Texas Capital Bancshares, Inc. Announces Operating Results for 2017

DALLAS, Jan. 24, 2018 (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 2017.

“We are pleased to finish 2017 with strong operating results, including record earnings. The strong loan and deposit growth in 2017 positions us well as we move into 2018," said Keith Cargill, CEO. "We are focused on developing our talent and leveraging our people with improved technology as we gain efficiencies and improve client experience."

  • Q4 2017 was negatively impacted by a $17.6 million ($0.35 per share) write-off of our deferred tax asset ("DTA") as a result of the Tax Cuts and Jobs Act (the "Tax Act"). The amount of the write-off is expected to be recovered during 2018 from cash tax savings resulting from the Tax Act.
  • Net income decreased 24% on a linked quarter basis and decreased 8% from the fourth quarter of 2016.
  • EPS decreased 25% on a linked quarter basis and decreased 13% from the fourth quarter of 2016.
  • Loans held for investment ("LHI"), excluding mortgage finance, increased 4% on a linked quarter basis and 18% from the fourth quarter of 2016.
  • Total mortgage finance loans, including mortgage correspondent loans ("MCA loans"), decreased 4% on a linked quarter basis and increased 16% from the fourth quarter of 2016.
  • Demand deposits decreased 5% and total deposits remained flat on a linked quarter basis (increased 4% and 8% on an average basis, respectively), and decreased 2% and increased 12%, respectively, from the fourth quarter of 2016.

FINANCIAL SUMMARY
(dollars and shares in thousands)

2017 2016 % Change
ANNUAL OPERATING RESULTS
Net income$197,063 $155,119 27%
Net income available to common stockholders$187,313 $145,369 29%
Diluted EPS$3.73 $3.11 20%
Diluted shares50,260 46,766 7%
ROA0.87% 0.74%
ROE9.51% 9.27%
QUARTERLY OPERATING RESULTS
Net income$44,742 $48,386 (8)%
Net income available to common stockholders$42,305 $45,949 (8)%
Diluted EPS$0.84 $0.96 (13)%
Diluted shares50,312 47,760 5%
ROA0.71% 0.85%
ROE8.18% 10.82%
BALANCE SHEET
Loans held for sale (MCA)$1,007,695 $968,929 4%
LHI, mortgage finance5,308,160 4,497,338 18%
LHI15,366,252 13,001,011 18%
Total LHI20,674,412 17,498,349 18%
Total loans21,685,416 18,467,278 17%
Total assets25,075,645 21,697,134 16%
Demand deposits7,812,660 7,994,201 (2)%
Total deposits19,123,180 17,016,831 12%
Stockholders’ equity2,202,721 2,009,557 10%

DETAILED FINANCIALS
Texas Capital Bancshares, Inc. reported net income of $197.1 million and net income available to common stockholders of $187.3 million for the year ended December 31, 2017, compared to net income of $155.1 million and net income available to common stockholders of $145.4 million for the year ended December 31, 2016. For the fourth quarter of 2017, net income was $44.7 million and net income available to common stockholders was $42.3 million, compared to net income of $48.4 million and net income available to common stockholders of $45.9 million for the same period in 2016. On a fully diluted basis, earnings per common share were $3.73 for the year ended December 31, 2017 compared to $3.11 for the same period in 2016. Diluted earnings per common share were $0.84 for the quarter ended December 31, 2017 compared to $0.96 for the same period of 2016. The decrease reflects a $17.6 million write-off of our DTA in response to enactment of the Tax Act, which was recorded as additional income tax expense during the fourth quarter. The write-off had an adverse effect of $0.35 on earnings per common share for the 2017 fourth quarter and full year. The federal corporate income tax rates declined from 35% to 21% effective January 1, 2018 as a result of the Tax Act. The amount of the DTA write-off is expected to be recovered in 2018 from cash tax savings attributable to the Tax Act.

Return on common equity ("ROE") was 9.51 percent and return on average assets ("ROA") was 0.87 percent for the year ended December 31, 2017, compared to 9.27 percent and 0.74 percent, respectively, for the year ended December 31, 2016. ROE was 8.18 percent and ROA was 0.71 percent for the fourth quarter of 2017, compared to 11.20 percent and 0.99 percent, respectively, for the third quarter of 2017 and 10.82 percent and 0.85 percent, respectively, for the fourth quarter of 2016. The linked quarter and year-over-year decreases in ROE and ROA for the fourth quarter of 2017 resulted primarily from the DTA write-off, which outpaced the increases in net-interest income and decreases in the provision for credit losses. Excluding the DTA write-off, year-to-date and quarter-to-date December 31, 2017 ROE would have been 10.41% and 11.58%, respectively.

Net interest income was $210.6 million for the fourth quarter of 2017, compared to $204.4 million for the third quarter of 2017 and $171.2 million for the fourth quarter of 2016. The linked quarter and year-over-year increases in net interest income are due primarily to the growth in total LHI. Net interest margin for the fourth quarter of 2017 was 3.47% percent, a decrease of 12 basis points from the third quarter of 2017 and an increase of 36 basis points from the fourth quarter of 2016. Traditional LHI yields were down 3 basis points from the third quarter of 2017, but were up 50 basis points compared to the fourth quarter of 2016. In contrast, total cost of deposits for the fourth quarter of 2017 was up only 6 basis points to 0.53 percent compared to the third quarter of 2017 and up 31 basis points compared to the fourth quarter of 2016. Net interest margin for the fourth quarter of 2017 was adversely affected by increases in mortgage and liquidity assets which are at lower yields than traditional LHI, but produced significant growth in net interest income.

Average LHI, excluding mortgage finance loans, for the year ended December 31, 2017 were $14.0 billion, an increase of $1.7 billion, or 13 percent, from 2016. Average LHI, excluding mortgage finance loans, for the fourth quarter of 2017 were $15.0 billion, an increase of $582.1 million, or 4 percent, from the third quarter of 2017 and an increase of $2.3 billion, or 18 percent, from the fourth quarter of 2016. Average total mortgage finance loans (including MCA) for the fourth quarter of 2017 were $6.2 billion, an increase of $388.9 million, or 7 percent, from the third quarter of 2017 and an increase of $930.2 million, or 17 percent, from the fourth quarter of 2016.

Average total deposits for the year ended December 31, 2017 were $18.5 billion, an increase of $1.2 billion, or 7 percent, from 2016. Average demand deposits for the year ended December 31, 2017 were $8.3 billion, an increase of $196.5 billion, or 2 percent, from 2016. Average total deposits for the fourth quarter of 2017 increased $1.5 billion from the third quarter of 2017 and increased $1.9 billion from the fourth quarter of 2016. Average demand deposits for the fourth quarter of 2017 increased $321.6 million, or 4 percent, to $9.1 billion from $8.8 billion from the third quarter of 2017, and decreased $43.8 million, or 0.48 percent, from the third quarter of 2017.

We recorded a $2.0 million provision for credit losses for the fourth quarter of 2017 compared to $20.0 million for the third quarter of 2017 and $9.0 million for the fourth quarter of 2016. The provision for the fourth quarter of 2017 was driven by the consistent application of our methodology. The linked quarter and year-over-year decreases were 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 December 31, 2017 decreased to 1.26 percent of LHI excluding mortgage finance loans compared to 1.30 percent at September 30, 2017 and 1.38 percent at December 31, 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 fourth quarter of 2017 compared to levels reported in the third quarter of 2017 and fourth quarter of 2016, reducing the ratio or total non-performing assets to total LHI plus other real estate owned ("OREO") to 0.55 percent compared to 0.67 percent for the third quarter of 2017 and 1.07 percent for the fourth quarter of 2016. The linked quarter and year-over-year decreases are primarily related to the decrease in energy non-accrual loans from $81.6 million at September 30, 2017 and $121.5 at December 31, 2016 to $65.2 million at December 31, 2017. Net charge-offs for the fourth quarter of 2017 were $964,000 compared to $10.7 million for the third quarter of 2017 and $20.8 million for the fourth quarter of 2016. For the fourth quarter of 2017, net charge-offs related to energy loans were $175,000 compared to net charge-offs of $6.3 million for the third quarter of 2017 and $16.3 million for the fourth quarter of 2016. For the fourth quarter of 2017, net charge-offs were 0.02 percent of average total LHI, compared to 0.22 percent for the third quarter of 2017 and 0.48 percent for the same period in 2016. At December 31, 2017, OREO was $11.7 million compared to $18.1 million at September 30, 2017 and $19.0 at December 31, 2016. The linked quarter and year-over-year decreases were due to a $6.1 million permanent write down of a commercial property during the fourth quarter of 2017.

Non-interest income increased $539,000, or 3 percent, during the fourth quarter of 2017 compared to the same period of 2016, and increased $371,000, or 2 percent, compared to the third quarter of 2017. The year-over-year increase primarily related to a $3.9 million increase in servicing income during the fourth quarter of 2017 compared to the same period of 2016 primarily attributable to an increase in mortgage servicing rights ("MSRs"). Offsetting this increase was a $2.7 million decrease in other non-interest income and a $1.6 million decrease in brokered loan fees, which resulted from a decrease in mortgage finance volumes.

Non-interest expense for the fourth quarter of 2017 increased $26.6 million, or 25 percent, compared to the fourth quarter of 2016, and increased $18.3 million, or 16 percent, compared to the third quarter of 2017. The year-over-year increase is primarily related to a $6.1 million write-down of OREO taken during the fourth quarter of 2017 and a $6.8 million increase in servicing related expenses resulting from a $2.8 million impairment charge primarily due to an anticipated sale of Ginnie Mae MSRs in the first quarter of 2018 and an increase in MSRs, which are being amortized. Non-interest expense for the fourth quarter of 2017 was also affected by increases in salaries and employee benefits, marketing expense and legal and professional expense of $4.1 million, $3.8 million and $2.3 million, respectively, all of which were due to general business growth. The linked quarter increase in non-interest expense was primarily related to the $6.1 million write-down of OREO, as well as a $3.3 million increase in servicing related expenses, which included a $2.8 million impairment charge on MSRs, a $2.4 million increase in legal and professional expense and a $2.3 million increase in salaries and employee benefits.

Stockholders’ equity increased by 10 percent from $2.0 billion at December 31, 2016 to $2.2 billion at December 31, 2017, primarily due to retention of net income. Texas Capital Bank is well capitalized under regulatory guidelines. At December 31, 2017, our ratio of tangible common equity to total tangible assets was 8.1 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 financial impact of the Tax Cuts and Jobs Act on our results of operations, 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)
4th Quarter3rd Quarter2nd Quarter1st Quarter4th Quarter
20172017201720172016
CONSOLIDATED STATEMENTS OF INCOME
Interest income$249,519 $237,643 $208,191 $183,946 $188,671
Interest expense38,870 33,282 25,232 20,587 17,448
Net interest income210,649 204,361 182,959 163,359 171,223
Provision for credit losses2,000 20,000 13,000 9,000 9,000
Net interest income after provision for credit losses208,649 184,361 169,959 154,359 162,223
Non-interest income19,374 19,003 18,769 17,110 18,835
Non-interest expense133,138 114,830 111,814 106,094 106,523
Income before income taxes94,885 88,534 76,914 65,375 74,535
Income tax expense50,143 29,850 25,819 22,833 26,149
Net income44,742 58,684 51,095 42,542 48,386
Preferred stock dividends2,437 2,438 2,437 2,438 2,437
Net income available to common stockholders$42,305 $56,246 $48,658 $40,104 $45,949
Diluted EPS$0.84 $1.12 $0.97 $0.80 $0.96
Diluted shares50,311,962 50,250,866 50,229,670 50,234,230 47,759,548
CONSOLIDATED BALANCE SHEET DATA
Total assets$25,075,645 $24,400,998 $23,119,713 $20,864,874 $21,697,134
LHI15,366,252 14,828,406 14,280,353 13,298,918 13,001,011
LHI, mortgage finance5,308,160 5,642,285 5,183,600 3,371,598 4,497,338
Loans held for sale, MCA1,007,695 955,983 843,164 884,647 968,929
Liquidity assets(1)2,727,581 2,357,537 2,142,658 2,804,921 2,725,645
Securities23,511 24,224 119,043 42,203 24,874
Demand deposits7,812,660 8,263,202 8,174,830 7,094,696 7,994,201
Total deposits19,123,180 19,081,257 17,292,223 16,605,380 17,016,831
Other borrowings3,165,040 2,583,496 3,162,224 1,641,834 2,109,575
Subordinated notes281,406 281,315 281,225 281,134 281,044
Long-term debt113,406 113,406 113,406 113,406 113,406
Stockholders’ equity2,202,721 2,158,363 2,100,553 2,050,442 2,009,557
End of period shares outstanding49,643,344 49,621,825 49,595,252 49,560,100 49,503,662
Book value$41.35 $40.47 $39.33 $38.35 $37.56
Tangible book value(2)$40.97 $40.09 $38.94 $37.95 $37.17
SELECTED FINANCIAL RATIOS
Net interest margin3.47%3.59%3.57%3.29%3.11%
Return on average assets0.71%0.99%0.96%0.83%0.85%
Return on average common equity8.18%11.20%10.08%8.60%10.82%
Non-interest income to average earning assets0.32%0.33%0.36%0.34%0.34%
Efficiency ratio(3)57.9%51.4%55.4%58.8%56.0%
Efficiency ratio, excluding OREO write-down(3)55.2%51.4%55.4%58.8%56.0%
Non-interest expense to average earning assets2.17%2.00%2.17%2.12%1.93%
Tangible common equity to total tangible assets(4)8.1%8.2%8.4%9.0%8.5%
Common Equity Tier 18.5%8.4%8.6%9.6%9.0%
Tier 1 capital9.5%9.4%9.8%10.9%10.2%
Total capital11.5%11.4%11.8%13.3%12.5%
Leverage9.2%9.6%10.3%10.3%9.3%
(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,
2017
December 31,
2016
%
Change
Assets
Cash and due from banks$178,010 $113,707 57%
Interest-bearing deposits2,697,581 2,700,645 %
Federal funds sold and securities purchased under resale agreements30,000 25,000 20%
Securities, available-for-sale23,511 24,874 (5)%
Loans held for sale ($1,007.7 million and $968.9 million at December 31, 2017 and 2016, respectively, at fair value)1,011,004 968,929 4%
LHI, mortgage finance5,308,160 4,497,338 18%
LHI (net of unearned income)15,366,252 13,001,011 18%
Less: Allowance for loan losses184,655 168,126 10%
LHI, net20,489,757 17,330,223 18%
Mortgage servicing rights, net85,327 28,536 199%
Premises and equipment, net25,176 19,775 27%
Accrued interest receivable and other assets516,239 465,933 11%
Goodwill and intangibles, net19,040 19,512 (2)%
Total assets$25,075,645 $21,697,134 16%
Liabilities and Stockholders’ Equity
Liabilities:
Deposits:
Non-interest bearing$7,812,660 $7,994,201 (2)%
Interest bearing11,310,520 9,022,630 25%
Total deposits19,123,180 17,016,831 12%
Accrued interest payable7,680 5,498 40%
Other liabilities182,212 161,223 13%
Federal funds purchased and repurchase agreements365,040 109,575 233%
Other borrowings2,800,000 2,000,000 40%
Subordinated notes, net281,406 281,044 %
Trust preferred subordinated debentures113,406 113,406 %
Total liabilities22,872,924 19,687,577 16%
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, 2017 and 2016150,000 150,000 %
Common stock, $.01 par value:
Authorized shares - 100,000,000
Issued shares - 49,643,761 and 49,504,079 at December 31, 2017 and 2016, respectively496 495 %
Additional paid-in capital961,305 955,468 1%
Retained earnings1,090,500 903,187 21%
Treasury stock (shares at cost: 417 at December 31, 2017 and 2016)(8)(8)%
Accumulated other comprehensive income, net of taxes428 415 3%
Total stockholders’ equity2,202,721 2,009,557 10%
Total liabilities and stockholders’ equity$25,075,645 $21,697,134 16%


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
2017201620172016
Interest income
Interest and fees on loans$238,906 $182,909 $846,292 $684,582
Securities213 228 1,066 967
Federal funds sold and securities purchased under resale agreements936 338 2,542 1,547
Deposits in other banks9,464 5,196 29,399 16,312
Total interest income249,519 188,671 879,299 703,408
Interest expense
Deposits27,625 10,432 79,886 37,175
Federal funds purchased723 156 2,592 518
Other borrowings5,380 1,863 15,137 6,128
Subordinated notes4,191 4,191 16,764 16,764
Trust preferred subordinated debentures951 806 3,592 3,009
Total interest expense38,870 17,448 117,971 63,594
Net interest income210,649 171,223 761,328 639,814
Provision for credit losses2,000 9,000 44,000 77,000
Net interest income after provision for credit losses208,649 162,223 717,328 562,814
Non-interest income
Service charges on deposit accounts3,109 2,940 12,432 10,341
Wealth management and trust fee income1,767 1,244 6,153 4,268
Bank owned life insurance (BOLI) income698 481 2,260 2,073
Brokered loan fees5,692 7,249 23,331 25,339
Servicing income5,270 1,410 15,657 1,715
Swap fees586 536 3,990 2,866
Other2,252 4,975 10,433 14,178
Total non-interest income19,374 18,835 74,256 60,780
Non-interest expense
Salaries and employee benefits70,192 66,081 264,231 228,985
Net occupancy expense6,749 5,937 25,811 23,221
Marketing8,438 4,617 26,787 17,303
Legal and professional8,756 6,443 29,731 23,326
Communications and technology6,590 6,334 31,004 25,562
FDIC insurance assessment6,710 6,573 23,510 24,440
Servicing related expenses7,177 398 15,506 1,703
Allowance and other carrying costs for OREO6,122 59 6,437 824
Other12,404 10,081 42,859 37,033
Total non-interest expense133,138 106,523 465,876 382,397
Income before income taxes94,885 74,535 325,708 241,197
Income tax expense50,143 26,149 128,645 86,078
Net income44,742 48,386 197,063 155,119
Preferred stock dividends2,437 2,437 9,750 9,750
Net income available to common stockholders$42,305 $45,949 $187,313 $145,369
Basic earnings per common share$0.85 $0.97 $3.78 $3.14
Diluted earnings per common share$0.84 $0.96 $3.73 $3.11


TEXAS CAPITAL BANCSHARES, INC.
SUMMARY OF LOAN LOSS EXPERIENCE
(Dollars in thousands)
4th Quarter3rd Quarter2nd Quarter1st Quarter4th Quarter
20172017201720172016
Allowance for loan losses:
Beginning balance$182,929 $174,225 $172,013 $168,126 $180,436
Loans charged-off:
Commercial1,999 10,603 12,310 9,233 22,326
Real estate 250 40
Construction 59
Consumer 180 7
Leases
Total charge-offs1,999 10,912 12,530 9,233 22,333
Recoveries:
Commercial1,019 132 61 3,381 1,535
Real estate1 21 3 50 27
Construction 3 101
Consumer14 15 36 5 5
Leases1 1 8 6
Total recoveries1,035 172 100 3,545 1,573
Net charge-offs964 10,740 12,430 5,688 20,760
Provision for loan losses2,690 19,444 14,642 9,575 8,450
Ending balance$184,655 $182,929 $174,225 $172,013 $168,126
Allowance for off-balance sheet credit losses:
Beginning balance$9,761 $9,205 $10,847 $11,422 $10,872
Provision for off-balance sheet credit losses(690)556 (1,642)(575)550
Ending balance$9,071 $9,761 $9,205 $10,847 $11,422
Total allowance for credit losses$193,726 $192,690 $183,430 $182,860 $179,548
Total provision for credit losses$2,000 $20,000 $13,000 $9,000 $9,000
Allowance for loan losses to LHI0.89%0.89%0.90%1.03%0.96%
Allowance for loan losses to LHI excluding mortgage finance loans(2)1.20%1.23%1.22%1.29%1.29%
Allowance for loan losses to average LHI0.92%0.95%0.99%1.09%0.98%
Allowance for loan losses to average LHI excluding mortgage finance loans(2)1.23%1.27%1.27%1.33%1.32%
Net charge-offs to average LHI(1)0.02%0.22%0.28%0.15%0.48%
Net charge-offs to average LHI excluding mortgage finance loans(1)(2)0.03%0.30%0.36%0.18%0.65%
Net charge-offs to average LHI for last twelve months(1)0.16%0.29%0.27%0.28%0.29%
Net charge-offs to average LHI, excluding mortgage finance loans, for last twelve months(1)(2)0.21%0.37%0.36%0.36%0.38%
Total provision for credit losses to average LHI(1)0.04%0.41%0.30%0.23%0.21%
Total provision for credit losses to average LHI excluding mortgage finance loans(1)(2)0.05%0.55%0.38%0.28%0.28%
Combined allowance for credit losses to LHI0.94%0.94%0.94%1.10%1.03%
Combined allowance for credit losses to LHI, excluding mortgage finance loans(2)1.26%1.30%1.28%1.37%1.38%
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 NON-PERFORMING ASSETS AND PAST DUE LOANS
(Dollars in thousands)
4th Quarter3rd Quarter2nd Quarter1st Quarter4th Quarter
20172017201720172016
Non-performing assets (NPAs):
Non-accrual loans$101,444 $118,205 $123,730 $146,549 $167,791
Other real estate owned (OREO)11,742 18,131 18,689 18,833 18,961
Total$113,186 $136,336 $142,419 $165,382 $186,752
Non-accrual loans to LHI0.49%0.58%0.64%0.88%0.96%
Non-accrual loans to LHI excluding mortgage finance loans(1)0.66%0.80%0.87%1.10%1.29%
Total NPAs to LHI plus OREO0.55%0.67%0.73%0.99%1.07%
Total NPAs to LHI excluding mortgage finance loans plus OREO(1)0.74%0.92%1.00%1.24%1.43%
Total NPAs to earning assets0.47%0.58%0.64%0.82%0.89%
Allowance for loan losses to non-accrual loans 1.8x 1.5x 1.4x 1.2x 1.0x
Restructured loans$ $ $ $ $
Loans past due 90 days and still accruing(2)(3)$28,166 $8,892 $11,077 $8,799 $10,729
Loans past due 90 days to LHI0.14%0.04%0.06%0.05%0.06%
Loans past due 90 days to LHI excluding mortgage finance loans(2)0.18%0.06%0.08%0.07%0.08%
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 December 31, 2017, loans past due 90 days and still accruing includes premium finance loans of $5.5 million. These loans are primarily secured by obligations of insurance carriers to refund premiums on canceled insurance policies. The refund of premiums from the insurance carriers can take 180 days or longer from the cancellation date.
3. At December 31, 2017, loans past due 90 days and still accruing includes $19.7 million in loans held for sale, of which $19.0 million are loans with government guarantees that we purchased and sold into Ginnie Mae pools. Pursuant to Ginnie Mae servicing guidelines we have the unilateral right to repurchase these loans, and therefore must record them as loans held for sale on our balance sheet regardless of whether the repurchase option has been exercised.


TEXAS CAPITAL BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(Dollars in thousands)
4th Quarter3rd Quarter2nd Quarter1st Quarter4th Quarter
20172017201720172016
Interest income
Interest and fees on loans$238,906 $229,116 $201,646 $176,624 $182,909
Securities213 341 287 225 228
Federal funds sold and securities purchased under resale agreements936 642 434 530 338
Deposits in other banks9,464 7,544 5,824 6,567 5,196
Total interest income249,519 237,643 208,191 183,946 188,671
Interest expense
Deposits27,625 22,435 16,533 13,293 10,432
Federal funds purchased723 891 726 252 156
Other borrowings5,380 4,835 2,901 2,021 1,863
Subordinated notes4,191 4,191 4,191 4,191 4,191
Trust preferred subordinated debentures951 930 881 830 806
Total interest expense38,870 33,282 25,232 20,587 17,448
Net interest income210,649 204,361 182,959 163,359 171,223
Provision for credit losses2,000 20,000 13,000 9,000 9,000
Net interest income after provision for credit losses208,649 184,361 169,959 154,359 162,223
Non-interest income
Service charges on deposit accounts3,109 3,211 3,067 3,045 2,940
Wealth management and trust fee income1,767 1,627 1,402 1,357 1,244
Bank owned life insurance (BOLI) income698 615 481 466 481
Brokered loan fees5,692 6,152 5,809 5,678 7,249
Servicing income5,270 4,486 3,700 2,201 1,410
Swap fees586 647 954 1,803 536
Other2,252 2,265 3,356 2,560 4,975
Total non-interest income19,374 19,003 18,769 17,110 18,835
Non-interest expense
Salaries and employee benefits70,192 67,882 63,154 63,003 66,081
Net occupancy expense6,749 6,436 6,515 6,111 5,937
Marketing8,438 7,242 6,157 4,950 4,617
Legal and professional8,756 6,395 7,127 7,453 6,443
Communications and technology6,590 6,002 11,906 6,506 6,334
FDIC insurance assessment6,710 6,203 4,603 5,994 6,573
Servicing related expenses7,177 3,897 2,682 1,750 398
Allowance and other carrying costs for OREO6,122 105 71 139 59
Other12,404 10,668 9,599 10,188 10,081
Total non-interest expense133,138 114,830 111,814 106,094 106,523
Income before income taxes94,885 88,534 76,914 65,375 74,535
Income tax expense50,143 29,850 25,819 22,833 26,149
Net income44,742 58,684 51,095 42,542 48,386
Preferred stock dividends2,437 2,438 2,437 2,438 2,437
Net income available to common shareholders$42,305 $56,246 $48,658 $40,104 $45,949


TEXAS CAPITAL BANCSHARES, INC.
QUARTERLY FINANCIAL SUMMARY - UNAUDITED
Consolidated Daily Average Balances, Average Yields and Rates
(Dollars in thousands)
4th Quarter 2017 3rd Quarter 2017 2nd Quarter 2017 1st Quarter 2017 4th 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$23,678 $213 3.57% $86,087 $340 1.57% $65,049 $287 1.77% $31,905 $224 2.84% $25,008 $221 3.53%
Securities - Non-taxable(2) % % % 224 3 4.85% 531 9 6.37%
Federal funds sold and securities purchased under resale agreements292,544 936 1.27% 205,938 642 1.24% 174,264 434 1.00% 276,910 530 0.78% 254,008 338 0.53%
Interest-bearing deposits in other banks2,924,942 9,464 1.28% 2,383,060 7,544 1.26% 2,250,330 5,824 1.04% 3,312,256 6,567 0.80% 3,812,076 5,197 0.54%
Loans held for sale, at fair value1,144,124 11,507 3.99% 1,009,703 9,882 3.88% 845,623 8,235 3.91% 1,064,322 9,535 3.63% 944,484 7,903 3.33%
LHI, mortgage finance loans5,102,107 44,477 3.46% 4,847,530 42,294 3.46% 3,805,831 33,399 3.52% 2,757,566 23,105 3.40% 4,371,475 35,081 3.19%
LHI(1)(2)15,010,041 185,039 4.89% 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%
Less allowance for loan losses183,233 172,774 170,957 169,318 180,727
LHI, net of allowance19,928,915 229,516 4.57% 19,102,736 221,133 4.59% 17,353,613 194,768 4.50% 15,568,792 168,123 4.38% 16,892,616 175,211 4.13%
Total earning assets24,314,203 251,636 4.11% 22,787,524 239,541 4.17% 20,688,879 209,548 4.06% 20,254,409 184,982 3.70% 21,928,723 188,879 3.43%
Cash and other assets766,622 713,778 632,097 606,762 595,671
Total assets$25,080,825 $23,501,302 $21,320,976 $20,861,171 $22,524,394
Liabilities and Stockholders’ Equity
Transaction deposits$2,469,984 $5,845 0.94% $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%
Savings deposits8,403,473 20,655 0.98% 7,618,843 17,152 0.89% 6,952,317 12,940 0.75% 6,989,748 10,483 0.61% 6,711,083 7,592 0.45%
Time deposits533,312 1,125 0.84% 496,076 924 0.74% 455,542 700 0.62% 427,770 617 0.59% 474,548 711 0.60%
Total interest bearing deposits11,406,769 27,625 0.96% 10,260,243 22,435 0.87% 9,416,731 16,533 0.70% 9,425,919 13,293 0.57% 9,466,871 10,432 0.44%
Other borrowings1,852,750 6,103 1.31% 1,821,837 5,726 1.25% 1,456,737 3,627 1.00% 1,333,685 2,273 0.69% 1,553,010 2,017 0.52%
Subordinated notes281,348 4,191 5.91% 281,256 4,191 5.91% 281,167 4,191 5.98% 281,076 4,191 6.05% 280,985 4,191 5.93%
Trust preferred subordinated debentures113,406 951 3.33% 113,406 930 3.25% 113,406 881 3.12% 113,406 830 2.97% 113,406 806 2.83%
Total interest bearing liabilities13,654,273 38,870 1.13% 12,476,742 33,282 1.06% 11,268,041 25,232 0.90% 11,154,086 20,587 0.75% 11,414,272 17,446 0.61%
Demand deposits9,085,819 8,764,263 7,863,402 7,547,338 9,129,668
Other liabilities138,050 116,998 102,653 117,877 141,153
Stockholders’ equity2,202,683 2,143,299 2,086,880 2,041,870 1,839,301
Total liabilities and stockholders’ equity$25,080,825 $23,501,302 $21,320,976 $20,861,171 $22,524,394
Net interest income(2) $212,766 $206,259 $184,316 $164,395 $171,433
Net interest margin 3.47% 3.59% 3.57% 3.29% 3.11%
(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.

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

Source:Texas Capital Bancshares, Inc.