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 shares | 50,260 | 46,766 | 7 | % | ||||||
| ROA | 0.87 | % | 0.74 | % | ||||||
| ROE | 9.51 | % | 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 shares | 50,312 | 47,760 | 5 | % | ||||||
| ROA | 0.71 | % | 0.85 | % | ||||||
| ROE | 8.18 | % | 10.82 | % | ||||||
| BALANCE SHEET | ||||||||||
| Loans held for sale (MCA) | $ | 1,007,695 | $ | 968,929 | 4 | % | ||||
| LHI, mortgage finance | 5,308,160 | 4,497,338 | 18 | % | ||||||
| LHI | 15,366,252 | 13,001,011 | 18 | % | ||||||
| Total LHI | 20,674,412 | 17,498,349 | 18 | % | ||||||
| Total loans | 21,685,416 | 18,467,278 | 17 | % | ||||||
| Total assets | 25,075,645 | 21,697,134 | 16 | % | ||||||
| Demand deposits | 7,812,660 | 7,994,201 | (2 | )% | ||||||
| Total deposits | 19,123,180 | 17,016,831 | 12 | % | ||||||
| Stockholders’ equity | 2,202,721 | 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 Quarter | 3rd Quarter | 2nd Quarter | 1st Quarter | 4th Quarter | |||||||||||
| 2017 | 2017 | 2017 | 2017 | 2016 | |||||||||||
| CONSOLIDATED STATEMENTS OF INCOME | |||||||||||||||
| Interest income | $ | 249,519 | $ | 237,643 | $ | 208,191 | $ | 183,946 | $ | 188,671 | |||||
| Interest expense | 38,870 | 33,282 | 25,232 | 20,587 | 17,448 | ||||||||||
| Net interest income | 210,649 | 204,361 | 182,959 | 163,359 | 171,223 | ||||||||||
| Provision for credit losses | 2,000 | 20,000 | 13,000 | 9,000 | 9,000 | ||||||||||
| Net interest income after provision for credit losses | 208,649 | 184,361 | 169,959 | 154,359 | 162,223 | ||||||||||
| Non-interest income | 19,374 | 19,003 | 18,769 | 17,110 | 18,835 | ||||||||||
| Non-interest expense | 133,138 | 114,830 | 111,814 | 106,094 | 106,523 | ||||||||||
| Income before income taxes | 94,885 | 88,534 | 76,914 | 65,375 | 74,535 | ||||||||||
| Income tax expense | 50,143 | 29,850 | 25,819 | 22,833 | 26,149 | ||||||||||
| Net income | 44,742 | 58,684 | 51,095 | 42,542 | 48,386 | ||||||||||
| Preferred stock dividends | 2,437 | 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 shares | 50,311,962 | 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 | |||||
| LHI | 15,366,252 | 14,828,406 | 14,280,353 | 13,298,918 | 13,001,011 | ||||||||||
| LHI, mortgage finance | 5,308,160 | 5,642,285 | 5,183,600 | 3,371,598 | 4,497,338 | ||||||||||
| Loans held for sale, MCA | 1,007,695 | 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 | ||||||||||
| Securities | 23,511 | 24,224 | 119,043 | 42,203 | 24,874 | ||||||||||
| Demand deposits | 7,812,660 | 8,263,202 | 8,174,830 | 7,094,696 | 7,994,201 | ||||||||||
| Total deposits | 19,123,180 | 19,081,257 | 17,292,223 | 16,605,380 | 17,016,831 | ||||||||||
| Other borrowings | 3,165,040 | 2,583,496 | 3,162,224 | 1,641,834 | 2,109,575 | ||||||||||
| Subordinated notes | 281,406 | 281,315 | 281,225 | 281,134 | 281,044 | ||||||||||
| Long-term debt | 113,406 | 113,406 | 113,406 | 113,406 | 113,406 | ||||||||||
| Stockholders’ equity | 2,202,721 | 2,158,363 | 2,100,553 | 2,050,442 | 2,009,557 | ||||||||||
| End of period shares outstanding | 49,643,344 | 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 margin | 3.47 | % | 3.59 | % | 3.57 | % | 3.29 | % | 3.11 | % | |||||
| Return on average assets | 0.71 | % | 0.99 | % | 0.96 | % | 0.83 | % | 0.85 | % | |||||
| Return on average common equity | 8.18 | % | 11.20 | % | 10.08 | % | 8.60 | % | 10.82 | % | |||||
| Non-interest income to average earning assets | 0.32 | % | 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 assets | 2.17 | % | 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 1 | 8.5 | % | 8.4 | % | 8.6 | % | 9.6 | % | 9.0 | % | |||||
| Tier 1 capital | 9.5 | % | 9.4 | % | 9.8 | % | 10.9 | % | 10.2 | % | |||||
| Total capital | 11.5 | % | 11.4 | % | 11.8 | % | 13.3 | % | 12.5 | % | |||||
| Leverage | 9.2 | % | 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 deposits | 2,697,581 | 2,700,645 | — | % | ||||
| Federal funds sold and securities purchased under resale agreements | 30,000 | 25,000 | 20 | % | ||||
| Securities, available-for-sale | 23,511 | 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 finance | 5,308,160 | 4,497,338 | 18 | % | ||||
| LHI (net of unearned income) | 15,366,252 | 13,001,011 | 18 | % | ||||
| Less: Allowance for loan losses | 184,655 | 168,126 | 10 | % | ||||
| LHI, net | 20,489,757 | 17,330,223 | 18 | % | ||||
| Mortgage servicing rights, net | 85,327 | 28,536 | 199 | % | ||||
| Premises and equipment, net | 25,176 | 19,775 | 27 | % | ||||
| Accrued interest receivable and other assets | 516,239 | 465,933 | 11 | % | ||||
| Goodwill and intangibles, net | 19,040 | 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 bearing | 11,310,520 | 9,022,630 | 25 | % | ||||
| Total deposits | 19,123,180 | 17,016,831 | 12 | % | ||||
| Accrued interest payable | 7,680 | 5,498 | 40 | % | ||||
| Other liabilities | 182,212 | 161,223 | 13 | % | ||||
| Federal funds purchased and repurchase agreements | 365,040 | 109,575 | 233 | % | ||||
| Other borrowings | 2,800,000 | 2,000,000 | 40 | % | ||||
| Subordinated notes, net | 281,406 | 281,044 | — | % | ||||
| Trust preferred subordinated debentures | 113,406 | 113,406 | — | % | ||||
| Total liabilities | 22,872,924 | 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 2016 | 150,000 | 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, respectively | 496 | 495 | — | % | ||||
| Additional paid-in capital | 961,305 | 955,468 | 1 | % | ||||
| Retained earnings | 1,090,500 | 903,187 | 21 | % | ||||
| Treasury stock (shares at cost: 417 at December 31, 2017 and 2016) | (8 | ) | (8 | ) | — | % | ||
| Accumulated other comprehensive income, net of taxes | 428 | 415 | 3 | % | ||||
| Total stockholders’ equity | 2,202,721 | 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 | |||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||
| Interest income | ||||||||||||
| Interest and fees on loans | $ | 238,906 | $ | 182,909 | $ | 846,292 | $ | 684,582 | ||||
| Securities | 213 | 228 | 1,066 | 967 | ||||||||
| Federal funds sold and securities purchased under resale agreements | 936 | 338 | 2,542 | 1,547 | ||||||||
| Deposits in other banks | 9,464 | 5,196 | 29,399 | 16,312 | ||||||||
| Total interest income | 249,519 | 188,671 | 879,299 | 703,408 | ||||||||
| Interest expense | ||||||||||||
| Deposits | 27,625 | 10,432 | 79,886 | 37,175 | ||||||||
| Federal funds purchased | 723 | 156 | 2,592 | 518 | ||||||||
| Other borrowings | 5,380 | 1,863 | 15,137 | 6,128 | ||||||||
| Subordinated notes | 4,191 | 4,191 | 16,764 | 16,764 | ||||||||
| Trust preferred subordinated debentures | 951 | 806 | 3,592 | 3,009 | ||||||||
| Total interest expense | 38,870 | 17,448 | 117,971 | 63,594 | ||||||||
| Net interest income | 210,649 | 171,223 | 761,328 | 639,814 | ||||||||
| Provision for credit losses | 2,000 | 9,000 | 44,000 | 77,000 | ||||||||
| Net interest income after provision for credit losses | 208,649 | 162,223 | 717,328 | 562,814 | ||||||||
| Non-interest income | ||||||||||||
| Service charges on deposit accounts | 3,109 | 2,940 | 12,432 | 10,341 | ||||||||
| Wealth management and trust fee income | 1,767 | 1,244 | 6,153 | 4,268 | ||||||||
| Bank owned life insurance (BOLI) income | 698 | 481 | 2,260 | 2,073 | ||||||||
| Brokered loan fees | 5,692 | 7,249 | 23,331 | 25,339 | ||||||||
| Servicing income | 5,270 | 1,410 | 15,657 | 1,715 | ||||||||
| Swap fees | 586 | 536 | 3,990 | 2,866 | ||||||||
| Other | 2,252 | 4,975 | 10,433 | 14,178 | ||||||||
| Total non-interest income | 19,374 | 18,835 | 74,256 | 60,780 | ||||||||
| Non-interest expense | ||||||||||||
| Salaries and employee benefits | 70,192 | 66,081 | 264,231 | 228,985 | ||||||||
| Net occupancy expense | 6,749 | 5,937 | 25,811 | 23,221 | ||||||||
| Marketing | 8,438 | 4,617 | 26,787 | 17,303 | ||||||||
| Legal and professional | 8,756 | 6,443 | 29,731 | 23,326 | ||||||||
| Communications and technology | 6,590 | 6,334 | 31,004 | 25,562 | ||||||||
| FDIC insurance assessment | 6,710 | 6,573 | 23,510 | 24,440 | ||||||||
| Servicing related expenses | 7,177 | 398 | 15,506 | 1,703 | ||||||||
| Allowance and other carrying costs for OREO | 6,122 | 59 | 6,437 | 824 | ||||||||
| Other | 12,404 | 10,081 | 42,859 | 37,033 | ||||||||
| Total non-interest expense | 133,138 | 106,523 | 465,876 | 382,397 | ||||||||
| Income before income taxes | 94,885 | 74,535 | 325,708 | 241,197 | ||||||||
| Income tax expense | 50,143 | 26,149 | 128,645 | 86,078 | ||||||||
| Net income | 44,742 | 48,386 | 197,063 | 155,119 | ||||||||
| Preferred stock dividends | 2,437 | 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 Quarter | 3rd Quarter | 2nd Quarter | 1st Quarter | 4th Quarter | |||||||||||
| 2017 | 2017 | 2017 | 2017 | 2016 | |||||||||||
| Allowance for loan losses: | |||||||||||||||
| Beginning balance | $ | 182,929 | $ | 174,225 | $ | 172,013 | $ | 168,126 | $ | 180,436 | |||||
| Loans charged-off: | |||||||||||||||
| Commercial | 1,999 | 10,603 | 12,310 | 9,233 | 22,326 | ||||||||||
| Real estate | — | 250 | 40 | — | — | ||||||||||
| Construction | — | 59 | — | — | — | ||||||||||
| Consumer | — | — | 180 | — | 7 | ||||||||||
| Leases | — | — | — | — | — | ||||||||||
| Total charge-offs | 1,999 | 10,912 | 12,530 | 9,233 | 22,333 | ||||||||||
| Recoveries: | |||||||||||||||
| Commercial | 1,019 | 132 | 61 | 3,381 | 1,535 | ||||||||||
| Real estate | 1 | 21 | 3 | 50 | 27 | ||||||||||
| Construction | — | 3 | — | 101 | — | ||||||||||
| Consumer | 14 | 15 | 36 | 5 | 5 | ||||||||||
| Leases | 1 | 1 | — | 8 | 6 | ||||||||||
| Total recoveries | 1,035 | 172 | 100 | 3,545 | 1,573 | ||||||||||
| Net charge-offs | 964 | 10,740 | 12,430 | 5,688 | 20,760 | ||||||||||
| Provision for loan losses | 2,690 | 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 LHI | 0.89 | % | 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 LHI | 0.92 | % | 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 LHI | 0.94 | % | 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 Quarter | 3rd Quarter | 2nd Quarter | 1st Quarter | 4th Quarter | |||||||||||
| 2017 | 2017 | 2017 | 2017 | 2016 | |||||||||||
| 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 LHI | 0.49 | % | 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 OREO | 0.55 | % | 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 assets | 0.47 | % | 0.58 | % | 0.64 | % | 0.82 | % | 0.89 | % | |||||
| Allowance for loan losses to non-accrual loans | 1.8 | x | 1.5 | x | 1.4 | x | 1.2 | x | 1.0 | x | |||||
| 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 LHI | 0.14 | % | 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 Quarter | 3rd Quarter | 2nd Quarter | 1st Quarter | 4th Quarter | |||||||||||
| 2017 | 2017 | 2017 | 2017 | 2016 | |||||||||||
| Interest income | |||||||||||||||
| Interest and fees on loans | $ | 238,906 | $ | 229,116 | $ | 201,646 | $ | 176,624 | $ | 182,909 | |||||
| Securities | 213 | 341 | 287 | 225 | 228 | ||||||||||
| Federal funds sold and securities purchased under resale agreements | 936 | 642 | 434 | 530 | 338 | ||||||||||
| Deposits in other banks | 9,464 | 7,544 | 5,824 | 6,567 | 5,196 | ||||||||||
| Total interest income | 249,519 | 237,643 | 208,191 | 183,946 | 188,671 | ||||||||||
| Interest expense | |||||||||||||||
| Deposits | 27,625 | 22,435 | 16,533 | 13,293 | 10,432 | ||||||||||
| Federal funds purchased | 723 | 891 | 726 | 252 | 156 | ||||||||||
| Other borrowings | 5,380 | 4,835 | 2,901 | 2,021 | 1,863 | ||||||||||
| Subordinated notes | 4,191 | 4,191 | 4,191 | 4,191 | 4,191 | ||||||||||
| Trust preferred subordinated debentures | 951 | 930 | 881 | 830 | 806 | ||||||||||
| Total interest expense | 38,870 | 33,282 | 25,232 | 20,587 | 17,448 | ||||||||||
| Net interest income | 210,649 | 204,361 | 182,959 | 163,359 | 171,223 | ||||||||||
| Provision for credit losses | 2,000 | 20,000 | 13,000 | 9,000 | 9,000 | ||||||||||
| Net interest income after provision for credit losses | 208,649 | 184,361 | 169,959 | 154,359 | 162,223 | ||||||||||
| Non-interest income | |||||||||||||||
| Service charges on deposit accounts | 3,109 | 3,211 | 3,067 | 3,045 | 2,940 | ||||||||||
| Wealth management and trust fee income | 1,767 | 1,627 | 1,402 | 1,357 | 1,244 | ||||||||||
| Bank owned life insurance (BOLI) income | 698 | 615 | 481 | 466 | 481 | ||||||||||
| Brokered loan fees | 5,692 | 6,152 | 5,809 | 5,678 | 7,249 | ||||||||||
| Servicing income | 5,270 | 4,486 | 3,700 | 2,201 | 1,410 | ||||||||||
| Swap fees | 586 | 647 | 954 | 1,803 | 536 | ||||||||||
| Other | 2,252 | 2,265 | 3,356 | 2,560 | 4,975 | ||||||||||
| Total non-interest income | 19,374 | 19,003 | 18,769 | 17,110 | 18,835 | ||||||||||
| Non-interest expense | |||||||||||||||
| Salaries and employee benefits | 70,192 | 67,882 | 63,154 | 63,003 | 66,081 | ||||||||||
| Net occupancy expense | 6,749 | 6,436 | 6,515 | 6,111 | 5,937 | ||||||||||
| Marketing | 8,438 | 7,242 | 6,157 | 4,950 | 4,617 | ||||||||||
| Legal and professional | 8,756 | 6,395 | 7,127 | 7,453 | 6,443 | ||||||||||
| Communications and technology | 6,590 | 6,002 | 11,906 | 6,506 | 6,334 | ||||||||||
| FDIC insurance assessment | 6,710 | 6,203 | 4,603 | 5,994 | 6,573 | ||||||||||
| Servicing related expenses | 7,177 | 3,897 | 2,682 | 1,750 | 398 | ||||||||||
| Allowance and other carrying costs for OREO | 6,122 | 105 | 71 | 139 | 59 | ||||||||||
| Other | 12,404 | 10,668 | 9,599 | 10,188 | 10,081 | ||||||||||
| Total non-interest expense | 133,138 | 114,830 | 111,814 | 106,094 | 106,523 | ||||||||||
| Income before income taxes | 94,885 | 88,534 | 76,914 | 65,375 | 74,535 | ||||||||||
| Income tax expense | 50,143 | 29,850 | 25,819 | 22,833 | 26,149 | ||||||||||
| Net income | 44,742 | 58,684 | 51,095 | 42,542 | 48,386 | ||||||||||
| Preferred stock dividends | 2,437 | 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 agreements | 292,544 | 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 banks | 2,924,942 | 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 value | 1,144,124 | 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 loans | 5,102,107 | 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 losses | 183,233 | — | — | 172,774 | — | — | 170,957 | — | — | 169,318 | — | — | 180,727 | — | — | |||||||||||||||||||||||||||||
| LHI, net of allowance | 19,928,915 | 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 assets | 24,314,203 | 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 assets | 766,622 | 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 deposits | 8,403,473 | 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 deposits | 533,312 | 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 deposits | 11,406,769 | 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 borrowings | 1,852,750 | 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 notes | 281,348 | 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 debentures | 113,406 | 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 liabilities | 13,654,273 | 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 deposits | 9,085,819 | 8,764,263 | 7,863,402 | 7,547,338 | 9,129,668 | |||||||||||||||||||||||||||||||||||||||
| Other liabilities | 138,050 | 116,998 | 102,653 | 117,877 | 141,153 | |||||||||||||||||||||||||||||||||||||||
| Stockholders’ equity | 2,202,683 | 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