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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 shares50,251 46,510 8%
ROA0.99% 0.78%
ROE11.20% 10.20%
BALANCE SHEET
Loans held for sale (MCA)$955,983 $648,684 47%
LHI, mortgage finance5,642,285 4,961,159 14%
LHI14,828,406 12,662,394 17%
Total LHI20,470,691 17,623,553 16%
Total loans21,426,674 18,272,237 17%
Total assets24,400,998 22,216,388 10%
Demand deposits8,263,202 8,789,740 (6)%
Total deposits19,081,257 18,145,123 5%
Stockholders’ equity2,158,363 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 Quarter2nd Quarter1st Quarter4th Quarter3rd Quarter
20172017201720162016
CONSOLIDATED STATEMENTS OF INCOME
Interest income$237,643 $208,191 $183,946 $188,671 $182,492
Interest expense33,282 25,232 20,587 17,448 15,753
Net interest income204,361 182,959 163,359 171,223 166,739
Provision for credit losses20,000 13,000 9,000 9,000 22,000
Net interest income after provision for credit losses184,361 169,959 154,359 162,223 144,739
Non-interest income19,003 18,769 17,110 18,835 16,716
Non-interest expense114,830 111,814 106,094 106,523 94,799
Income before income taxes88,534 76,914 65,375 74,535 66,656
Income tax expense29,850 25,819 22,833 26,149 23,931
Net income58,684 51,095 42,542 48,386 42,725
Preferred stock dividends2,438 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 shares50,250,866 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
LHI14,828,406 14,280,353 13,298,918 13,001,011 12,662,394
LHI, mortgage finance5,642,285 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 assets2,357,537 2,142,658 2,804,921 2,725,645 3,471,074
Securities24,224 119,043 42,203 24,874 26,356
Demand deposits8,263,202 8,174,830 7,094,696 7,994,201 8,789,740
Total deposits19,081,257 17,292,223 16,605,380 17,016,831 18,145,123
Other borrowings2,583,496 3,162,224 1,641,834 2,109,575 1,751,420
Subordinated notes281,315 281,225 281,134 281,044 280,954
Long-term debt113,406 113,406 113,406 113,406 113,406
Stockholders’ equity2,158,363 2,100,553 2,050,442 2,009,557 1,725,782
End of period shares outstanding49,621,825 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 margin3.59%3.57%3.29%3.11%3.14%
Return on average assets0.99%0.96%0.83%0.85%0.78%
Return on average common equity11.20%10.08%8.60%10.82%10.20%
Non-interest income to earning assets0.33%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 assets2.00%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 18.4%8.6%9.6%9.0%7.6%
Tier 1 capital9.4%9.8%10.9%10.2%8.8%
Total capital11.4%11.8%13.3%12.5%11.1%
Leverage9.6%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 deposits2,332,537 3,441,074 (32)%
Federal funds sold and securities purchased under resale agreements25,000 30,000 (17)%
Securities, available-for-sale24,224 26,356 (8)%
Loans held for sale, at fair value955,983 648,684 47%
LHI, mortgage finance5,642,285 4,961,159 14%
LHI (net of unearned income)14,828,406 12,662,394 17%
Less: Allowance for loan losses182,929 180,436 1%
LHI, net20,287,762 17,443,117 16%
Mortgage servicing rights, net77,630 15,462 402%
Premises and equipment, net23,882 20,604 16%
Accrued interest receivable and other assets511,207 454,116 13%
Goodwill and intangibles, net19,157 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 bearing10,818,055 9,355,383 16%
Total deposits19,081,257 18,145,123 5%
Accrued interest payable4,562 3,124 46%
Other liabilities178,599 196,579 (9)%
Federal funds purchased and repurchase agreements83,496 81,420 3%
Other borrowings2,500,000 1,670,000 50%
Subordinated notes, net281,315 280,954
Trust preferred subordinated debentures113,406 113,406
Total liabilities22,242,635 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 2016150,000 150,000
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, respectively496 460 8%
Additional paid-in capital959,251 717,452 34%
Retained earnings1,048,195 857,238 22%
Treasury stock (shares at cost: 417 at September 30, 2017 and 2016)(8)(8)
Accumulated other comprehensive income, net of taxes429 640 (33)%
Total stockholders’ equity2,158,363 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
2017201620172016
Interest income
Interest and fees on loans$229,116 $177,724 $607,386 $501,673
Securities341 232 853 739
Federal funds sold and securities purchased under resale agreements642 455 1,606 1,209
Deposits in other banks7,544 4,081 19,935 11,116
Total interest income237,643 182,492 629,780 514,737
Interest expense
Deposits22,435 8,950 52,261 26,743
Federal funds purchased891 126 1,869 362
Other borrowings4,835 1,733 9,757 4,265
Subordinated notes4,191 4,191 12,573 12,573
Trust preferred subordinated debentures930 753 2,641 2,203
Total interest expense33,282 15,753 79,101 46,146
Net interest income204,361 166,739 550,679 468,591
Provision for credit losses20,000 22,000 42,000 68,000
Net interest income after provision for credit losses184,361 144,739 508,679 400,591
Non-interest income
Service charges on deposit accounts3,211 2,880 9,323 7,401
Wealth management and trust fee income1,627 1,113 4,386 3,024
Bank owned life insurance (BOLI) income615 520 1,562 1,592
Brokered loan fees6,152 7,581 17,639 18,090
Servicing income4,486 310 10,387 305
Swap fees647 918 3,404 2,330
Other2,265 3,394 8,181 9,203
Total non-interest income19,003 16,716 54,882 41,945
Non-interest expense
Salaries and employee benefits67,882 56,722 194,039 162,904
Net occupancy expense6,436 5,634 19,062 17,284
Marketing7,242 4,292 18,349 12,686
Legal and professional6,395 5,333 20,975 16,883
Communications and technology6,002 6,620 24,414 19,228
FDIC insurance assessment6,203 6,355 16,800 17,867
Servicing related expenses3,897 620 8,329 1,305
Other10,773 9,223 30,770 27,717
Total non-interest expense114,830 94,799 332,738 275,874
Income before income taxes88,534 66,656 230,823 166,662
Income tax expense29,850 23,931 78,502 59,929
Net income58,684 42,725 152,321 106,733
Preferred stock dividends2,438 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 Quarter2nd Quarter1st Quarter4th Quarter3rd Quarter
20172017201720162016
Allowance for loan losses:
Beginning balance$174,225 $172,013 $168,126 $180,436 $167,397
Loans charged-off:
Commercial10,603 12,310 9,233 22,326 9,945
Real estate250 40
Construction59
Consumer 180 7 40
Total charge-offs10,912 12,530 9,233 22,333 9,985
Recoveries:
Commercial132 61 3,381 1,535 2,495
Real estate21 3 50 27 15
Construction3 101
Consumer15 36 5 5 5
Leases1 8 6 26
Total recoveries172 100 3,545 1,573 2,541
Net charge-offs10,740 12,430 5,688 20,760 7,444
Provision for loan losses19,444 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 losses556 (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 LHI0.89%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 LHI0.95%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 LHI0.94%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 Quarter2nd Quarter1st Quarter4th Quarter3rd Quarter
20172017201720162016
Non-accrual loans to LHI0.58%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 OREO0.67%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 assets0.58%0.64%0.82%0.89%0.87%
Allowance for loan losses to non-accrual loans1.5x1.4x1.2x1.0x1.1x
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 LHI0.04%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 Quarter2nd Quarter1st Quarter4th Quarter3rd Quarter
20172017201720162016
Interest income
Interest and fees on loans$229,116 $201,646 $176,624 $182,909 $177,724
Securities341 287 225 228 232
Federal funds sold and securities purchased under resale agreements642 434 530 338 455
Deposits in other banks7,544 5,824 6,567 5,196 4,081
Total interest income237,643 208,191 183,946 188,671 182,492
Interest expense
Deposits22,435 16,533 13,293 10,432 8,950
Federal funds purchased891 726 252 156 126
Other borrowings4,835 2,901 2,021 1,863 1,733
Subordinated notes4,191 4,191 4,191 4,191 4,191
Trust preferred subordinated debentures930 881 830 806 753
Total interest expense33,282 25,232 20,587 17,448 15,753
Net interest income204,361 182,959 163,359 171,223 166,739
Provision for credit losses20,000 13,000 9,000 9,000 22,000
Net interest income after provision for credit losses184,361 169,959 154,359 162,223 144,739
Non-interest income
Service charges on deposit accounts3,211 3,067 3,045 2,940 2,880
Wealth management and trust fee income1,627 1,402 1,357 1,244 1,113
Bank owned life insurance (BOLI) income615 481 466 481 520
Brokered loan fees6,152 5,809 5,678 7,249 7,581
Servicing income4,486 3,700 2,201 1,410 310
Swap fees647 954 1,803 536 918
Other2,265 3,356 2,560 4,975 3,394
Total non-interest income19,003 18,769 17,110 18,835 16,716
Non-interest expense
Salaries and employee benefits67,882 63,154 63,003 66,081 56,722
Net occupancy expense6,436 6,515 6,111 5,937 5,634
Marketing7,242 6,157 4,950 4,617 4,292
Legal and professional6,395 7,127 7,453 6,443 5,333
Communications and technology6,002 11,906 6,506 6,334 6,620
FDIC insurance assessment6,203 4,603 5,994 6,573 6,355
Servicing related expenses3,897 2,682 1,750 398 620
Other10,773 9,670 10,327 10,140 9,223
Total non-interest expense114,830 111,814 106,094 106,523 94,799
Income before income taxes88,534 76,914 65,375 74,535 66,656
Income tax expense29,850 25,819 22,833 26,149 23,931
Net income58,684 51,095 42,542 48,386 42,725
Preferred stock dividends2,438 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 agreements205,938 642 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 banks2,383,060 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 value1,009,703 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 loans4,847,530 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 allowance19,102,736 221,133 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 assets22,787,524 239,541 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 assets713,778 632,097 606,762 595,671 588,440
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 deposits7,618,843 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 deposits496,076 924 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 deposits10,260,243 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 borrowings1,821,837 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 notes281,256 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 debentures113,406 930 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 liabilities12,476,742 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 deposits8,764,263 7,863,402 7,547,338 9,129,668 8,849,725
Other liabilities116,998 102,653 117,877 141,153 135,141
Stockholders’ equity2,143,299 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.

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

Source:Texas Capital Bancshares, Inc.