Texas Capital Bancshares, Inc. Announces Operating Results for Q1 2018


DALLAS, April 18, 2018 (GLOBE NEWSWIRE) -- Texas Capital Bancshares, Inc. (NASDAQ:TCBI), the parent company of Texas Capital Bank, announced earnings and operating results for the first quarter of 2018.

“We begin 2018 with strong operating results and continued traditional LHI growth, with the expected first quarter seasonal contraction in the mortgage finance business," said Keith Cargill, CEO. "We remain focused on gaining efficiencies and improving client experience, positioning us for long-term success."

  • Loans held for investment ("LHI"), excluding mortgage finance, increased 2% on a linked quarter basis, growing 18% from the first quarter of 2017.
  • Total mortgage finance loans, including mortgage correspondent aggregation ("MCA") loans, decreased 9% on a linked quarter basis and increased 36% from the first quarter of 2017.
  • Demand deposits decreased 5% and total deposits decreased 2% on a linked quarter basis, increasing 4% and 13%, respectively, from the first quarter of 2017.
  • Net income increased 61% on a linked quarter basis and increased 69% from the first quarter of 2017.
  • EPS increased 64% on a linked quarter basis and increased 73% from the first quarter of 2017.


FINANCIAL SUMMARY
(dollars and shares in thousands)

 Q1 2018 Q1 2017 % Change
QUARTERLY OPERATING RESULTS     
Net income$71,945 $42,542 69%
Net income available to common stockholders$69,507 $40,104 73%
Diluted EPS$1.38 $0.80 73%
Diluted shares50,353 50,234 —%
ROA1.22% 0.83%  
ROE13.39% 8.60%  
      
BALANCE SHEET     
Loans held for sale (LHS), MCA$1,088,565 $884,647 23%
LHI, mortgage finance4,689,938 3,371,598 39%
LHI15,741,772 13,298,918 18%
Total LHI20,431,710 16,670,516 23%
Total loans21,520,275 17,555,163 23%
Total assets24,449,147 20,864,874 17%
Demand deposits7,413,340 7,094,696 4%
Total deposits18,764,533 16,605,380 13%
Stockholders’ equity2,273,429 2,050,442 11%
      


DETAILED FINANCIALS

Texas Capital Bancshares, Inc. reported net income of $71.9 million and net income available to common stockholders of $69.5 million for the quarter ended March 31, 2018 compared to net income of $42.5 million and net income available to common stockholders of $40.1 million for the same period in 2017. On a fully diluted basis, earnings per common share were $1.38 for the quarter ended March 31, 2018 compared to $0.80 for the same period of 2017. The increase reflects a $29.4 million year-over-year increase in net income caused by an improvement in operating results for the first quarter of 2018 compared to the first quarter of 2017, as well as a decline in income tax rates as a result of the Tax Cuts and Jobs Act ("Tax Act") which became effective on January 1, 2018.

Return on average common equity (“ROE”) was 13.39 percent and return on average assets (“ROA”) was 1.22 percent for the first quarter of 2018, compared to 8.18 percent and 0.71 percent, respectively, for the fourth quarter of 2017 and 8.60 percent and 0.83 percent, respectively, for the first quarter of 2017. The linked quarter increases in ROE and ROA resulted primarily from the deferred tax asset re-measurement that was included in the fourth quarter 2017 income tax expense as well as a decrease in income tax expense caused by a decline in income tax rates as a result of the Tax Act. ROA also benefited from more effective utilization of liquidity assets as balances were deployed into higher yielding loan categories.

Net interest income was $210.3 million for the first quarter of 2018, compared to $210.6 million for the fourth quarter of 2017 and $163.4 million for the first quarter of 2017. Net interest income was flat on a linked quarter basis with seasonally lower mortgage finance loan balances as well as the decrease in day count for the first quarter, partially offset by the growth in the traditional LHI portfolio. The year-over-year increase in net interest income is due primarily to the increase in total LHI, improved earning asset composition and the effect of increases in interest rates on loan yields attributable to our asset-sensitive balance sheet. Net interest margin for the first quarter of 2018 was 3.71 percent, an increase of 24 basis points from the fourth quarter of 2017 and an increase of 42 basis points from the first quarter of 2017. We experienced significant improvement in traditional LHI yields, reporting a 25 basis point increase for the first quarter of 2018 compared to the fourth quarter of 2017 and a 61 basis point increase compared to the first quarter of 2017. In contrast, total cost of deposits for the first quarter of 2018 was up only 13 basis points to 0.66 percent compared to 0.53 percent for the fourth quarter of 2017, and was up 34 basis points from 0.32 percent for the first quarter of 2017.

Average LHI, excluding mortgage finance loans, for the first quarter of 2018 were $15.4 billion, an increase of $415.3 million, or 3 percent, from the fourth quarter of 2017 and an increase of $2.4 billion, or 19 percent, from the first quarter of 2017. Average total mortgage finance loans (including Mortgage Correspondent Aggregation ("MCA")) for the first quarter of 2018 were $5.3 billion, a decrease of $960.6 million, or 15 percent, from the fourth quarter of 2017 and an increase of $1.5 billion, or 38 percent, from the first quarter of 2017. The linked-quarter decrease in total mortgages is in line with historical first quarter seasonal declines.

Average total deposits for the first quarter of 2018 decreased $1.1 billion from the fourth quarter of 2017 and increased $2.5 billion from the first quarter of 2017. Average demand deposits for the first quarter of 2018 decreased $938.1 million, or 10 percent, to $8.1 billion from $9.1 billion during the fourth quarter of 2017, but increased $600.4 million, or 8 percent, from the first quarter of 2017. The linked-quarter decrease in total average deposits and demand deposits is in line with historical first quarter seasonal declines.

We recorded a $12.0 million provision for credit losses for the first quarter of 2018 compared to $2.0 million for the fourth quarter of 2017 and $9.0 million for the first quarter of 2017. The provision for the first quarter of 2018 was driven by the consistent application of our methodology. The linked-quarter increase was primarily related to traditional LHI growth and migration in the portfolio, which included a $22.1 million increase in non-accrual loans. The total allowance for credit losses increased to 1.27 percent of LHI excluding mortgage finance loans at March 31, 2018 compared to 1.26 percent at December 31, 2017 and decreased from 1.37 percent at March 31, 2017. 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 an increase in non-performing assets ("NPAs") in the first quarter of 2018 related to two commercial (non-energy) loan relationships compared to levels reported in the fourth quarter of 2017, increasing the ratio of total non-performing assets to total LHI plus other real estate owned (“OREO”) to 0.65 percent compared to 0.55 percent for the fourth quarter of 2017. The ratio decreased from 0.99 percent for the first quarter of 2017 primarily related to the decrease in energy non-accrual loans from $92.3 million at March 31, 2017 to $50.4 million at March 31, 2018. Net charge-offs for the first quarter of 2018 were $5.2 million compared to $964,000 for the fourth quarter of 2017 and $5.7 million for the first quarter of 2017. For the first quarter of 2018, net charge-offs related to energy loans were $5.1 million compared to $175,000 for the fourth quarter of 2017 and $7.1 million for the first quarter of 2017. For the first quarter of 2018, net charge-offs were 0.11 percent of average total LHI, compared to 0.02 percent for the fourth quarter of 2017 and 0.15 percent for the same period in 2017. At March 31, 2018, total OREO was $9.6 million compared to $11.7 million at December 31, 2017 and $18.8 million at March 31, 2017. We recorded a $2.0 million OREO valuation allowance during the first quarter of 2018, compared to a $6.1 million permanent write-down during the fourth quarter of 2017.

Non-interest income increased $2.8 million, or 17 percent, during the first quarter of 2018 compared to the same period of 2017, and increased $573,000, or 3 percent, compared to the fourth quarter of 2017. The year-over-year increase primarily related to a $3.3 million increase in servicing income during the first quarter of 2018 compared to the same period of 2017 attributable to an increase in mortgage servicing rights ("MSRs") associated with our MCA program.

Non-interest expense for the first quarter of 2018 increased $20.9 million, or 20 percent, compared to the first quarter of 2017, and decreased $6.2 million, or 5 percent, compared to the fourth quarter of 2017. The year-over-year increase is primarily related to increases in salaries and employee benefits, net occupancy, marketing and other non-interest expenses, all of which were attributable to general business growth and continued build-out. Servicing related expenses for the first quarter of 2018 increased $2.1 million compared to the first quarter of 2017 primarily due to an increase in mortgage servicing rights ("MSRs"), which are being amortized. Also contributing to the year-over-year increase in non-interest expense was a $2.0 million increase in allowance and other carrying costs for OREO resulting from the OREO valuation allowance recorded during the first quarter of 2018. The linked quarter decrease in non-interest expense is primarily related to decreases in servicing related expenses and allowance and other carrying costs for OREO. Specifically, the fourth quarter of 2017 included a $2.8 million impairment charge on MSRs and a $6.1 million OREO permanent write-down.

Stockholders’ equity increased by 11 percent from $2.1 billion at March 31, 2017 to $2.3 billion at March 31, 2018, due to retention of net income. Texas Capital Bank is well capitalized under regulatory guidelines and at March 31, 2018, our ratio of tangible common equity to total tangible assets was 8.6 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, 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)
 1st Quarter4th Quarter3rd Quarter2nd Quarter1st Quarter
 20182017201720172017
CONSOLIDATED STATEMENTS OF INCOME     
Interest income$253,869 $249,519 $237,643 $208,191 $183,946 
Interest expense43,569 38,870 33,282 25,232 20,587 
Net interest income210,300 210,649 204,361 182,959 163,359 
Provision for credit losses12,000 2,000 20,000 13,000 9,000 
Net interest income after provision for credit losses198,300 208,649 184,361 169,959 154,359 
Non-interest income19,947 19,374 19,003 18,769 17,110 
Non-interest expense126,960 133,138 114,830 111,814 106,094 
Income before income taxes91,287 94,885 88,534 76,914 65,375 
Income tax expense19,342 50,143 29,850 25,819 22,833 
Net income71,945 44,742 58,684 51,095 42,542 
Preferred stock dividends2,438 2,437 2,438 2,437 2,438 
Net income available to common stockholders$69,507 $42,305 $56,246 $48,658 $40,104 
      
Diluted EPS$1.38 $0.84 $1.12 $0.97 $0.80 
Diluted shares50,353,497 50,311,962 50,250,866 50,229,670 50,234,230 
      
CONSOLIDATED BALANCE SHEET DATA     
Total assets$24,449,147 $25,075,645 $24,400,998 $23,119,713 $20,864,874 
LHI15,741,772 15,366,252 14,828,406 14,280,353 13,298,918 
LHI, mortgage finance4,689,938 5,308,160 5,642,285 5,183,600 3,371,598 
LHS, MCA1,088,565 1,007,695 955,983 843,164 884,647 
Liquidity assets(1)2,296,673 2,727,581 2,357,537 2,142,658 2,804,921 
Investment securities24,929 23,511 24,224 119,043 42,203 
Demand deposits7,413,340 7,812,660 8,263,202 8,174,830 7,094,696 
Total deposits18,764,533 19,123,180 19,081,257 17,292,223 16,605,380 
Other borrowings2,835,540 3,165,040 2,583,496 3,162,224 1,641,834 
Subordinated notes281,496 281,406 281,315 281,225 281,134 
Long-term debt113,406 113,406 113,406 113,406 113,406 
Stockholders’ equity2,273,429 2,202,721 2,158,363 2,100,553 2,050,442 
      
End of period shares outstanding49,669,774 49,643,344 49,621,825 49,595,252 49,560,100 
Book value$42.75 $41.35 $40.47 $39.33 $38.35 
Tangible book value(2)$42.37 $40.97 $40.09 $38.94 $37.95 
      
SELECTED FINANCIAL RATIOS     
Net interest margin3.71% 3.47% 3.59% 3.57% 3.29% 
Return on average assets1.22% 0.71% 0.99% 0.96% 0.83% 
Return on average common equity13.39% 8.18% 11.20% 10.08% 8.60% 
Non-interest income to average earning assets0.35% 0.32% 0.33% 0.36% 0.34% 
Efficiency ratio(3)55.1% 57.9% 51.4% 55.4% 58.8% 
Efficiency ratio, excluding OREO write-down(3)54.3% 55.2% 51.4% 55.4% 58.8% 
Non-interest expense to average earning assets2.23% 2.17% 2.00% 2.17% 2.12% 
Tangible common equity to total tangible assets(4)8.6% 8.1% 8.2% 8.4% 9.0% 
Common Equity Tier 18.8% 8.5% 8.4% 8.6% 9.6% 
Tier 1 capital9.9% 9.5% 9.4% 9.8% 10.9% 
Total capital11.9% 11.5% 11.4% 11.8% 13.3% 
Leverage9.9% 9.2% 9.6% 10.3% 10.3% 

(1) Liquidity assets include Federal funds sold and interest-bearing 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)
 March 31, 2018March 31, 2017%
Change
Assets   
Cash and due from banks$154,497 $116,013 33%
Interest-bearing deposits in other banks2,271,673 2,779,921 (18)%
Federal funds sold and securities purchased under resale agreements25,000 25,000 —%
Investment securities24,929 42,203 (41)%
LHS, at fair value1,088,565 884,647 23%
LHI, mortgage finance4,689,938 3,371,598 39%
LHI (net of unearned income)15,741,772 13,298,918 18%
Less:  Allowance for loan losses190,898 172,013 11%
LHI, net20,240,812 16,498,503 23%
Mortgage servicing rights, net76,561 45,526 68%
Premises and equipment, net27,564 20,831 32%
Accrued interest receivable and other assets520,624 432,835 20%
Goodwill and intangibles, net18,922 19,395 (2)%
Total assets$24,449,147 $20,864,874 17%
    
Liabilities and Stockholders’ Equity   
Liabilities:   
Deposits:   
Non-interest bearing$7,413,340 $7,094,696 4%
Interest bearing11,351,193 9,510,684 19%
Total deposits18,764,533 16,605,380 13%
    
Accrued interest payable5,174 3,293 57%
Other liabilities175,569 169,385 4%
Federal funds purchased and repurchase agreements535,540 141,834 278%
Other borrowings2,300,000 1,500,000 53%
Subordinated notes, net281,496 281,134 
Trust preferred subordinated debentures113,406 113,406 
Total liabilities22,175,718 18,814,432 18%
    
Stockholders’ equity:   
Preferred stock, $.01 par value, $1,000 liquidation value:   
Authorized shares - 10,000,000   
Issued shares - 6,000,000 shares issued at March 31, 2018 and 2017150,000 150,000 
Common stock, $.01 par value:   
Authorized shares - 100,000,000   
Issued shares - 49,670,191 and 49,560,517 at March 31, 2018 and 2017, respectively497 496 —%
Additional paid-in capital962,553 956,246 1%
Retained earnings1,159,925 943,291 23%
Treasury stock (shares at cost: 417 at March 31, 2018 and 2017)(8) (8) 
Accumulated other comprehensive income, net of taxes462 417 11%
Total stockholders’ equity2,273,429 2,050,442 11%
Total liabilities and stockholders’ equity$24,449,147 $20,864,874 17%


TEXAS CAPITAL BANCSHARES, INC.  
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)  
(Dollars in thousands except per share data)  
 Three Months Ended
March 31
 20182017
Interest income  
Interest and fees on loans$243,864 $176,624 
Investment securities206 225 
Federal funds sold and securities purchased under resale agreements1,045 530 
Interest-bearing deposits in other banks8,754 6,567 
Total interest income253,869 183,946 
Interest expense  
Deposits31,702 13,293 
Federal funds purchased969 252 
Other borrowings5,680 2,021 
Subordinated notes4,191 4,191 
Trust preferred subordinated debentures1,027 830 
Total interest expense43,569 20,587 
Net interest income210,300 163,359 
Provision for credit losses12,000 9,000 
Net interest income after provision for credit losses198,300 154,359 
Non-interest income  
Service charges on deposit accounts3,137 3,045 
Wealth management and trust fee income1,924 1,357 
Bank owned life insurance (BOLI) income659 466 
Brokered loan fees5,168 5,678 
Servicing income5,492 2,201 
Swap fees1,562 1,803 
Other2,005 2,560 
Total non-interest income19,947 17,110 
Non-interest expense  
Salaries and employee benefits72,537 63,003 
Net occupancy expense7,234 6,111 
Marketing8,677 4,950 
Legal and professional7,530 7,453 
Communications and technology6,633 6,506 
FDIC insurance assessment6,103 5,994 
Servicing related expenses3,805 1,750 
Allowance and other carrying costs for OREO2,155 139 
Other12,286 10,188 
Total non-interest expense126,960 106,094 
Income before income taxes91,287 65,375 
Income tax expense19,342 22,833 
Net income71,945 42,542 
Preferred stock dividends2,438 2,438 
Net income available to common stockholders$69,507 $40,104 
   
Basic earnings per common share$1.40 $0.81 
Diluted earnings per common share$1.38 $0.80 
       


 
TEXAS CAPITAL BANCSHARES, INC.
SUMMARY OF LOAN LOSS EXPERIENCE
(Dollars in thousands)
 1st Quarter4th Quarter3rd Quarter2nd Quarter1st Quarter
 20182017201720172017
Allowance for loan losses:     
Beginning balance$184,655 $182,929 $174,225 $172,013 $168,126 
Loans charged-off:     
Commercial5,667 1,999 10,603 12,310 9,233 
Real estate  250 40  
Construction  59   
Consumer   180  
Total charge-offs5,667 1,999 10,912 12,530 9,233 
Recoveries:     
Commercial360 1,019 132 61 3,381 
Real estate24 1 21 3 50 
Construction  3  101 
Consumer59 14 15 36 5 
Leases19 1 1  8 
Total recoveries462 1,035 172 100 3,545 
Net charge-offs5,205 964 10,740 12,430 5,688 
Provision for loan losses11,448 2,690 19,444 14,642 9,575 
Ending balance$190,898 $184,655 $182,929 $174,225 $172,013 
      
Allowance for off-balance sheet credit losses:     
Beginning balance$9,071 $9,761 $9,205 $10,847 $11,422 
Provision for off-balance sheet credit losses552 (690) 556 (1,642) (575) 
Ending balance$9,623 $9,071 $9,761 $9,205 $10,847 
      
Total allowance for credit losses$200,521 $193,726 $192,690 $183,430 $182,860 
      
Total provision for credit losses$12,000 $2,000 $20,000 $13,000 $9,000 
      
Allowance for loan losses to LHI0.93% 0.89% 0.89% 0.90% 1.03% 
Allowance for loan losses to LHI excluding mortgage finance loans(2)1.21% 1.20% 1.23% 1.22% 1.29% 
Allowance for loan losses to average LHI0.98% 0.92% 0.95% 0.99% 1.09% 
Allowance for loan losses to average LHI excluding mortgage finance loans(2)1.27% 1.23% 1.27% 1.27% 1.33% 
Net charge-offs to average LHI(1)0.11% 0.02% 0.22% 0.28% 0.15% 
Net charge-offs to average LHI excluding mortgage finance loans(1)(2)0.14% 0.03% 0.30% 0.36% 0.18% 
Net charge-offs to average LHI for last twelve months(1)0.15% 0.16% 0.29% 0.27% 0.28% 
Net charge-offs to average LHI excluding mortgage finance loans for last twelve months(1)(2)0.20% 0.21% 0.37% 0.36% 0.36% 
Total provision for credit losses to average LHI(1)0.25% 0.04% 0.41% 0.30% 0.23% 
Total provision for credit losses to average LHI excluding mortgage finance loans(1)(2)0.32% 0.05% 0.55% 0.38% 0.28% 
Total allowance for credit losses to LHI0.98% 0.94% 0.94% 0.94% 1.10% 
Total allowance for credit losses to LHI excluding mortgage finance loans(1)1.27% 1.26% 1.30% 1.28% 1.37% 
           

(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 LOAN LOSS EXPERIENCE     
(Dollars in thousands)     
 1st Quarter4th Quarter3rd Quarter2nd Quarter1st Quarter
 20182017201720172017
      
Non-accrual loans$123,542 $101,444 $118,205 $123,730 $146,549 
Other real estate owned (OREO)(2)9,558 11,742 18,131 18,689 18,833 
Total LHI NPAs$133,100 $113,186 $136,336 $142,419 $165,382 
      
Non-accrual loans to LHI0.60% 0.49% 0.58% 0.64% 0.88% 
Non-accrual loans to LHI excluding mortgage finance loans(1)0.78% 0.66% 0.80% 0.87% 1.10% 
Total NPAs to LHI plus OREO0.65% 0.55% 0.67% 0.73% 0.99% 
Total NPAs to LHI excluding mortgage finance loans plus OREO(1)0.85% 0.74% 0.92% 1.00% 1.24% 
Total NPAs to earning assets0.56% 0.47% 0.58% 0.64% 0.82% 
Allowance for loan losses to non-accrual loans1.5x 1.8x 1.5x 1.4x 1.2x 
      
Restructured loans - accruing$ $ $ $ $ 
Loans past due 90 days and still accruing(3)$13,563 $8,429 $8,892 $11,077 $8,799 
      
Loans past due 90 days to LHI0.07% 0.14% 0.04% 0.06% 0.05% 
Loans past due 90 days to LHI excluding mortgage finance loans(1)0.09% 0.18% 0.06% 0.08% 0.07% 
      
LHS past due 90 days and still accruing(4)$35,226 $19,737 $ $ $ 
                

(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 March 31, 2018, there was a $2.0 million valuation allowance recorded against the OREO balance.
(3) At March 31, 2018, loans past due 90 days and still accruing includes premium finance loans of $4.1 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.
(4) Includes loans guaranteed by U.S. government agencies that were repurchased out of Ginnie Mae securities. Loans are recorded as LHS and carried at fair value on the balance sheet. Interest on these past due loans accrues at the debenture rate guaranteed by the U.S. government. Also includes loans that, pursuant to Ginnie Mae servicing guidelines, we have the unilateral right, but not obligation, to repurchase and thus must record as LHS on the balance sheet regardless of whether the repurchase option has been exercised.

 
TEXAS CAPITAL BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(Dollars in thousands)
 1st Quarter4th Quarter3rd Quarter2nd Quarter1st Quarter
 20182017201720172017
Interest income     
Interest and fees on loans$243,864 $238,906 $229,116 $201,646 $176,624 
Investment securities206 213 341 287 225 
Federal funds sold and securities purchased under resale agreements1,045 936 642 434 530 
Interest-bearing deposits in other banks8,754 9,464 7,544 5,824 6,567 
Total interest income253,869 249,519 237,643 208,191 183,946 
Interest expense     
Deposits31,702 27,625 22,435 16,533 13,293 
Federal funds purchased969 723 891 726 252 
Other borrowings5,680 5,380 4,835 2,901 2,021 
Subordinated notes4,191 4,191 4,191 4,191 4,191 
Trust preferred subordinated debentures1,027 951 930 881 830 
Total interest expense43,569 38,870 33,282 25,232 20,587 
Net interest income210,300 210,649 204,361 182,959 163,359 
Provision for credit losses12,000 2,000 20,000 13,000 9,000 
Net interest income after provision for credit losses198,300 208,649 184,361 169,959 154,359 
Non-interest income     
Service charges on deposit accounts3,137 3,109 3,211 3,067 3,045 
Wealth management and trust fee income1,924 1,767 1,627 1,402 1,357 
Bank owned life insurance (BOLI) income659 698 615 481 466 
Brokered loan fees5,168 5,692 6,152 5,809 5,678 
Servicing income5,492 5,270 4,486 3,700 2,201 
Swap fees1,562 586 647 954 1,803 
Other2,005 2,252 2,265 3,356 2,560 
Total non-interest income19,947 19,374 19,003 18,769 17,110 
Non-interest expense     
Salaries and employee benefits72,537 70,192 67,882 63,154 63,003 
Net occupancy expense7,234 6,749 6,436 6,515 6,111 
Marketing8,677 8,438 7,242 6,157 4,950 
Legal and professional7,530 8,756 6,395 7,127 7,453 
Communications and technology6,633 6,590 6,002 11,906 6,506 
FDIC insurance assessment6,103 6,710 6,203 4,603 5,994 
Servicing related expenses3,805 7,177 3,897 2,682 1,750 
Allowance and other carrying costs for OREO2,155 6,122 105 71 139 
Other12,286 12,404 10,668 9,599 10,188 
Total non-interest expense126,960 133,138 114,830 111,814 106,094 
Income before income taxes91,287 94,885 88,534 76,914 65,375 
Income tax expense19,342 50,143 29,850 25,819 22,833 
Net income71,945 44,742 58,684 51,095 42,542 
Preferred stock dividends2,438 2,437 2,438 2,437 2,438 
Net income available to common shareholders$69,507 $42,305 $56,246 $48,658 $40,104 
                


         
TEXAS CAPITAL BANCSHARES, INC.        
QUARTERLY FINANCIAL SUMMARY - UNAUDITED        
Consolidated Daily Average Balances, Average Yields and Rates        
(Dollars in thousands)        
 1st Quarter 2018 4th Quarter 2017  3rd Quarter 2017 2nd Quarter 2017 1st Quarter 2017 
 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                         
Investment                                             
securities - Taxable$23,854 $206 3.50% $23,678 $213 3.57% $86,087 $340 1.57% $65,049 $287 1.77% $31,905 $224 2.84% 
Investment securities-                                  
Non- taxable(2)  %   %   %   % 224 3 4.85% 
Federal funds                                  
sold and securities                                   
purchased under                                   
resale agreements261,641 1,045 1.62% 292,544 936 1.27% 205,938 642 1.24 174,264 434 1.00% 276,910 530 0.78% 
Interest-bearing                                   
deposits in                                    
other banks2,302,938 8,754 1.54% 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% 
LHS, at fair value1,187,594 12,535 4.28% 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% 
LHI, mortgage                                  
finance loans4,097,995 37,362 3.70% 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% 
LHI(1)(2)15,425,323 195,333 5.14% 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% 
Less allowance                                    
 for loan losses184,238    183,233    172,774    170,957    169,318    
LHI, net of                                   
allowance19,339,080 232,695 4.88% 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% 
Total earning assets23,115,107 255,235 4.48% 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% 
Cash and other                                   
assets797,506     766,622     713,778     632,097     606,762     
Total assets$23,912,613     $25,080,825     $23,501,302     $21,320,976     $20,861,171     
Liabilities and                          
Stockholders’ Equity                         
Transaction deposits$2,792,954 $8,651 1.26% $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% 
Savings deposits7,982,256 21,958 1.12% 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% 
Time deposits506,375 1,093 0.88% 533,312 1,125 0.84% 496,076 924 0.74% 455,542 700 0.62% 427,770 617 0.59% 
Total interest                                   
bearing deposits11,281,585 31,702 1.14% 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% 
Other borrowings1,721,914 6,649 1.57% 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% 
Subordinated notes281,437 4,191 6.04% 281,348 4,191 5.91% 281,256 4,191 5.91% 281,167 4,191 5.98% 281,076 4,191 6.05% 
Trust preferred                                  
subordinated                                   
debentures113,406 1,027 3.67% 113,406 951 3.33% 113,406 930 3.25% 113,406 881 3.12% 113,406 830 2.97% 
Total interest                                  
bearing liabilities13,398,342 43,569 1.32% 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% 
Demand deposits8,147,721     9,085,819     8,764,263     7,863,402     7,547,338     
Other liabilities110,698     138,050     116,998     102,653     117,877     
Stockholders’ equity2,255,852     2,202,683     2,143,299     2,086,880     2,041,870     
Total liabilities and                                   
stockholders’ equity$23,912,613     $25,080,825     $23,501,302     $21,320,976     $20,861,171     
Net interest                                   
income(2) $211,666     $212,766     $206,259     $184,316     $164,395    
Net interest margin  3.71%   3.47%   3.59%   3.57%   3.29% 
                          

(1) The loan averages include non-accrual loans and are stated net of unearned income.
(2) Taxable equivalent rates used where applicable.

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