 6,002
FDIC insurance assessment6,524 6,257 6,103 6,710 6,203
Servicing related expenses4,207 4,367 3,805 7,177 3,897
Allowance and other carrying costs for OREO(1,864)176 2,155 6,122 105
Other13,174 12,538 12,286 12,404 10,668
Total non-interest expense136,143 132,131 126,960 133,138 114,830
Income before income taxes108,550 89,860 91,287 94,885 88,534
Income tax expense22,998 18,424 19,342 50,143 29,850
Net income85,552 71,436 71,945 44,742 58,684
Preferred stock dividends2,438 2,437 2,438 2,437 2,438
Net income available to common shareholders$83,114 $68,999 $69,507 $42,305 $56,246

TEXAS CAPITAL BANCSHARES, INC.
QUARTERLY FINANCIAL SUMMARY - UNAUDITED
Consolidated Daily Average Balances, Average Yields and Rates
(Dollars in thousands)
3rd Quarter 2018 2nd Quarter 2018 1st Quarter 2018 4th Quarter 2017 3rd Quarter 2017
AverageBalanceRevenue/ExpenseYield/Rate Average BalanceRevenue/ ExpenseYield/ Rate Average BalanceRevenue/ ExpenseYield/ Rate Average BalanceRevenue/ ExpenseYield/ Rate Average BalanceRevenue/ ExpenseYield/ Rate
Assets
Investment securities - Taxable$24,221 $191 3.14% $24,514 $193 3.15% $23,854 $206 3.50% $23,678 $213 3.57% $86,087 $340 1.57%
Investment securities - Non-taxable(2)91,298 1,228 5.33% — — —% — — —% — — —% — — —%
Federal funds sold and securities purchased under resale agreements203,972 1,018 1.98% 166,613 745 1.79% 261,641 1,045 1.62% 292,544 936 1.27% 205,938 642 1.24%
Interest-bearing deposits in other banks1,697,787 8,386 1.96% 1,498,474 6,467 1.73% 2,302,938 8,754 1.54% 2,924,942 9,464 1.28% 2,383,060 7,544 1.26%
LHS, at fair value1,484,459 17,272 4.62% 1,516,047 17,026 4.50% 1,187,594 12,535 4.28% 1,144,124 11,507 3.99% 1,009,703 9,882 3.88%
LHI, mortgage finance loans5,443,829 49,715 3.62% 4,898,411 47,056 3.85% 4,097,995 37,362 3.70% 5,102,107 44,477 3.46% 4,847,530 42,294 3.46%
LHI(1)(2)16,331,622 225,604 5.48% 15,883,317 216,755 5.47% 15,425,323 195,333 5.14% 15,010,041 185,039 4.89% 14,427,980 178,839 4.92%
Less allowance for loan losses179,227 — — 189,238 — — 184,238 — — 183,233 — — 172,774 — —
LHI, net of allowance21,596,224 275,319 5.06% 20,592,490 263,811 5.14% 19,339,080 232,695 4.88% 19,928,915 229,516 4.57% 19,102,736 221,133 4.59%
Total earning assets25,097,961 303,414 4.80% 23,798,138 288,242 4.86% 23,115,107 255,235 4.48% 24,314,203 251,636 4.11% 22,787,524 239,541 4.17%
Cash and other assets877,954 808,099 797,506 766,622 713,778
Total assets$25,975,915 $24,606,237 $23,912,613 $25,080,825 $23,501,302
Liabilities and Stockholders’ Equity
Transaction deposits$3,253,310 $13,642 1.66% $2,889,834 $10,295 1.43% $2,792,954 $8,651 1.26% $2,469,984 $5,845 0.94% $2,145,324 $4,359 0.81%
Savings deposits7,820,742 29,930 1.52% 7,784,937 25,454 1.31% 7,982,256 21,958 1.12% 8,403,473 20,655 0.98% 7,618,843 17,152 0.89%
Time deposits1,778,831 8,462 1.89% 979,735 3,858 1.58% 506,375 1,093 0.88% 533,312 1,125 0.84% 496,076 924 0.74%
Total interest bearing deposits12,852,883 52,034 1.61% 11,654,506 39,607 1.36% 11,281,585 31,702 1.14% 11,406,769 27,625 0.96% 10,260,243 22,435 0.87%
Other borrowings2,275,640 12,117 2.11% 2,113,391 10,149 1.93% 1,721,914 6,649 1.57% 1,852,750 6,103 1.31% 1,821,837 5,726 1.25%
Subordinated notes281,619 4,191 5.90% 281,527 4,191 5.97% 281,437 4,191 6.04% 281,348 4,191 5.91% 281,256 4,191 5.91%
Trust preferred subordinated debentures113,406 1,237 4.33% 113,406 1,193 4.22% 113,406 1,027 3.67% 113,406 951 3.33% 113,406 930 3.25%
Total interest bearing liabilities15,523,548 69,579 1.78% 14,162,830 55,140 1.56% 13,398,342 43,569 1.32% 13,654,273 38,870 1.13% 12,476,742 33,282 1.06%
Demand deposits7,940,503 8,017,578 8,147,721 9,085,819 8,764,263
Other liabilities116,302 100,074 110,698 138,050 116,998
Stockholders’ equity2,395,562 2,325,755 2,255,852 2,202,683 2,143,299
Total liabilities and stockholders’ equity$25,975,915 $24,606,237 $23,912,613 $25,080,825 $23,501,302
Net interest income(2) $233,835 $233,102 $211,666 $212,766 $206,259
Net interest margin 3.70% 3.93% 3.71% 3.47% 3.59%
(1) The loan averages include non-accrual loans and are stated net of unearned income.
(2) Taxable equivalent rates used where applicable.

INVESTOR CONTACTHeather Worley, 214.932.6646[email protected]

Texas Capital Bancshares, Inc.

Source: Texas Capital Bancshares, Inc.

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