Texas Capital Bancshares, Inc. Announces Operating Results for 2018

| Source: Texas Capital Bancshares, Inc. Texas Capital Bancshares, Inc.

DALLAS, Jan. 23, 2019 (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 2018.

“We are pleased with our 2018 operating results, highlights of which include record earnings increasing 53% year over year, continued loan growth and improvements in operating leverage," said Keith Cargill, President and CEO. "We are committed to being proactive in regard to both credit quality and ensuring that our balance sheet is well positioned ahead of an eventual economic slowdown. We are confident in the continued success of our strategic initiatives for 2019, which include diversifying our funding profile and growing risk-appropriate earnings, as well as developing our talent and leveraging our people with improved technology to deliver premier client experience."

  • Loans held for investment ("LHI"), excluding mortgage finance, increased 1% on a linked quarter basis (increasing 2% on an average basis) and 9% from the fourth quarter of 2017 (increasing 11% on an average basis).
  • Total mortgage finance loans, including mortgage correspondent aggregation ("MCA") loans held for sale ("LHS"), increased 10% on a linked quarter basis (increasing 2% on an average basis) and increased 24% from the fourth quarter of 2017 (increasing 14% on an average basis).
  • Demand deposits increased 4% and total deposits increased 1% on a linked quarter basis (decreased 6% and increased 1%, respectively, on an average basis), and decreased 6% and increased 8%, respectively, from the fourth quarter of 2017 (decreased 18% and increased 2%, respectively on an average basis).
  • Net income decreased 16% on a linked quarter basis, reflecting an increased provision for credit losses, and increased 61% from the fourth quarter of 2017.
  • EPS decreased 16% on a linked quarter basis, reflecting an increased provision for credit losses, and increased 64% from the fourth quarter of 2017.

FINANCIAL SUMMARY
(dollars and shares in thousands)

 2018 2017 % Change
ANNUAL OPERATING RESULTS     
Net income$300,824  $197,063  53 %
Net income available to common stockholders$291,074  $187,313  55 %
Diluted EPS$5.79  $3.73  55 %
Diluted shares50,273  50,260  — %
ROA1.19% 0.87%  
ROE13.14% 9.51%  
QUARTERLY OPERATING RESULTS     
Net income$71,891  $44,742  61 %
Net income available to common stockholders$69,454  $42,305  64 %
Diluted EPS$1.38  $0.84  64 %
Diluted shares50,333  50,312  — %
ROA1.09% 0.71%  
ROE11.82% 8.18%  
BALANCE SHEET     
LHS$1,969,474  $1,011,004  95 %
LHI, mortgage finance5,877,524  5,308,160  11 %
LHI16,690,550  15,366,252  9 %
Total LHI22,568,074  20,674,412  9 %
Total loans24,537,548  21,688,725  13 %
Total assets28,257,767  25,075,645  13 %
Demand deposits7,317,161  7,812,660  (6)%
Total deposits20,606,113  19,123,180  8 %
Stockholders’ equity2,500,394  2,202,721  14 %

DETAILED FINANCIALS
Texas Capital Bancshares, Inc. reported net income of $300.8 million and net income available to common stockholders of $291.1 million for the year ended December 31, 2018, compared to net income of $197.1 million and net income available to common stockholders of $187.3 million for the year ended December 31, 2017. For the fourth quarter of 2018, net income was $71.9 million and net income available to common stockholders was $69.5 million, compared to net income of $44.7 million and net income available to common stockholders of $42.3 million for the same period in 2017. On a fully diluted basis, earnings per common share were $5.79 for the year ended December 31, 2018 compared to $3.73 for the same period in 2017. Diluted earnings per common share were $1.38 for the quarter ended December 31, 2018 compared to $0.84 for the same period of 2017. The increase reflects a $27.1 million increase in net income primarily driven by an increase in net interest income for the fourth quarter of 2018 compared to the fourth quarter of 2017, as well as a decrease in income tax rates as a result of the Tax Cuts and Jobs Act which became effective on January 1, 2018 (the "Tax Act"), offset by an increase in the provision for credit losses. Results for the fourth quarter of 2017 were negatively impacted by a $17.6 million ($0.35 per share) write-off of our deferred tax asset as a result of the Tax Act.

Return on common equity ("ROE") was 13.14 percent and return on average assets ("ROA") was 1.19 percent for the year ended December 31, 2018, compared to 9.51 percent and 0.87 percent, respectively, for the year ended December 31, 2017. ROE was 11.82 percent and ROA was 1.09 percent for the fourth quarter of 2018, compared to 14.68 percent and 1.31 percent, respectively, for the third quarter of 2018 and 8.18 percent and 0.71 percent, respectively, for the fourth quarter of 2017. The linked quarter decreases in ROE and ROA for the fourth quarter of 2018 resulted primarily from the increase in the provision for credit losses.

Net interest income was $240.7 million for the fourth quarter of 2018, compared to $232.2 million for the third quarter of 2018 and $210.6 million for the fourth quarter of 2017. The linked quarter and year-over-year increases in net interest income are due primarily to increases in loan yields and growth in total loans. Net interest margin for the fourth quarter of 2018 was 3.78 percent, an increase of 8 basis points from the third quarter of 2018 and an increase of 31 basis points from the fourth quarter of 2017. LHI, excluding mortgage finance, yields were up 24 basis points from the third quarter of 2018, and were up 83 basis points compared to the fourth quarter of 2017. Mortgage finance, excluding MCA, yields for the fourth quarter of 2018 increased 10 basis points compared to the third quarter of 2018 and increased 26 basis points compared to the fourth quarter of 2017. Total cost of deposits for the fourth quarter of 2018 increased 18 basis points to 1.17 percent compared to 0.99 percent for the third quarter of 2018, and increased 64 basis points from 0.53 percent for the fourth quarter of 2017.

Average LHI, excluding mortgage finance loans, for the year ended December 31, 2018 were $16.1 billion, an increase of $2.0 billion, or 14 percent, from 2017. Average LHI, excluding mortgage finance loans, for the fourth quarter of 2018 were $16.6 billion, an increase of $311.9 million, or 2 percent, from the third quarter of 2018 and an increase of $1.6 billion, or 11 percent, from the fourth quarter of 2017. Average total mortgage finance loans, including MCA loans, for the fourth quarter of 2018 were $7.1 billion, an increase of $167.6 million, or 2 percent, from the third quarter of 2018 and an increase of $849.7 million, or 14 percent, from the fourth quarter of 2017.

Average total deposits for the year ended December 31, 2018 were $20.2 billion, an increase of $1.8 billion, or 10 percent, from 2017. Average demand deposits for the year ended December 31, 2018 were $7.9 billion, a decrease of $430.3 million, or 5 percent, from 2017. Average total deposits for the fourth quarter of 2018 increased $143.3 million from the third quarter of 2018 and increased $444.1 million from the fourth quarter of 2017. Average demand deposits for the fourth quarter of 2018 decreased $478.1 million, or 6 percent, to $7.5 billion from $7.9 billion from the third quarter of 2018, and decreased $1.6 billion, or 18 percent, from the fourth quarter of 2017 as a result of the rising interest rate environment and the shift to interest-bearing deposits.

We recorded a $35.0 million provision for credit losses for the fourth quarter of 2018 compared to $13.0 million for the third quarter of 2018 and $2.0 million for the fourth quarter of 2017. The provision for the fourth quarter of 2018 was driven by the consistent application of our methodology. The linked quarter increase resulted from an increase in charge-offs primarily related to several commercial loans, all of which were identified as non-accrual as of September 30, 2018, as well as an increase in total criticized loans. The total allowance for credit losses at December 31, 2018 increased to 1.22 percent of LHI, excluding mortgage finance loans, compared to 1.21 percent at September 30, 2018 and decreased from 1.26 percent at December 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 a decrease in non-performing assets ("NPAs") in the fourth quarter of 2018 compared to the third quarter of 2018 and fourth quarter of 2017, decreasing the ratio of total NPAs to total LHI plus other real estate owned ("OREO") to 0.36 percent compared to 0.49 percent for the third quarter of 2018 and 0.55 percent for the fourth quarter of 2017. Net charge-offs for the fourth quarter of 2018 were $32.6 million compared to $2.0 million for the third quarter of 2018 and $964,000 for the fourth quarter of 2017. The increase in charge-offs was primarily related to several commercial loans, all of which were identified as non-accrual as of September 30, 2018. For the fourth quarter of 2018, net charge-offs were 0.60 percent of average total LHI, compared to 0.04 percent for the third quarter of 2018 and 0.02 percent for the same period in 2017. At December 31, 2018, total OREO was $79,000 compared to $79,000 at September 30, 2018 and $11.7 million at December 31, 2017.

Non-interest income decreased $4.1 million, or 21 percent, during the fourth quarter of 2018 compared to the same period of 2017, and decreased $10.2 million, or 40 percent, compared to the third quarter of 2018. The linked quarter decrease is primarily related to decreases in the gain on sale of loans held for sale and servicing income. The year-over-year decrease primarily related to decreases in the gain on sale of loans and servicing income, offset by an increase in other non-interest income.

Non-interest expense for the fourth quarter of 2018 decreased $6.3 million, or 5 percent, compared to the third quarter of 2018, and decreased $3.3 million, or 2 percent, compared to the fourth quarter of 2017. The linked quarter decrease in non-interest expense was primarily related to decreases in salaries and employee benefits, FDIC insurance assessment and servicing related expenses, offset by increases in legal and professional expenses, communications and technology expenses and allowance and other carrying costs for OREO expenses. The year-over-year decrease was primarily due to decreases in allowance and other carrying costs for OREO, servicing related expenses and FDIC insurance assessment, offset by increases in legal and professional, communications and technology and marketing expenses.

Stockholders’ equity increased by 14 percent from $2.2 billion at December 31, 2017 to $2.5 billion at December 31, 2018, primarily due to the retention of net income. Texas Capital Bank is well capitalized under regulatory guidelines. At December 31, 2018, our ratio of tangible common equity to total tangible assets was 8.3% 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)
 4th Quarter3rd Quarter2nd Quarter1st Quarter4th Quarter
 20182018201820182017
CONSOLIDATED STATEMENTS OF INCOME     
Interest income$321,718 $301,754 $286,852 $253,869 $249,519 
Interest expense81,045 69,579 55,140 43,569 38,870 
Net interest income240,673 232,175 231,712 210,300 210,649 
Provision for credit losses35,000 13,000 27,000 12,000 2,000 
Net interest income after provision for credit losses205,673 219,175 204,712 198,300 208,649 
Non-interest income15,280 25,518 17,279 19,947 19,374 
Non-interest expense129,862 136,143 132,131 126,960 133,138 
Income before income taxes91,091 108,550 89,860 91,287 94,885 
Income tax expense19,200 22,998 18,424 19,342 50,143 
Net income71,891 85,552 71,436 71,945 44,742 
Preferred stock dividends2,437 2,438 2,437 2,438 2,437 
Net income available to common stockholders$69,454 $83,114 $68,999 $69,507 $42,305 
      
Diluted EPS$1.38 $1.65 $1.38 $1.38 $0.84 
Diluted shares50,333,412 50,381,349 50,096,015 50,353,497 50,311,962 
CONSOLIDATED BALANCE SHEET DATA     
Total assets$28,257,767 $27,127,107 $27,781,910 $24,449,147 $25,075,645 
LHI16,690,550 16,569,538 16,536,721 15,741,772 15,366,252 
LHI, mortgage finance5,877,524 5,477,787 5,923,058 4,689,938 5,308,160 
LHS1,969,474 1,651,930 1,276,768 1,088,565 1,011,004 
Liquidity assets(1)2,865,874 2,615,570 3,288,107 2,296,673 2,727,581 
Investment securities120,216 117,389 24,408 24,929 23,511 
Demand deposits7,317,161 7,031,460 7,648,125 7,413,340 7,812,660 
Total deposits20,606,113 20,385,637 20,334,871 18,764,533 19,123,180 
Other borrowings4,541,174 3,686,818 4,520,849 2,835,540 3,165,040 
Subordinated notes281,767 281,677 281,586 281,496 281,406 
Long-term debt113,406 113,406 113,406 113,406 113,406 
Stockholders’ equity2,500,394 2,426,442 2,343,530 2,273,429 2,202,721 
      
End of period shares outstanding50,200,710 50,177,260 50,151,064 49,669,774 49,643,344 
Book value$46.82 $45.37 $43.74 $42.75 $41.35 
Tangible book value(2)$46.45 $45.00 $43.36 $42.37 $40.97 
SELECTED FINANCIAL RATIOS     
Net interest margin3.78%3.70%3.93%3.71%3.47%
Return on average assets1.09%1.31%1.16%1.22%0.71%
Return on average common equity11.82%14.68%12.72%13.39%8.18%
Non-interest income to average earning assets0.24%0.40%0.29%0.35%0.32%
Efficiency ratio(3)50.7%52.8%53.1%55.1%57.9%
Non-interest expense to average earning assets2.03%2.15%2.23%2.23%2.17%
Tangible common equity to total tangible assets(4)8.3%8.3%7.8%8.6%8.1%
Common Equity Tier 18.6%8.6%8.3%8.8%8.5%
Tier 1 capital9.5%9.6%9.3%9.9%9.5%
Total capital11.3%11.5%11.1%11.9%11.5%
Leverage9.9%9.7%9.9%9.9%9.2%

(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)
 December 31, 2018December 31, 2017%
Change
Assets   
Cash and due from banks$214,191 $178,010 20 %
Interest-bearing deposits2,815,684 2,697,581 4 %
Federal funds sold and securities purchased under resale agreements50,190 30,000 67 %
Securities, available-for-sale120,216 23,511 411 %
LHS ($1,969.2 million and $1,007.7 million at December 2018 and 2017, respectively, at fair value)1,969,474 1,011,004 95 %
LHI, mortgage finance5,877,524 5,308,160 11 %
LHI (net of unearned income)16,690,550 15,366,252 9 %
Less:  Allowance for loan losses191,522 184,655 4 %
LHI, net22,376,552 20,489,757 9 %
Mortgage servicing rights, net42,474 85,327 (50)%
Premises and equipment, net23,802 25,176 (5)%
Accrued interest receivable and other assets626,614 516,239 21 %
Goodwill and intangibles, net18,570 19,040 (2)%
Total assets$28,257,767 $25,075,645 13 %
    
Liabilities and Stockholders’ Equity   
Liabilities:   
Deposits:   
Non-interest bearing$7,317,161 $7,812,660 (6)%
Interest bearing13,288,952 11,310,520 17 %
Total deposits20,606,113 19,123,180 8 %
    
Accrued interest payable20,675 7,680 169 %
Other liabilities194,238 182,212 7 %
Federal funds purchased and repurchase agreements 641,174 365,040 76 %
Other borrowings3,900,000 2,800,000 39 %
Subordinated notes, net281,767 281,406 — %
Trust preferred subordinated debentures113,406 113,406 — %
Total liabilities25,757,373 22,872,924 13 %
    
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, 2018 and 2017150,000 150,000 — %
Common stock, $.01 par value:   
Authorized shares - 100,000,000   
Issued shares - 50,201,127 and 49,643,761 at December 31, 2018 and 2017, respectively502 496 1 %
Additional paid-in capital967,890 961,305 1 %
Retained earnings1,381,492 1,090,500 27 %
Treasury stock (shares at cost: 417 at December 31, 2018 and 2017)(8)(8)— %
Accumulated other comprehensive income, net of taxes518 428 21 %
Total stockholders’ equity2,500,394 2,202,721 14 %
Total liabilities and stockholders’ equity$28,257,767 $25,075,645 13 %


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,
 2018201720182017
Interest income    
Interest and fees on loans$310,470 $238,906 $1,124,970 $846,292 
Investment securities1,274 213 2,834 1,066 
Federal funds sold and securities purchased under resale agreements984 936 3,792 2,542 
Interest-bearing deposits in other banks8,990 9,464 32,597 29,399 
Total interest income321,718 249,519 1,164,193 879,299 
Interest expense    
Deposits61,773 27,625 185,116 79,886 
Federal funds purchased2,097 723 6,531 2,592 
Other borrowings11,726 5,380 36,207 15,137 
Subordinated notes4,191 4,191 16,764 16,764 
Trust preferred subordinated debentures1,258 951 4,715 3,592 
Total interest expense81,045 38,870 249,333 117,971 
Net interest income240,673 210,649 914,860 761,328 
Provision for credit losses35,000 2,000 87,000 44,000 
Net interest income after provision for credit losses205,673 208,649 827,860 717,328 
Non-interest income    
Service charges on deposit accounts3,168 3,109 12,787 12,432 
Wealth management and trust fee income2,152 1,767 8,148 6,153 
Brokered loan fees5,408 5,692 22,532 23,331 
Servicing income2,861 5,270 18,307 15,657 
Swap fees1,356 586 5,625 3,990 
Gain/(Loss) on sale of LHS(8,087)(1,055)(15,934)(2,387)
Other8,422 4,005 26,559 15,080 
Total non-interest income15,280 19,374 78,024 74,256 
Non-interest expense    
Salaries and employee benefits69,500 70,192 291,768 264,231 
Net occupancy expense7,390 6,749 30,342 25,811 
Marketing10,208 8,438 39,335 26,787 
Legal and professional13,042 8,756 42,990 29,731 
Communications and technology8,845 6,590 30,056 31,004 
FDIC insurance assessment5,423 6,710 24,307 23,510 
Servicing related expenses2,555 7,177 14,934 15,506 
Allowance and other carrying costs for OREO7 6,122 474 6,437 
Other12,892 12,404 50,890 42,859 
Total non-interest expense129,862 133,138 525,096 465,876 
Income before income taxes91,091 94,885 380,788 325,708 
Income tax expense19,200 50,143 79,964 128,645 
Net income71,891 44,742 300,824 197,063 
Preferred stock dividends2,437 2,437 9,750 9,750 
Net income available to common stockholders$69,454 $42,305 $291,074 $187,313 
     
Basic earnings per common share$1.38 $0.85 $5.83 $3.78 
Diluted earnings per common share$1.38 $0.84 $5.79 $3.73 


TEXAS CAPITAL BANCSHARES, INC.
SUMMARY OF LOAN LOSS EXPERIENCE
(Dollars in thousands)
 4th Quarter3rd Quarter2nd Quarter1st Quarter4th Quarter
 20182018201820182017
Allowance for loan losses:     
Beginning balance$190,306 $179,096 $190,898 $184,655 $182,929 
Loans charged-off:     
Commercial34,419 1,301 38,305 5,667 1,999 
Real estate— — — — — 
Construction— — — — — 
Consumer— 767 — — — 
Leases— 319 — — — 
Total charge-offs34,419 2,387 38,305 5,667 1,999 
Recoveries:     
Commercial1,399 389 320 360 1,019 
Real estate26 11 8 24 1 
Construction— — — — — 
Consumer360 10 9 59 14 
Leases1 12 1 19 1 
Total recoveries1,786 422 338 462 1,035 
Net charge-offs32,633 1,965 37,967 5,205 964 
Provision for loan losses33,849 13,175 26,165 11,448 2,690 
Ending balance$191,522 $190,306 $179,096 $190,898 $184,655 
      
Allowance for off-balance sheet credit losses:     
Beginning balance$10,283 $10,458 $9,623 $9,071 $9,761 
Provision for off-balance sheet credit losses1,151 (175)835 552 (690)
Ending balance$11,434 $10,283 $10,458 $9,623 $9,071 
      
Total allowance for credit losses$202,956 $200,589 $189,554 $200,521 $193,726 
      
Total provision for credit losses$35,000 $13,000 $27,000 $12,000 $2,000 
      
Allowance for loan losses to LHI0.85%0.86%0.80%0.93%0.89%
Allowance for loan losses to LHI excluding mortgage finance loans(2)1.15%1.15%1.08%1.21%1.20%
Allowance for loan losses to average LHI0.88%0.87%0.86%0.98%0.92%
Allowance for loan losses to average LHI excluding mortgage finance loans(2)1.15%1.17%1.13%1.24%1.23%
Net charge-offs to average LHI(1)0.60%0.04%0.73%0.11%0.02%
Net charge-offs to average LHI excluding mortgage finance loans(1)(2)0.78%0.05%0.96%0.14%0.03%
Net charge-offs to average LHI for last twelve months(1)0.37%0.22%0.28%0.15%0.16%
Net charge-offs to average LHI, excluding mortgage finance loans, for last twelve months(1)(2)0.48%0.29%0.36%0.20%0.21%
Total provision for credit losses to average LHI(1)0.64%0.24%0.52%0.25%0.04%
Total provision for credit losses to average LHI excluding mortgage finance loans(1)(2)0.83%0.32%0.68%0.32%0.05%
Total allowance for credit losses to LHI0.90%0.91%0.84%0.98%0.94%
Total allowance for credit losses to LHI, excluding mortgage finance loans(2)1.22%1.21%1.15%1.27%1.26%
  1. Interim period ratios are annualized.
  2. The indicated ratios are presented with and excluding the mortgage finance loans because the risk profile of our mortgage finance loans is different than our other loans held for investment. No provision for credit losses is allocated to these loans based on the internal risk grade assigned.
TEXAS CAPITAL BANCSHARES, INC.     
SUMMARY OF NON-PERFORMING ASSETS AND PAST DUE LOANS   
(Dollars in thousands)     
 4th Quarter3rd Quarter2nd Quarter1st Quarter4th Quarter
 20182018201820182017
      
Non-performing assets (NPAs):     
Non-accrual loans$80,375 $107,532 $83,295 $123,542 $101,444 
Other real estate owned (OREO)79 79 9,526 9,558 11,742 
Total LHI NPAs$80,454 $107,611 $92,821 $133,100 $113,186 
      
Non-accrual loans to LHI0.36%0.49%0.37%0.60%0.49%
Non-accrual loans to LHI excluding mortgage finance loans(1)0.48%0.65%0.50%0.78%0.66%
Total LHI NPAs to LHI plus OREO0.36%0.49%0.41%0.65%0.55%
Total LHI NPAs to LHI excluding mortgage finance loans plus OREO(1)0.48%0.65%0.56%0.85%0.74%
Total LHI NPAs to earning assets0.29%0.41%0.35%0.56%0.47%
Allowance for loan losses to non-accrual loans2.4x       1.8x       2.2x       1.5x       1.8x       
      
Loans past due 90 days and still accruing(2)$9,353 $11,295 $7,357 $13,563 $8,429 
      
Loans past due 90 days to LHI0.04%0.05%0.03%0.07%0.04%
Loans past due 90 days to LHI excluding mortgage finance loans(1)0.06%0.07%0.04%0.09%0.05%
      
LHS past due 90 days and still accruing(3)$16,829 $25,238 $27,858 $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 December 31, 2018, loans past due 90 days and still accruing includes premium finance loans of $9.2 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. 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 our balance sheet regardless of whether the repurchase option has been exercised.
TEXAS CAPITAL BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(Dollars in thousands)
      
 4th Quarter3rd Quarter2nd Quarter1st Quarter4th Quarter
 20182018201820182017
Interest income     
Interest and fees on loans$310,470 $291,189 $279,447 $243,864 $238,906 
Investment securities1,274 1,161 193 206 213 
Federal funds sold and securities purchased under resale agreements984 1,018 745 1,045 936 
Interest-bearing deposits in other banks8,990 8,386 6,467 8,754 9,464 
Total interest income321,718 301,754 286,852 253,869 249,519 
Interest expense     
Deposits61,773 52,034 39,607 31,702 27,625 
Federal funds purchased2,097 1,800 1,665 969 723 
Other borrowings11,726 10,317 8,484 5,680 5,380 
Subordinated notes4,191 4,191 4,191 4,191 4,191 
Trust preferred subordinated debentures1,258 1,237 1,193 1,027 951 
Total interest expense81,045 69,579 55,140 43,569 38,870 
Net interest income240,673 232,175 231,712 210,300 210,649 
Provision for credit losses35,000 13,000 27,000 12,000 2,000 
Net interest income after provision for credit losses205,673 219,175 204,712 198,300 208,649 
Non-interest income     
Service charges on deposit accounts3,168 3,477 3,005 3,137 3,109 
Wealth management and trust fee income2,152 2,065 2,007 1,924 1,767 
Brokered loan fees5,408 6,141 5,815 5,168 5,692 
Servicing income2,861 4,987 4,967 5,492 5,270 
Swap fees1,356 1,355 1,352 1,562 586 
Gain/(Loss) on sale of LHS(8,087)(444)(5,230)(2,173)(1,055)
Other8,422 7,937 5,363 4,837 4,005 
Total non-interest income15,280 25,518 17,279 19,947 19,374 
Non-interest expense     
Salaries and employee benefits69,500 77,327 72,404 72,537 70,192 
Net occupancy expense7,390 8,362 7,356 7,234 6,749 
Marketing10,208 10,214 10,236 8,677 8,438 
Legal and professional13,042 10,764 11,654 7,530 8,756 
Communications and technology8,845 7,435 7,143 6,633 6,590 
FDIC insurance assessment5,423 6,524 6,257 6,103 6,710 
Servicing related expenses2,555 4,207 4,367 3,805 7,177 
Allowance and other carrying costs for OREO7 (1,864)176 2,155 6,122 
Other12,892 13,174 12,538 12,286 12,404 
Total non-interest expense129,862 136,143 132,131 126,960 133,138 
Income before income taxes91,091 108,550 89,860 91,287 94,885 
Income tax expense19,200 22,998 18,424 19,342 50,143 
Net income71,891 85,552 71,436 71,945 44,742 
Preferred stock dividends2,437 2,438 2,437 2,438 2,437 
Net income available to common shareholders$69,454 $83,114 $68,999 $69,507 $42,305 


TEXAS CAPITAL BANCSHARES, INC.
QUARTERLY FINANCIAL SUMMARY - UNAUDITED
Consolidated Daily Average Balances, Average Yields and Rates
(Dollars in thousands)
 4th Quarter 2018 3rd Quarter 2018 2nd Quarter 2018 1st Quarter 2018 4th 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$23,977 $259 4.29% $24,221 $191 3.14% $24,514 $193 3.15% $23,854 $206 3.50% $23,678 $213 3.57%
Investment securities - Non-taxable(2)93,394 1,285 5.46% 91,298 1,228 5.33% — — —% — — —% — — —%
Federal funds sold and securities purchased under resale agreements173,654 984 2.25% 203,972 1,018 1.98% 166,613 745 1.79% 261,641 1,045 1.62% 292,544 936 1.27%
Interest-bearing deposits in other banks1,585,763 8,990 2.25% 1,697,787 8,386 1.96% 1,498,474 6,467 1.73% 2,302,938 8,754 1.54% 2,924,942 9,464 1.28%
LHS, at fair value2,049,395 24,407 4.72% 1,484,459 17,272 4.62% 1,516,047 17,026 4.50% 1,187,594 12,535 4.28% 1,144,124 11,507 3.99%
LHI, mortgage finance loans5,046,540 47,305 3.72% 5,443,829 49,715 3.62% 4,898,411 47,056 3.85% 4,097,995 37,362 3.70% 5,102,107 44,477 3.46%
LHI(1)(2)16,643,559 239,995 5.72% 16,331,622 225,604 5.48% 15,883,317 216,755 5.47% 15,425,323 195,333 5.14% 15,010,041 185,039 4.89%
Less allowance for loan
  losses		182,814 — —  179,227 — —  189,238 — —  184,238 — —  183,233 — — 
LHI, net of allowance21,507,285 287,300 5.30% 21,596,224 275,319 5.06% 20,592,490 263,811 5.14% 19,339,080 232,695 4.88% 19,928,915 229,516 4.57%
Total earning assets25,433,468 323,225 5.04% 25,097,961 303,414 4.80% 23,798,138 288,242 4.86% 23,115,107 255,235 4.48% 24,314,203 251,636 4.11%
Cash and other assets828,156    877,954    808,099    797,506    766,622   
Total assets$26,261,624    $25,975,915    $24,606,237    $23,912,613    $25,080,825   
Liabilities and Stockholders’ Equity                   
Transaction deposits$3,233,960 $15,150 1.86% $3,253,310 $13,642 1.66% $2,889,834 $10,295 1.43% $2,792,954 $8,651 1.26% $2,469,984 $5,845 0.94%
Savings deposits8,354,332 36,913 1.75% 7,820,742 29,930 1.52% 7,784,937 25,454 1.31% 7,982,256 21,958 1.12% 8,403,473 20,655 0.98%
Time deposits1,886,016 9,710 2.04% 1,778,831 8,462 1.89% 979,735 3,858 1.58% 506,375 1,093 0.88% 533,312 1,125 0.84%
Total interest bearing deposits13,474,308 61,773 1.82% 12,852,883 52,034 1.61% 11,654,506 39,607 1.36% 11,281,585 31,702 1.14% 11,406,769 27,625 0.96%
Other borrowings2,290,520 13,823 2.39% 2,275,640 12,117 2.11% 2,113,391 10,149 1.93% 1,721,914 6,649 1.57% 1,852,750 6,103 1.31%
Subordinated notes281,708 4,191 5.90% 281,619 4,191 5.90% 281,527 4,191 5.97% 281,437 4,191 6.04% 281,348 4,191 5.91%
Trust preferred subordinated debentures113,406 1,258 4.40% 113,406 1,237 4.33% 113,406 1,193 4.22% 113,406 1,027 3.67% 113,406 951 3.33%
Total interest bearing liabilities16,159,942 81,045 1.99% 15,523,548 69,579 1.78% 14,162,830 55,140 1.56% 13,398,342 43,569 1.32% 13,654,273 38,870 1.13%
Demand deposits7,462,392    7,940,503    8,017,578    8,147,721    9,085,819   
Other liabilities157,278    116,302    100,074    110,698    138,050   
Stockholders’ equity2,482,012    2,395,562    2,325,755    2,255,852    2,202,683   
Total liabilities and stockholders’ equity$26,261,624    $25,975,915    $24,606,237    $23,912,613    $25,080,825   
Net interest income(2) $242,180    $233,835    $233,102    $211,666    $212,766  
Net interest margin  3.78%   3.70%   3.93%   3.71%   3.47%

(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 

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