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 FINANCIALSTexas 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 EndedDecember 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
  AverageBalance     Revenue/Expense (1)     Yield/Rate   AverageBalance     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 agreements 254,008     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 banks 3,812,076     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 value 944,484     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 loans 4,371,475     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 %
LHI 12,701,868     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 allowance 16,892,616     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 assets 21,928,723     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 assets 595,671           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 deposits 6,711,083     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 deposits 474,548     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 deposits 9,466,871     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 borrowings 1,553,010     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 notes 280,985     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 debentures 113,406     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 liabilities 11,414,272     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 deposits 9,129,668           8,849,725           7,767,693           6,730,586           6,755,615        
Other liabilities 141,153           135,141           113,927           148,418           157,425        
Stockholders' equity 1,839,301           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 CONTACTHeather Worley, 214.932.6646heather.worley@texascapitalbank.com

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