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Texas Capital Bancshares, Inc. Announces Operating Results for 2016

DALLAS, Jan. 25, 2017 (GLOBE NEWSWIRE) -- Texas Capital Bancshares, Inc. (NASDAQ:TCBI), the parent company of Texas Capital Bank, announced earnings and operating results for the fourth quarter and full year of 2016.

“We are extremely pleased to finish 2016 with solid earnings and continued growth in loans, deposits and fee income. Our recent capital raise positions us to fully support potentially stronger growth by our clients in an environment that is expected to be more business-friendly," said Keith Cargill, CEO. "Continuing to attract and develop great talent and partnering with exceptional clients will drive future risk-appropriate assets and earnings growth, and solidify our outlook for a bright future as a leading organic-growth company."

  • Loans held for investment ("LHI"), excluding mortgage finance, increased 3% and total LHI decreased 1% on a linked quarter basis (increased 1% and decreased 1% on an average basis, respectively), growing 11% and 5%, respectively, from the fourth quarter of 2015.
  • Total mortgage finance loans, including MCA loans, decreased 3% on a linked quarter basis (increasing 4% on an average basis) and increased 8% from the fourth quarter of 2015.
  • Demand deposits decreased 9% and total deposits decreased 6% on a linked quarter basis (increasing 3% and 4% on an average basis, respectively), growing 25% and 13%, respectively, from the fourth quarter of 2015.
  • Net income increased 13% on a linked quarter basis and increased 39% from the fourth quarter of 2015.
  • EPS increased 10% on a linked quarter basis and increased 37% from the fourth quarter of 2015.

FINANCIAL SUMMARY
(dollars and shares in thousands)

2016 2015 % Change
ANNUAL OPERATING RESULTS
Net income $155,119 $144,854 7%
Net income available to common stockholders $145,369 $135,104 8%
Diluted EPS $3.11 $2.91 7%
Diluted shares 46,766 46,438 1%
ROA 0.74% 0.79%
ROE 9.27% 9.65%
QUARTERLY OPERATING RESULTS
Net income $48,386 $34,753 39%
Net income available to common stockholders $45,949 $32,316 42%
Diluted EPS $0.96 $0.70 37%
Diluted shares 47,760 46,480 3%
ROA 0.85% 0.72%
ROE 10.82% 8.82%
BALANCE SHEET
Loans held for sale (MCA) $968,929 $86,075 N/M
LHI, mortgage finance 4,497,338 4,966,276 (9)%
LHI 13,001,011 11,745,674 11%
Total LHI 17,498,349 16,711,950 5%
Total assets 21,697,134 18,903,821 15%
Demand deposits 7,994,201 6,386,911 25%
Total deposits 17,016,831 15,084,619 13%
Stockholders’ equity 2,009,557 1,623,533 24%
Tangible book value per share $37.17 $31.69 17%

DETAILED FINANCIALS
Texas Capital Bancshares, Inc. reported net income of $155.1 million and net income available to common stockholders of $145.4 million for the year ended December 31, 2016, compared to net income of $144.9 million and net income available to common stockholders of $135.1 million for the year ended December 31, 2015. For the fourth quarter of 2016, net income was $48.4 million and net income available to common stockholders was $45.9 million, compared to net income of $34.8 million and net income available to common stockholders of $32.3 million for the same period in 2015. On a fully diluted basis, earnings per common share were $3.11 for the year ended December 31, 2016 compared to $2.91 for the same period in 2015. Diluted earnings per common share were $0.96 for the quarter ended December 31, 2016 compared to $0.70 for the same period of 2015. The increase reflects the $13.6 million year over year increase in net income offset by the $0.02 per share dilutive effect of the fourth quarter 2016 offering of 3.45 million common shares for net proceeds of $236.4 million.

Return on average common equity (“ROE”) was 9.27 percent and return on average assets ("ROA") was 0.74 percent for the year ended December 31, 2016, compared to 9.65 percent and 0.79 percent, respectively, for the year ended December 31, 2015. ROE was 10.82 percent and ROA was 0.85 percent for the fourth quarter of 2016, compared to 10.20 percent and 0.78 percent, respectively, for the third quarter of 2016 and 8.82 percent and 0.72 percent, respectively, for the fourth quarter of 2015. The linked quarter increase in quarter-to-date ROE for the fourth quarter of 2016 resulted from a 59% linked quarter decrease in the provision for credit losses for the fourth quarter of 2016. The year-over-year increase in quarter-to-date ROE for the fourth quarter of 2016 resulted from an increase in net interest income and a lower provision for credit losses for the fourth quarter of 2016. ROA remains low as a result of higher liquidity assets. The linked quarter and year-over-year increases in quarter-to-date ROA for the fourth quarter of 2016 resulted from increases in net revenue and the decreased provision for credit losses. Average liquidity assets for the fourth quarter of 2016 totaled $4.1 billion, including $3.8 billion in deposits at the Federal Reserve Bank of Dallas, which had an average yield of 54 basis points, compared to $3.1 billion for the fourth quarter of 2015, which had an average yield of 27 basis points.

Net interest income was $171.2 million for the fourth quarter of 2016, compared to $166.7 million for the third quarter of 2016 and $142.2 million for the fourth quarter of 2015. Net interest margin for the fourth quarter of 2016 was 3.11% percent, a 3 basis point decrease from the third quarter of 2016 and a 10 basis point increase from the fourth 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 interest bearing deposits with higher funding costs, partially offset by higher yields on loans. 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 year ended December 31, 2016 were $12.4 billion, an increase of $1.3 billion, or 11 percent, from 2015. Average LHI, excluding mortgage finance loans, for the fourth quarter of 2016 were $12.7 billion, an increase of $110.3 million, or 1 percent, from the third quarter of 2016 and an increase of $1.0 billion, or 9 percent, from the fourth quarter of 2015. Average mortgage finance loans for the year ended December 31, 2016 were $4.3 billion, an increase of $300.4 million, or 8 percent, from 2015. Average mortgage finance loans for the fourth quarter of 2016 were $4.4 billion, a decrease of $287.3 million, or 6 percent, from the third quarter of 2016 and an increase of $702.5 million, or 19 percent, from the fourth quarter of 2015. Average mortgage participations sold for the year ended December 31, 2016 were $726.3 million, an increase of $316.9 million, or 77 percent, from the same period of 2015. Average mortgage participations sold for the fourth quarter of 2016 were $991.7 million, an increase of $108.7 million, or 12 percent, from the third quarter of 2016 and an increase of $598.9 million, or 152 percent, from the fourth quarter of 2015. Average loans held for sale ("LHS") generated from our Mortgage Correspondent Aggregation ("MCA") business increased to $416.3 million for the year ended December 31, 2016 from $6.4 million for 2015. Average LHS increased to $944.5 million for the fourth quarter of 2016, an increase of $513.6 million from the third quarter of 2016 and an increase of $919.8 million from the fourth quarter of 2015 as we continue to gain traction in that business.

Average total deposits for the year ended December 31, 2016 were $17.2 billion, an increase of $2.5 billion, or 17 percent, from 2015. Average total deposits for the fourth quarter of 2016 increased $766.1 million from the third quarter of 2016 and increased $2.8 billion from the fourth quarter of 2015. Average demand deposits for the year ended December 31, 2016 were $8.1 billion, an increase of $1.7 billion, or 26 percent, from 2015. Average demand deposits for the fourth quarter of 2016 increased $280.0 million, or 3 percent, to $9.1 billion from $8.8 billion from the third quarter of 2016, and increased $2.4 billion, or 35 percent, from $6.8 billion during the fourth quarter of 2015.

We recorded a $9.0 million provision for credit losses for the fourth quarter of 2016 compared to $22.0 million for the third quarter of 2016 and $14.0 million for the fourth quarter of 2015. The provision for the fourth quarter of 2016 was driven by the application of our methodology. The linked quarter decrease was primarily related to a meaningful decrease in criticized loans. The combined allowance for credit losses at December 31, 2016 decreased to 1.38 percent of LHI excluding mortgage finance loans compared to 1.51 percent at September 30, 2016 and 1.28 percent at December 31, 2015. The year-over-year increase of $29.4 million (20%) in the combined allowance for credit losses 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 decrease in non-performing assets in the fourth quarter of 2016 on a linked quarter basis, keeping the ratio of total non-performing assets to total LHI plus other real estate owned (“OREO”) at 1.07 percent compared to 1.07 percent for the third quarter of 2016 and decreasing from 1.08 percent for the fourth quarter of 2015. Net charge-offs for the fourth quarter of 2016 were $20.8 million compared to $7.4 million for the third quarter of 2016 and $2.0 million for the fourth quarter of 2015. The linked quarter and year-over-year increase in net charge-offs resulted from realizing losses for which reserves had been provided in previous quarters. For the fourth quarter of 2016, net charge-offs related to energy loans were $16.3 million compared to $1.8 million for the third quarter of 2016 and none for the fourth quarter of 2015. For the fourth quarter of 2016, net charge-offs were 0.48 percent of total LHI, compared to 0.17 percent for the third quarter of 2016 and 0.05 percent for the same period in 2015. At December 31, 2016, total OREO was $19.0 million compared to $19.0 million at September 30, 2016 and $278,000 at December 31, 2015. The year-over-year increase was due to the foreclosure of a commercial property during the first quarter of 2016.

Non-interest income increased $7.5 million, or 66 percent, during the fourth quarter of 2016 compared to the same period of 2015, and increased $2.1 million, or 13 percent, compared to the third quarter of 2016. The year-over-year increase primarily related to an increase in brokered loan fees and other non-interest income. Brokered loan fees increased $3.0 million during the fourth quarter of 2016 compared to the same period of 2015 as a result of an increase in mortgage finance and LHS volumes. Other non-interest income increased $4.2 million compared to the fourth quarter of 2015, $3.1 million of which relates to increases in gain on sale of LHS and servicing fee income related to our MCA business. The linked-quarter increase in non-interest income primarily related to a $2.7 million, or 72 percent, increase in other non-interest income. This increase relates to increased gain on sale of LHS and servicing fee income, which had a combined linked quarter increase of $1.4 million from the third quarter of 2016 as a result of increasing volumes in our MCA business.

Non-interest expense for the fourth quarter of 2016 increased $19.5 million, or 22 percent, compared to the fourth quarter of 2015, and increased $11.7 million, or 12 percent, compared to the third quarter of 2016. The year-over-year increase is primarily related to a $16.1 million increase in salaries and employee benefits expense which was due to general business growth, as well as an increase in stock compensation expense as a result of increases in the market prices of our common stock. FDIC insurance assessment expense for the fourth quarter of 2016 increased $1.8 million compared to the same quarter in 2015 as a result of the increase in total assets from December 31, 2015 to December 31, 2016.

Stockholders’ equity increased by 24 percent from $1.6 billion at December 31, 2015 to $2.0 billion at December 31, 2016, 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. At December 31, 2016, our ratio of tangible common equity to total tangible assets was 8.5 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)
4th Quarter 3rd Quarter 2nd Quarter 1st Quarter 4th Quarter
2016 2016 2016 2016 2015
CONSOLIDATED STATEMENTS OF INCOME
Interest income $188,671 $182,492 $172,442 $159,803 $154,820
Interest expense 17,448 15,753 15,373 15,020 12,632
Net interest income 171,223 166,739 157,069 144,783 142,188
Provision for credit losses 9,000 22,000 16,000 30,000 14,000
Net interest income after provision for credit losses 162,223 144,739 141,069 114,783 128,188
Non-interest income 18,835 16,716 13,932 11,297 11,320
Non-interest expense 106,523 94,799 94,255 86,820 87,042
Income before income taxes 74,535 66,656 60,746 39,260 52,466
Income tax expense 26,149 23,931 21,866 14,132 17,713
Net income 48,386 42,725 38,880 25,128 34,753
Preferred stock dividends 2,437 2,438 2,437 2,438 2,437
Net income available to common stockholders $45,949 $40,287 $36,443 $22,690 $32,316
Diluted EPS $0.96 $0.87 $0.78 $0.49 $0.70
Diluted shares 47,759,548 46,509,683 46,438,132 46,354,378 46,479,845
CONSOLIDATED BALANCE SHEET DATA
Total assets $21,697,134 $22,216,388 $21,080,994 $20,210,893 $18,903,821
LHI 13,001,011 12,662,394 12,502,513 12,059,849 11,745,674
LHI, mortgage finance 4,497,338 4,961,159 5,260,027 4,981,304 4,966,276
Loans held for sale, at fair value 968,929 648,684 221,347 94,702 86,075
Liquidity assets(1) 2,725,645 3,471,074 2,624,170 2,644,418 1,681,374
Securities 24,874 26,356 27,372 28,461 29,992
Demand deposits 7,994,201 8,789,740 7,984,208 7,455,107 6,386,911
Total deposits 17,016,831 18,145,123 16,703,565 16,298,847 15,084,619
Other borrowings 2,109,575 1,751,420 2,115,445 1,704,859 1,643,051
Subordinated notes 281,044 280,954 280,863 280,773 280,682
Long-term debt 113,406 113,406 113,406 113,406 113,406
Stockholders’ equity 2,009,557 1,725,782 1,684,735 1,647,088 1,623,533
End of period shares outstanding 49,503,662 46,009,495 45,952,911 45,902,489 45,873,807
Book value $37.56 $34.25 $33.40 $32.61 $32.12
Tangible book value(2) $37.17 $33.82 $32.97 $32.18 $31.69
SELECTED FINANCIAL RATIOS
Net interest margin 3.11% 3.14% 3.18% 3.13% 3.01%
Return on average assets 0.85% 0.78% 0.77% 0.53% 0.72%
Return on average common equity 10.82% 10.20% 9.65% 6.13% 8.82%
Non-interest income to earning assets 0.34% 0.32% 0.28% 0.24% 0.24%
Efficiency ratio(3) 56.0% 51.7% 55.1% 55.6% 56.7%
Non-interest expense to earning assets 1.93% 1.79% 1.91% 1.88% 1.84%
Tangible common equity to total tangible assets(4) 8.5% 7.0% 7.2% 7.3% 7.7%
Common Equity Tier 1 9.0% 7.6% 7.4% 7.5% 7.5%
Tier 1 capital 10.2% 8.8% 8.6% 8.8% 8.8%
Total capital 12.5% 11.1% 10.9% 11.1% 11.1%
Leverage 9.3% 8.4% 8.7% 9.1% 8.9%
(1) Liquidity assets include Federal funds sold and 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)
December 31,
2016
December 31,
2015
%
Change
Assets
Cash and due from banks $113,707 $109,496 4%
Interest-bearing deposits 2,700,645 1,626,374 66%
Federal funds sold and securities purchased under resale agreements 25,000 55,000 (55)%
Securities, available-for-sale 24,874 29,992 (17)%
Loans held for sale, at fair value 968,929 86,075 N/M
LHI, mortgage finance 4,497,338 4,966,276 (9)%
LHI (net of unearned income) 13,001,011 11,745,674 11%
Less: Allowance for loan losses 168,126 141,111 19%
LHI, net 17,330,223 16,570,839 5%
Mortgage servicing rights, net 28,536 423 100%
Premises and equipment, net 19,775 23,561 (16)%
Accrued interest receivable and other assets 465,933 382,101 22%
Goodwill and intangibles, net 19,512 19,960 (2)%
Total assets $21,697,134 $18,903,821 15%
Liabilities and Stockholders’ Equity
Liabilities:
Deposits:
Non-interest bearing $7,994,201 $6,386,911 25%
Interest bearing 9,022,630 8,697,708 4%
Total deposits 17,016,831 15,084,619 13%
Accrued interest payable 5,498 5,097 8%
Other liabilities 161,223 153,433 5%
Federal funds purchased and repurchase agreements 109,575 143,051 (23)%
Other borrowings 2,000,000 1,500,000 33%
Subordinated notes, net 281,044 280,682
Trust preferred subordinated debentures 113,406 113,406
Total liabilities 19,687,577 17,280,288 14%
Stockholders’ equity:
Preferred stock, $.01 par value, $1,000 liquidation value:
Authorized shares - 10,000,000
Issued shares - 6,000,000 shares issued at December 31, 2016 and 2015 150,000 150,000
Common stock, $.01 par value:
Authorized shares - 100,000,000
Issued shares - 49,504,079 and 45,874,224 at December 31, 2016 and 2015, respectively 495 459 8%
Additional paid-in capital 955,468 714,546 34%
Retained earnings 903,187 757,818 19%
Treasury stock (shares at cost: 417 at December 31, 2016 and 2015) (8) (8)
Accumulated other comprehensive income, net of taxes 415 718 (42)%
Total stockholders’ equity 2,009,557 1,623,533 24%
Total liabilities and stockholders’ equity $21,697,134 $18,903,821 15%

TEXAS CAPITAL BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(Dollars in thousands except per share data)
Three Months Ended
December 31
Year Ended
December 31
2016 2015 2016 2015
Interest income
Interest and fees on loans $182,909 $152,200 $684,582 $594,729
Securities 228 275 967 1,254
Federal funds sold 338 255 1,547 682
Deposits in other banks 5,196 2,090 16,312 6,293
Total interest income 188,671 154,820 703,408 602,958
Interest expense
Deposits 10,432 7,068 37,175 24,578
Federal funds purchased 156 67 518 284
Repurchase agreements 1 5 9 19
Other borrowings 1,862 642 6,119 2,232
Subordinated notes 4,191 4,191 16,764 16,764
Trust preferred subordinated debentures 806 659 3,009 2,551
Total interest expense 17,448 12,632 63,594 46,428
Net interest income 171,223 142,188 639,814 556,530
Provision for credit losses 9,000 14,000 77,000 53,250
Net interest income after provision for credit losses 162,223 128,188 562,814 503,280
Non-interest income
Service charges on deposit accounts 2,940 1,984 10,341 8,323
Trust fee income 1,244 1,313 4,268 5,022
Bank owned life insurance (BOLI) income 481 567 2,073 2,011
Brokered loan fees 7,249 4,267 25,339 18,661
Swap fees 536 1,000 2,866 4,275
Other 6,385 2,189 15,893 9,446
Total non-interest income 18,835 11,320 60,780 47,738
Non-interest expense
Salaries and employee benefits 66,081 49,999 228,985 192,610
Net occupancy expense 5,937 5,809 23,221 23,182
Marketing 4,617 4,349 17,303 16,491
Legal and professional 6,443 6,974 23,326 22,150
Communications and technology 6,334 5,520 25,562 21,425
FDIC insurance assessment 6,573 4,741 24,440 17,231
Allowance and other carrying costs for OREO 59 6 824 22
Other 10,479 9,644 38,736 33,412
Total non-interest expense 106,523 87,042 382,397 326,523
Income before income taxes 74,535 52,466 241,197 224,495
Income tax expense 26,149 17,713 86,078 79,641
Net income 48,386 34,753 155,119 144,854
Preferred stock dividends 2,437 2,437 9,750 9,750
Net income available to common stockholders $45,949 $32,316 $145,369 $135,104
Basic earnings per common share $0.97 $0.70 $3.14 $2.95
Diluted earnings per common share $0.96 $0.70 $3.11 $2.91


TEXAS CAPITAL BANCSHARES, INC.
SUMMARY OF LOAN LOSS EXPERIENCE
(Dollars in thousands)
4th Quarter 3rd Quarter 2nd Quarter 1st Quarter 4th Quarter
2016 2016 2016 2016 2015
Allowance for loan losses:
Beginning balance $180,436 $167,397 $162,510 $141,111 $130,540
Loans charged-off:
Commercial 22,326 9,945 15,791 8,496 4,976
Real estate 528 43
Consumer 7 40
Leases
Total charge-offs 22,333 9,985 16,319 8,496 5,019
Recoveries:
Commercial 1,535 2,495 4,294 1,040 2,846
Real estate 27 15 13 8 5
Construction 34 3
Consumer 5 5 4 7 154
Leases 6 26 45 11
Total recoveries 1,573 2,541 4,345 1,100 3,019
Net charge-offs 20,760 7,444 11,974 7,396 2,000
Provision for loan losses 8,450 20,483 16,861 28,795 12,571
Ending balance $168,126 $180,436 $167,397 $162,510 $141,111
Allowance for off-balance sheet credit losses:
Beginning balance $10,872 $9,355 $10,216 $9,011 $7,582
Provision for off-balance sheet credit losses 550 1,517 (861) 1,205 1,429
Ending balance $11,422 $10,872 $9,355 $10,216 $9,011
Total allowance for credit losses $179,548 $191,308 $176,752 $172,726 $150,122
Total provision for credit losses $9,000 $22,000 $16,000 $30,000 $14,000
Allowance for loan losses to LHI 0.96% 1.02% 0.94% 0.95% 0.84%
Allowance for loan losses to LHI excluding mortgage finance loans(2) 1.29% 1.42% 1.34% 1.35% 1.20%
Allowance for loan losses to average LHI 0.98% 1.05% 1.00% 1.04% 0.92%
Allowance for loan losses to average LHI excluding mortgage finance loans(2) 1.32% 1.43% 1.36% 1.36% 1.21%
Net charge-offs to average LHI(1) 0.48% 0.17% 0.29% 0.19% 0.05%
Net charge-offs to average LHI excluding mortgage finance loans(1)(2) 0.65% 0.24% 0.39% 0.25% 0.07%
Net charge-offs to average LHI for last twelve months(1) 0.29% 0.18% 0.15% 0.10% 0.07%
Net charge-offs to average LHI, excluding mortgage finance loans, for last twelve months(1)(2) 0.38% 0.24% 0.20% 0.14% 0.10%
Total provision for credit losses to average LHI(1) 0.21% 0.51% 0.39% 0.77% 0.36%
Total provision for credit losses to average LHI excluding mortgage finance loans(1)(2) 0.28% 0.70% 0.52% 1.01% 0.47%
Combined allowance for credit losses to LHI 1.03% 1.09% 1.00% 1.01% 0.90%
Combined allowance for credit losses to LHI, excluding mortgage finance loans(2) 1.38% 1.51% 1.41% 1.43% 1.28%
Non-performing assets (NPAs):
Non-accrual loans $167,791 $169,113 $165,429 $173,156 $179,788
Other real estate owned (OREO) 18,961 19,009 18,727 17,585 278
Total $186,752 $188,122 $184,156 $190,741 $180,066
Non-accrual loans to LHI 0.96% 0.96% 0.93% 1.02% 1.08%
Non-accrual loans to LHI excluding mortgage finance loans(2) 1.29% 1.34% 1.32% 1.44% 1.53%
Total NPAs to LHI plus OREO 1.07% 1.07% 1.04% 1.12% 1.08%
Total NPAs to LHI excluding mortgage finance loans plus OREO(2) 1.43% 1.48% 1.47% 1.58% 1.53%
Total NPAs to earning assets 0.89% 0.87% 0.90% 0.97% 0.99%
Allowance for loan losses to non-accrual loans 1.0x 1.1x 1.0x 0.9x 0.8x
Restructured loans $ $ $249 $249 $249
Loans past due 90 days and still accruing(3) $10,729 $9,706 $7,743 $10,100 $7,013
Loans past due 90 days to LHI 0.06% 0.06% 0.04% 0.06% 0.04%
Loans past due 90 days to LHI excluding mortgage finance loans(2) 0.08% 0.08% 0.06% 0.08% 0.06%
(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 December 31, 2016, loans past due 90 days and still accruing includes premium finance loans of $6.8 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)
4th Quarter 3rd Quarter 2nd Quarter 1st Quarter 4th Quarter
2016 2016 2016 2016 2015
Interest income
Interest and fees on loans $182,909 $177,724 $168,064 $155,885 $152,200
Securities 228 232 246 261 275
Federal funds sold 338 455 382 372 255
Deposits in other banks 5,196 4,081 3,750 3,285 2,090
Total interest income 188,671 182,492 172,442 159,803 154,820
Interest expense
Deposits 10,432 8,950 8,971 8,822 7,068
Federal funds purchased 156 126 110 126 67
Repurchase agreements 1 3 2 3 5
Other borrowings 1,862 1,730 1,365 1,162 642
Subordinated notes 4,191 4,191 4,191 4,191 4,191
Trust preferred subordinated debentures 806 753 734 716 659
Total interest expense 17,448 15,753 15,373 15,020 12,632
Net interest income 171,223 166,739 157,069 144,783 142,188
Provision for credit losses 9,000 22,000 16,000 30,000 14,000
Net interest income after provision for credit losses 162,223 144,739 141,069 114,783 128,188
Non-interest income
Service charges on deposit accounts 2,940 2,880 2,411 2,110 1,984
Trust fee income 1,244 1,113 1,098 813 1,313
Bank owned life insurance (BOLI) income 481 520 536 536 567
Brokered loan fees 7,249 7,581 5,864 4,645 4,267
Swap fees 536 918 1,105 307 1,000
Other 6,385 3,704 2,918 2,886 2,189
Total non-interest income 18,835 16,716 13,932 11,297 11,320
Non-interest expense
Salaries and employee benefits 66,081 56,722 54,810 51,372 49,999
Net occupancy expense 5,937 5,634 5,838 5,812 5,809
Marketing 4,617 4,292 4,486 3,908 4,349
Legal and professional 6,443 5,333 6,226 5,324 6,974
Communications and technology 6,334 6,620 6,391 6,217 5,520
FDIC insurance assessment 6,573 6,355 6,043 5,469 4,741
Allowance and other carrying costs for OREO 59 269 260 236 6
Other 10,479 9,574 10,201 8,482 9,644
Total non-interest expense 106,523 94,799 94,255 86,820 87,042
Income before income taxes 74,535 66,656 60,746 39,260 52,466
Income tax expense 26,149 23,931 21,866 14,132 17,713
Net income 48,386 42,725 38,880 25,128 34,753
Preferred stock dividends 2,437 2,438 2,437 2,438 2,437
Net income available to common shareholders $45,949 $40,287 $36,443 $22,690 $32,316


TEXAS CAPITAL BANCSHARES, INC.
QUARTERLY FINANCIAL SUMMARY - UNAUDITED
Consolidated Daily Average Balances, Average Yields and Rates
(Dollars in thousands)
4th Quarter 2016 3rd Quarter 2016 2nd Quarter 2016 1st Quarter 2016 4th 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$25,008 $221 3.53% $26,051 $228 3.47% $27,097 $240 3.57% $28,343 $254 3.60% $29,973 $267 3.53%
Securities - Non-taxable(2)531 9 6.37% 564 8 5.82% 564 8 5.87% 759 11 5.70% 829 12 5.74%
Federal funds sold and securities purchased under resale agreements254,008 338 0.53% 369,215 455 0.49% 312,832 382 0.49% 304,425 372 0.49% 375,181 255 0.27%
Interest-bearing deposits in other banks3,812,076 5,197 0.54% 3,192,141 4,080 0.51% 2,871,295 3,750 0.53% 2,649,164 3,285 0.50% 3,081,882 2,090 0.27%
Loans held for sale, at fair value944,484 7,903 3.33% 430,869 3,662 3.38% 157,898 1,350 3.44% 126,084 1,094 3.49% 24,658 237 3.81%
LHI, mortgage finance loans4,371,475 35,081 3.19% 4,658,804 36,655 3.13% 4,412,091 33,974 3.10% 3,724,513 29,037 3.14% 3,669,022 27,846 3.01%
LHI12,701,868 140,130 4.39% 12,591,561 137,407 4.34% 12,276,272 132,740 4.35% 11,910,788 125,754 4.25% 11,693,464 124,117 4.21%
Less allowance for loan
losses
180,727 168,086 164,316 141,125 130,822
LHI, net of allowance16,892,616 175,211 4.13% 17,082,279 174,062 4.05% 16,524,047 166,714 4.06% 15,494,176 154,791 4.02% 15,231,664 151,963 3.96%
Total earning assets21,928,723 188,879 3.43% 21,101,119 182,495 3.44% 19,893,733 172,444 3.49% 18,602,951 159,807 3.46% 18,744,187 154,824 3.28%
Cash and other assets595,671 588,440 544,737 506,025 499,712
Total assets$22,524,394 $21,689,559 $20,438,470 $19,108,976 $19,243,899
Liabilities and Stockholders’ Equity
Transaction deposits$2,281,240 $2,129 0.37% $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%
Savings deposits6,711,083 7,592 0.45% 6,177,681 6,228 0.40% 6,388,133 6,494 0.41% 6,335,425 6,714 0.43% 6,316,191 5,370 0.34%
Time deposits474,548 711 0.60% 501,701 763 0.61% 486,610 727 0.60% 509,762 727 0.57% 539,421 748 0.55%
Deposits in foreign branches % % % % %
Total interest bearing deposits9,466,871 10,432 0.44% 8,980,744 8,951 0.40% 9,082,469 8,970 0.40% 8,850,004 8,822 0.40% 9,006,352 7,068 0.31%
Other borrowings1,553,010 2,017 0.52% 1,607,613 1,860 0.46% 1,411,387 1,476 0.42% 1,346,998 1,292 0.39% 1,327,087 714 0.21%
Subordinated notes280,985 4,191 5.93% 280,895 4,191 5.94% 280,805 4,191 6.00% 280,713 4,191 6.00% 280,622 4,191 5.93%
Trust preferred subordinated debentures113,406 806 2.83% 113,406 752 2.64% 113,406 735 2.61% 113,406 716 2.54% 113,406 659 2.31%
Total interest bearing liabilities11,414,272 17,446 0.61% 10,982,658 15,754 0.57% 10,888,067 15,372 0.57% 10,591,121 15,021 0.57% 10,727,467 12,632 0.47%
Demand deposits9,129,668 8,849,725 7,767,693 6,730,586 6,755,615
Other liabilities141,153 135,141 113,927 148,418 157,425
Stockholders’ equity1,839,301 1,722,035 1,668,783 1,638,851 1,603,392
Total liabilities and stockholders’ equity$22,524,394 $21,689,559 $20,438,470 $19,108,976 $19,243,899
Net interest income(2) $171,433 $166,741 $157,072 $144,786 $142,192
Net interest margin 3.11% 3.14% 3.18% 3.13% 3.01%
(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.