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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 Quarter2nd Quarter1st Quarter4th Quarter3rd Quarter
20162016201620152015
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
2016201520162015
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 Quarter2nd Quarter1st Quarter4th Quarter3rd Quarter
20162016201620152015
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 agreements369,215 455 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 banks3,192,141 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 value430,869 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 loans4,658,804 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%
LHI12,591,561 137,407 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 allowance17,082,279 174,062 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 assets21,101,119 182,495 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 assets588,440 544,737 506,025 499,712 481,378
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 deposits6,177,681 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 deposits501,701 763 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 deposits8,980,744 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 borrowings1,607,613 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 notes280,895 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 debentures113,406 752 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 liabilities10,982,658 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 deposits8,849,725 7,767,693 6,730,586 6,755,615 6,621,159
Other liabilities135,141 113,927 148,418 157,425 152,154
Stockholders’ equity1,722,035 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.

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

Source:Texas Capital Bancshares, Inc.