Texas Capital Bancshares, Inc. Announces Operating Results For Q2 2017

DALLAS, July 19, 2017 (GLOBE NEWSWIRE) -- Texas Capital Bancshares, Inc. (NASDAQ:TCBI), the parent company of Texas Capital Bank, announced earnings and operating results for the second quarter of 2017.

"We are extremely pleased with our second quarter results, reporting record earnings led by strong core loan growth and rebounding mortgage finance balances," said Keith Cargill, CEO. "We continue to be optimistic about our earnings power for the remainder of 2017 and are well-positioned to exploit future business opportunities."
  • Loans held for investment ("LHI"), excluding mortgage finance, increased 7% on a linked quarter basis, growing 14% from the second quarter of 2016.
  • Total mortgage finance loans, including MCA increased 42% on a linked quarter basis and increased 10% from the second quarter of 2016.
  • Demand deposits increased 15% and total deposits increased 4% on a linked quarter basis, increasing 2% and 4%, respectively, from the second quarter of 2016.
  • Net income increased 20% on a linked quarter basis and increased 31% from the second quarter of 2016.
  • EPS increased 21% on a linked quarter basis and increased 24% from the second quarter of 2016.
  • ROE increased to 10.08% compared to 8.60% for the first quarter of 2017 and 9.65% for the second quarter of 2016.
 
FINANCIAL SUMMARY(dollars and shares in thousands)
           
   Q2 2017   Q2 2016   % Change
QUARTERLY OPERATING RESULTS          
Net income $ 51,095     $ 38,880                 31  %
Net income available to common stockholders       $ 48,658     $       36,443     34  %
Diluted EPS $       0.97     $ 0.78     24  %
Diluted shares 50,230     46,438     8  %
ROA 0.96 %   0.77 %    
ROE 10.08 %   9.65 %    
           
BALANCE SHEET          
Loans held for sale (MCA) $     843,164     $ 221,347            281  %
LHI, mortgage finance 5,183,600     5,260,027     (1 )%
LHI 14,280,353     12,502,513     14  %
Total LHI 19,463,953     17,762,540     10  %
Total loans 20,309,970     17,983,887     13  %
Total assets 23,119,713     21,080,994     10  %
Demand deposits 8,174,830     7,984,208     2  %
Total deposits 17,292,223     16,703,565     4  %
Stockholders' equity 2,100,553     1,684,735     25  %

DETAILED FINANCIALSTexas Capital Bancshares, Inc. reported net income of $51.1 million and net income available to common stockholders of $48.7 million for the quarter ended June 30, 2017 compared to net income of $38.9 million and net income available to common stockholders of $36.4 million for the same period in 2016. On a fully diluted basis, earnings per common share were $0.97 for the quarter ended June 30, 2017 compared to $0.78 for the same period of 2016. The increase reflects the $12.2 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 10.08 percent and return on average assets ("ROA") was 0.96 percent for the second quarter of 2017, compared to 8.60 percent and 0.83 percent, respectively, for the first quarter of 2017 and 9.65 percent and 0.77 percent, respectively, for the second quarter of 2016. The linked quarter increase in ROE and ROA resulted from increases in net interest income and non-interest income in the second quarter of 2017 that exceeded the growth of the provision for credit losses and non-interest expense. ROA also benefited from more effective utilization of liquidity balances and an increase in net interest margin. Average liquidity assets for the second quarter of 2017 totaled $2.4 billion, including $2.3 billion in deposits at the Federal Reserve Bank of Dallas, which had an average yield of 104 basis points, compared to $3.3 billion in the first quarter of 2017, which had an average yield of 80 basis points and $2.9 billion for the second quarter of 2016, which had an average yield of 53 basis points.

Net interest income was $183.0 million for the second quarter of 2017, compared to $163.4 million for the first quarter of 2017 and $157.1 million for the second quarter of 2016. Net interest margin for the second quarter of 2017 was 3.57 percent, an increase of 28 basis points from the first quarter of 2017 and an increase of 39 basis points from the second quarter of 2016. The linked quarter and year-over-year increases in net interest margin are due primarily to the improved earning asset composition and the effect of the increase in interest rates on loan yields attributable to our asset-sensitive balance sheet.

Average LHI, excluding mortgage finance loans, for the second quarter of 2017 were $13.7 billion, an increase of $738.2 million, or 6 percent, from the first quarter of 2017 and an increase of $1.4 billion, or 12 percent, from the second quarter of 2016. Average total mortgage finance loans (including Mortgage Correspondent Aggregation ("MCA")) for the second quarter of 2017 were $4.7 billion, an increase of $829.6 million, or 22 percent, from the first quarter of 2017 and a decrease of $81.5 million, or 2 percent, from the second quarter of 2016. Mortgage finance volumes showed increases in average balances from the seasonal lower volumes in the first quarter of 2017. Average loans held for sale ("LHS") generated from our MCA business decreased to $845.6 million for the second quarter of 2017 from $1.1 billion for the first quarter of 2017 as a result of the shorter holding period in the second quarter and increased from $157.9 million for the second quarter of 2016 as we continue to gain traction in that business.

Average total deposits for the second quarter of 2017 increased $306.9 million from the first quarter of 2017 and increased $430.0 million from the second quarter of 2016. Average demand deposits for the second quarter of 2017 increased $316.1 million, or 4 percent, to $7.9 billion from $7.5 billion during the first quarter of 2017, and increased $95.7 million, or 1 percent, from $7.8 billion during the second quarter of 2016.

We recorded a $13.0 million provision for credit losses for the second quarter of 2017 compared to $9.0 million for the first quarter of 2017 and $16.0 million for the second quarter of 2016. The provision for the second quarter of 2017 was driven by the application of our methodology. The linked-quarter increase was primarily related to 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. Overall 2016 provision levels were higher primarily related to energy exposure. As a result of strong loan growth, the combined allowance for credit losses at June 30, 2017 decreased to 1.28 percent of LHI excluding mortgage finance loans compared to 1.37 percent at March 31, 2017 and 1.41 percent at June 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 second quarter of 2017 compared to levels reported in the first quarter of 2017 and second quarter of 2016, bringing the ratio of total non-performing assets to total LHI plus other real estate owned ("OREO") to 0.73 percent compared to 0.99 percent for the first quarter of 2016 and 1.04 percent for the second quarter of 2016. The linked-quarter and year-over-year decreases are primarily related to the decrease in energy non-accrual loans from $127.0 million at June 30, 2016 and $100.9 million at March 31, 2017 to $82.6 million at June 30, 2017. Net charge-offs for the second quarter of 2017 were $12.4 million compared to $5.7 million for the first quarter of 2017 and $12.0 million for the second quarter of 2016. For the second quarter of 2017, net charge-offs related to energy loans were $6.4 million compared to $7.1 million for the first quarter of 2017 and $12.1 million for the second quarter of 2016. For the second quarter of 2017, net charge-offs were 0.28 percent of average total LHI, compared to 0.15 percent for the first quarter of 2017 and 0.29 percent for the same period in 2016. At June 30, 2017, total OREO was $18.7 million compared to $18.8 million at March 31, 2017 and $18.7 million at June 30, 2016.

Non-interest income increased $4.8 million, or 35 percent, during the second quarter of 2017 compared to the same period of 2016, and increased $1.7 million, or 10 percent, compared to the first quarter of 2017. The year-over-year increase primarily related to an increase in servicing income and service charges on deposit accounts. Servicing income increased $3.7 million during the second quarter of 2017 compared to the same period of 2016 as a result of an increase in servicing assets primarily related to our MCA business. Service charges increased $656,000 during the second quarter of 2017 compared to the same period of 2016 as a result of the improved pricing of treasury services. The linked-quarter increase in non-interest income primarily related to a $1.5 million, or 68 percent, increase in servicing income.

Non-interest expense for the second quarter of 2017 increased $17.6 million, or 19 percent, compared to the second quarter of 2016, and increased $5.7 million, or 5 percent, compared to the first quarter of 2017. In the second quarter of 2017, in an effort to improve processes and efficiencies, management determined that the current system in one of our support areas is not an effective technology, resulting in a $5.3 million technology write-off of the full value of the unamortized software and development costs. We are in the process of enabling a new technology. Other factors contributing to the year-over-year increase in non-interest expense included an $8.3 million increase in salaries and employee benefits expense and a $1.7 million increase in marketing expense, both of which were due to general business growth, and a $2.1 million increase in servicing related expenses, resulting from an increase in capitalized servicing assets, which are being amortized, primarily related to our MCA business. The linked quarter increase is primarily related to the second quarter 2017 technology write-off.

Stockholders' equity increased by 25 percent from $1.7 billion at June 30, 2016 to $2.1 billion at June 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 June 30, 2017, our ratio of tangible common equity to total tangible assets was 8.4 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, 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)
  2nd Quarter 1st Quarter 4th Quarter 3rd Quarter 2nd Quarter
  2017 2017 2016 2016 2016
CONSOLIDATED STATEMENTS OF INCOME          
Interest income $     208,191   $     183,946   $     188,671   $     182,492   $     172,442  
Interest expense 25,232   20,587   17,448   15,753   15,373  
Net interest income 182,959   163,359   171,223   166,739   157,069  
Provision for credit losses 13,000   9,000   9,000   22,000   16,000  
Net interest income after provision for credit losses     169,959   154,359   162,223   144,739   141,069  
Non-interest income 18,769   17,110   18,835   16,716   13,932  
Non-interest expense 111,814   106,094   106,523   94,799   94,255  
Income before income taxes 76,914   65,375   74,535   66,656   60,746  
Income tax expense 25,819   22,833   26,149   23,931   21,866  
Net income 51,095   42,542   48,386   42,725   38,880  
Preferred stock dividends 2,437   2,438   2,437   2,438   2,437  
Net income available to common stockholders $ 48,658   $ 40,104   $ 45,949   $ 40,287   $ 36,443  
           
Diluted EPS $   0.97   $ 0.80   $ 0.96   $ 0.87   $ 0.78  
Diluted shares 50,229,670   50,234,230   47,759,548   46,509,683   46,438,132  
           
CONSOLIDATED BALANCE SHEET DATA          
Total assets $ 23,119,713   $   20,864,874   $   21,697,134   $   22,216,388   $   21,080,994  
LHI 14,280,353   13,298,918   13,001,011   12,662,394   12,502,513  
LHI, mortgage finance 5,183,600   3,371,598   4,497,338   4,961,159   5,260,027  
Loans held for sale (MCA) 843,164   884,647   968,929   648,684   221,347  
Liquidity assets 2,142,658   2,804,921   2,725,645   3,471,074   2,624,170  
Securities 119,043   42,203   24,874   26,356   27,372  
Demand deposits 8,174,830   7,094,696   7,994,201   8,789,740   7,984,208  
Total deposits 17,292,223   16,605,380   17,016,831   18,145,123   16,703,565  
Other borrowings 3,162,224   1,641,834   2,109,575   1,751,420   2,115,445  
Subordinated notes 281,225   281,134   281,044   280,954   280,863  
Long-term debt 113,406   113,406   113,406   113,406   113,406  
Stockholders' equity 2,100,553   2,050,442   2,009,557   1,725,782   1,684,735  
           
End of period shares outstanding 49,595,252   49,560,100   49,503,662   46,009,495   45,952,911  
Book value $ 39.33   $ 38.35   $ 37.56   $ 34.25   $ 33.40  
Tangible book value (1) $ 38.94   $ 37.95   $ 37.17   $ 33.82   $ 32.97  
           
SELECTED FINANCIAL RATIOS          
Net interest margin 3.57 % 3.29 % 3.11 % 3.14 % 3.18 %
Return on average assets 0.96 % 0.83 % 0.85 % 0.78 % 0.77 %
Return on average common equity 10.08 % 8.60 % 10.82 % 10.20 % 9.65 %
Non-interest income to earning assets 0.36 % 0.34 % 0.34 % 0.32 % 0.28 %
Efficiency ratio (2) 55.4 % 58.8 % 56.0 % 51.7 % 55.1 %
Non-interest expense to earning assets 2.17 % 2.12 % 1.93 % 1.79 % 1.91 %
Tangible common equity to total tangible assets (3) 8.4 % 9.0 % 8.5 % 7.0 % 7.2 %
Common Equity Tier 1 8.6 % 9.6 % 9.0 % 7.6 % 7.4 %
Tier 1 capital 9.8 % 10.9 % 10.2 % 8.8 % 8.6 %
Total capital 11.8 % 13.3 % 12.5 % 11.1 % 10.9 %
Leverage 10.3 % 10.3 % 9.3 % 8.4 % 8.7 %
                     
(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)
  June 30, 2017 June 30, 2016 %Change
Assets      
Cash and due from banks $       126,977   $       98,807      29  %
Interest-bearing deposits 2,117,658   2,594,170   (18 )%
Federal funds sold and securities purchased under resale agreements 25,000   30,000     (17 )%
Securities, available-for-sale 119,043   27,372   335  %
Loans held for sale ($843.2 million and $221.3 million at June 30, 2017 and 2016, respectively, at fair value)     846,017   221,347            282  %
LHI, mortgage finance 5,183,600   5,260,027   (1 )%
LHI (net of unearned income) 14,280,353   12,502,513   14  %
Less:  Allowance for loan losses 174,225   167,397   4  %
LHI, net 19,289,728   17,595,143   10  %
Mortgage servicing rights, net 63,023   8,543   638  %
Premises and equipment, net 20,750   21,766   (5 )%
Accrued interest receivable and other assets 492,240   464,098   6  %
Goodwill and intangibles, net 19,277   19,748   (2 )%
Total assets $ 23,119,713   $ 21,080,994   10  %
       
Liabilities and Stockholders' Equity      
Liabilities:      
Deposits:      
Non-interest bearing $ 8,174,830   $ 7,984,208   2  %
Interest bearing 9,117,393   8,719,357   5  %
Total deposits 17,292,223   16,703,565   4  %
       
Accrued interest payable 6,246   5,339   17  %
Other liabilities 163,836   177,641   (8 )%
Federal funds purchased and repurchase agreements 462,224   95,982   382  %
Other borrowings 2,700,000   2,019,463   34  %
Subordinated notes, net 281,225   280,863    
Trust preferred subordinated debentures 113,406   113,406    
Total liabilities 21,019,160   19,396,259   8  %
       
Stockholders' equity:      
Preferred stock, $.01 par value, $1,000 liquidation value:      
Authorized shares - 10,000,000      
Issued shares - 6,000,000 shares issued at June 30, 2017 and 2016 150,000   150,000   -  
Common stock, $.01 par value:      
Authorized shares - 100,000,000      
Issued shares - 49,595,669 and 45,953,328 at June 30, 2017 and 2016, respectively 496   460   8  %
Additional paid-in capital 957,721   716,652   34  %
Retained earnings 991,949   816,951   21  %
Treasury stock (shares at cost: 417 at June 30, 2017 and 2016) (8 ) (8 )  
Accumulated other comprehensive income, net of taxes 395   680   (42 )%
Total stockholders' equity 2,100,553   1,684,735   25  %
Total liabilities and stockholders' equity $ 23,119,713   $ 21,080,994   10  %

TEXAS CAPITAL BANCSHARES, INC.        
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)         
(Dollars in thousands except per share data)        
  Three Months Ended June 30 Six Months EndedJune 30
  2017 2016 2017 2016
Interest income        
Interest and fees on loans $     201,646   $     168,064   $     378,270   $     323,949  
Securities 287   246   512   507  
Federal funds sold 434   382   964   754  
Deposits in other banks 5,824   3,750   12,391   7,035  
Total interest income 208,191   172,442   392,137   332,245  
Interest expense        
Deposits 16,533   8,971   29,826   17,793  
Federal funds purchased 726   110   978   236  
Other borrowings 2,901   1,367   4,922   2,532  
Subordinated notes 4,191   4,191   8,382   8,382  
Trust preferred subordinated debentures 881   734   1,711   1,450  
Total interest expense 25,232   15,373   45,819   30,393  
Net interest income 182,959   157,069   346,318   301,852  
Provision for credit losses 13,000   16,000   22,000   46,000  
Net interest income after provision for credit losses 169,959   141,069   324,318   255,852  
Non-interest income        
Service charges on deposit accounts 3,067   2,411   6,112   4,521  
Wealth management and trust fee income 1,402   1,098   2,759   1,911  
Bank owned life insurance (BOLI) income 481   536   947   1,072  
Brokered loan fees 5,809   5,864   11,487   10,509  
Servicing income 3,700   50   5,901   (5 )
Swap fees 954   1,105   2,757   1,412  
Other 3,356   2,868   5,916   5,809  
Total non-interest income 18,769   13,932   35,879   25,229  
Non-interest expense        
Salaries and employee benefits 63,154   54,810   126,157   106,182  
Net occupancy expense 6,515   5,838   12,626   11,650  
Marketing 6,157   4,486   11,107   8,394  
Legal and professional 7,127   6,226   14,580   11,550  
Communications and technology 11,906   6,391   18,412   12,608  
FDIC insurance assessment 4,603   6,043   10,597   11,512  
Servicing related expenses 2,682   612   4,432   685  
Other 9,670   9,849   19,997   18,494  
Total non-interest expense 111,814   94,255   217,908   181,075  
Income before income taxes 76,914   60,746   142,289   100,006  
Income tax expense 25,819   21,866   48,652   35,998  
Net income 51,095   38,880   93,637   64,008  
Preferred stock dividends 2,437   2,437   4,875   4,875  
Net income available to common stockholders $ 48,658   $ 36,443   $ 88,762   $ 59,133  
         
Basic earnings per common share $ 0.98   $ 0.79   $ 1.79   $ 1.29  
Diluted earnings per common share $ 0.97   $ 0.78   $ 1.77   $ 1.27  

TEXAS CAPITAL BANCSHARES, INC.
SUMMARY OF LOAN LOSS EXPERIENCE
(Dollars in thousands)
  2nd Quarter 1st Quarter 4th Quarter 3rd Quarter 2nd Quarter
  2017 2017 2016 2016 2016
Allowance for loan losses:          
Beginning balance $     172,013   $     168,126   $     180,436   $     167,397   $     162,510  
Loans charged-off:          
Commercial 12,310   9,233   22,326   9,945   15,791  
Real estate 40         528  
Consumer 180     7   40    
Total charge-offs 12,530   9,233   22,333   9,985   16,319  
Recoveries:          
Commercial 61   3,381   1,535   2,495   4,294  
Real estate 3   50   27   15   13  
Construction   101       34  
Consumer 36   5   5   5   4  
Leases   8   6   26    
Total recoveries 100   3,545   1,573   2,541   4,345  
Net charge-offs 12,430   5,688   20,760   7,444   11,974  
Provision for loan losses 14,642   9,575   8,450   20,483   16,861  
Ending balance $ 174,225   $ 172,013   $ 168,126   $ 180,436   $ 167,397  
           
Allowance for off-balance sheet credit losses:          
Beginning balance $ 10,847   $ 11,422   $ 10,872   $ 9,355   $ 10,216  
Provision for off-balance sheet credit losses (1,642 ) (575 ) 550   1,517   (861 )
Ending balance $ 9,205   $ 10,847   $ 11,422   $ 10,872   $ 9,355  
           
Total allowance for credit losses $ 183,430   $ 182,860   $ 179,548   $ 191,308   $ 176,752  
           
Total provision for credit losses $ 13,000   $ 9,000   $ 9,000   $ 22,000   $ 16,000  
           
Allowance for loan losses to LHI 0.90 % 1.03 % 0.96 % 1.02 % 0.94 %
Allowance for loan losses to LHI excluding mortgage finance loans (2) 1.22 % 1.29 % 1.29 % 1.42 % 1.34 %
Allowance for loan losses to average LHI 0.99 % 1.09 % 0.98 % 1.05 % 1.00 %
Allowance for loan losses to average LHI excluding mortgage finance loans (2) 1.27 % 1.33 % 1.32 % 1.43 % 1.36 %
Net charge-offs to average LHI (1) 0.28 % 0.15 % 0.48 % 0.17 % 0.29 %
Net charge-offs to average LHI excluding mortgage finance loans (1)(2) 0.36 % 0.18 % 0.65 % 0.24 % 0.39 %
Net charge-offs to average LHI for last twelve months (1) 0.27 % 0.28 % 0.29 % 0.18 % 0.15 %
Net charge-offs to average LHI excluding mortgage finance loans for last twelve months (1)(2)     0.36 % 0.36 % 0.38 % 0.24 % 0.20 %
Total provision for credit losses to average LHI (1) 0.30 % 0.23 % 0.21 % 0.51 % 0.39 %
Total provision for credit losses to average LHI excluding mortgage finance loans (1)(2) 0.38 % 0.28 % 0.28 % 0.70 % 0.52 %
Combined allowance for credit losses to LHI 0.94 % 1.10 % 1.03 % 1.09 % 1.00 %
Combined allowance for credit losses to LHI excluding mortgage finance loans (2) 1.28 % 1.37 % 1.38 % 1.51 % 1.41 %
           
Non-performing assets (NPAs):          
Non-accrual loans $ 123,730   $ 146,549   $ 167,791   $ 169,113   $ 165,429  
Other real estate owned (OREO) 18,689   18,833   18,961   19,009   18,727  
Total $ 142,419   $ 165,382   $ 186,752   $ 188,122   $ 184,156  
           

  2nd Quarter 1st Quarter 4th Quarter 3rd Quarter 2nd Quarter
  2017 2017 2016 2016 2016
           
Non-accrual loans to LHI 0.64 % 0.88 % 0.96 % 0.96 % 0.93 %
Non-accrual loans to LHI excluding mortgage finance loans (2) 0.87 % 1.10 % 1.29 % 1.34 % 1.32 %
Total NPAs to LHI plus OREO 0.73 % 0.99 % 1.07 % 1.07 % 1.04 %
Total NPAs to LHI excluding mortgage finance loans plus OREO (2) 1.00 % 1.24 % 1.43 % 1.48 % 1.47 %
Total NPAs to earning assets 0.64 % 0.82 % 0.89 % 0.87 % 0.90 %
Allowance for loan losses to non-accrual loans 1.4 x 1.2 x 1.0 x 1.1 x 1.0 x
           
Restructured loans $       $       $       $         $       249  
Loans past due 90 days and still accruing (3) $ 11,077   $ 8,799   $ 10,729   $       9,706   $ 7,743  
           
Loans past due 90 days to LHI 0.06 % 0.05 % 0.06 % 0.06 % 0.04 %
Loans past due 90 days to LHI excluding mortgage finance loans (2)   0.08 % 0.07 % 0.08 % 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 June 30, 2017, loans past due 90 days and still accruing includes premium finance loans of $6.3 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)
           
  2nd Quarter 1st Quarter 4th Quarter 3rd Quarter 2nd Quarter
  2017 2017 2016 2016 2016
Interest income          
Interest and fees on loans $       201,646   $       176,624   $       182,909   $       177,724   $       168,064  
Securities 287   225   228   232   246  
Federal funds sold 434   530   338   455   382  
Deposits in other banks 5,824   6,567   5,196   4,081   3,750  
Total interest income 208,191   183,946   188,671   182,492   172,442  
Interest expense          
Deposits 16,533   13,293   10,432   8,950   8,971  
Federal funds purchased 726   252   156   126   110  
Other borrowings 2,901   2,021   1,863   1,733   1,367  
Subordinated notes 4,191   4,191   4,191   4,191   4,191  
Trust preferred subordinated debentures 881   830   806   753   734  
Total interest expense 25,232   20,587   17,448   15,753   15,373  
Net interest income 182,959   163,359   171,223   166,739   157,069  
Provision for credit losses 13,000   9,000   9,000   22,000   16,000  
Net interest income after provision for credit losses       169,959   154,359   162,223   144,739   141,069  
Non-interest income          
Service charges on deposit accounts 3,067   3,045   2,940   2,880   2,411  
Wealth management and trust fee income 1,402   1,357   1,244   1,113   1,098  
Bank owned life insurance (BOLI) income 481   466   481   520   536  
Brokered loan fees 5,809   5,678   7,249   7,581   5,864  
Servicing income 3,700   2,201   1,410   310   50  
Swap fees 954   1,803   536   918   1,105  
Other 3,356   2,560   4,975   3,394   2,868  
Total non-interest income 18,769   17,110   18,835   16,716   13,932  
Non-interest expense          
Salaries and employee benefits 63,154   63,003   66,081   56,722   54,810  
Net occupancy expense 6,515   6,111   5,937   5,634   5,838  
Marketing 6,157   4,950   4,617   4,292   4,486  
Legal and professional 7,127   7,453   6,443   5,333   6,226  
Communications and technology 11,906   6,506   6,334   6,620   6,391  
FDIC insurance assessment 4,603   5,994   6,573   6,355   6,043  
Servicing related expenses 2,682   1,750   398   620   612  
Other 9,670   10,327   10,140   9,223   9,849  
Total non-interest expense 111,814   106,094   106,523   94,799   94,255  
Income before income taxes 76,914   65,375   74,535   66,656   60,746  
Income tax expense 25,819   22,833   26,149   23,931   21,866  
Net income 51,095   42,542   48,386   42,725   38,880  
Preferred stock dividends 2,437   2,438   2,437   2,438   2,437  
Net income available to common shareholders $ 48,658   $ 40,104   $ 45,949   $ 40,287   $ 36,443  

TEXAS CAPITAL BANCSHARES, INC.
QUARTERLY FINANCIAL SUMMARY - UNAUDITED
Consolidated Daily Average Balances, Average Yields and Rates
(Dollars in thousands)
  2nd Quarter 2017   1st Quarter 2017   4th Quarter 2016   3rd Quarter 2016   2nd Quarter 2016
  AverageBalance Revenue/Expense (1) Yield/Rate   Average Balance 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
Assets                                      
Securities - Taxable $ 65,049   $ 287   1.77 %   $ 31,905   $ 224   2.84 %   $ 25,008   $ 221   3.53 %   $ 26,051   $ 228   3.47 %   $ 27,097   $ 240   3.57 %
Securities - Non-taxable (2)     %   224   3   4.85 %   531   9   6.37 %   564   8   5.82 %   564   8   5.87 %
Federal funds sold and securities purchased under resale agreements 174,264   434   1.00 %   276,910   530   0.78 %   254,008   338   0.53 %   369,215   455   0.49 %   312,832   382   0.49 %
Interest-bearing deposits in other banks 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 %   2,871,295   3,750   0.53 %
Loans held for sale, at fair value 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 %   157,898   1,350   3.44 %
LHI, mortgage finance loans 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 %   4,412,091   33,974   3.10 %
LHI (2) 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 %   12,276,272   132,740   4.35 %
Less allowance for loan losses 170,957         169,318         180,727         168,086         164,316      
LHI, net of allowance 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 %   16,524,047   166,714   4.06 %
Total earning assets 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 %   19,893,733   172,444   3.49 %
Cash and other assets 632,097         606,762         595,671         588,440         544,737      
Total assets $ 21,320,976         $ 20,861,171         $ 22,524,394         $ 21,689,559         $ 20,438,470      
Liabilities and Stockholders' Equity                                      
Transaction deposits $ 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 %   $ 2,207,726   $ 1,749   0.32 %
Savings deposits 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 %   6,388,133   6,494   0.41 %
Time deposits 455,542   700   0.62 %   427,770   617   0.59 %   474,548   711   0.60 %   501,701   763   0.61 %   486,610   727   0.60 %
Total interest bearing deposits 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 %   9,082,469   8,970   0.40 %
Other borrowings 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 %   1,411,387   1,476   0.42 %
Subordinated notes 281,167   4,191   5.98 %   281,076   4,191   6.05 %   280,985   4,191   5.93 %   280,895   4,191   5.94 %   280,805   4,191   6.00 %
Trust preferred subordinated debentures 113,406   881   3.12 %   113,406   830   2.97 %   113,406   806   2.83 %   113,406   752   2.64 %   113,406   735   2.61 %
Total interest bearing liabilities 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 %   10,888,067   15,372   0.57 %
Demand deposits 7,863,402         7,547,338         9,129,668         8,849,725         7,767,693      
Other liabilities 102,653         117,877         141,153         135,141         113,927      
Stockholders' equity 2,086,880         2,041,870         1,839,301         1,722,035         1,668,783      
Total liabilities and stockholders' equity $ 21,320,976         $ 20,861,171         $ 22,524,394         $ 21,689,559         $ 20,438,470      
Net interest income (2)   $ 184,316         $ 164,395         $ 171,433         $ 166,741         $ 157,072    
Net interest margin     3.57 %       3.29 %       3.11 %       3.14 %       3.18 %
                                                 
(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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