Texas Capital Bancshares, Inc. Reports Fourth Quarter and Full Year 2021 Results


Fourth quarter 2021 net income of $65.1 million, or $1.19 per diluted share

Continued improvement in credit quality drove a provision release of $10.0 million

Necessary regulatory approvals obtained for launch of Texas Capital Securities

Full year 2021 net income of $253.9 million, or $4.60 per diluted share

DALLAS, Jan. 20, 2022 (GLOBE NEWSWIRE) -- Texas Capital Bancshares, Inc. (NASDAQ: TCBI) (the “Company”), the parent company of Texas Capital Bank, today reported results for the fourth quarter and full year of 2021.

Net income was $65.1 million, or $1.19 per diluted share, for the fourth quarter of 2021, compared to $43.4 million, or $0.76 per diluted share, for the third quarter of 2021 and $60.2 million, or $1.14 per diluted share, for the fourth quarter of 2020. Full year 2021 net income was $253.9 million, or $4.60 per diluted share, compared to $66.3 million, or $1.12 per diluted share, for full year 2020.

“This quarter’s results conclude a year full of new initiatives and accomplishments designed to best position the Company for yet another important year ahead,” said Rob C. Holmes, President and CEO. “Our entire team is poised to continue delivering on our goals outlined in September. With our organizational discipline improving and financial results trending favorably, I am confident we will continue realizing progress towards our vision of becoming the flagship financial services firm headquartered in Texas.”

FINANCIAL RESULTS         
(dollars and shares in thousands)         
 4th Quarter 3rd Quarter 4th Quarter Full Year Full Year
 2021 2021 2020 2021 2020
OPERATING RESULTS         
Net income$65,130  $43,390  $60,176  $253,939  $66,289 
Net income available to common stockholders$60,817  $39,078  $57,739  $235,218  $56,539 
Diluted earnings per common share$1.19  $0.76  $1.14  $4.60  $1.12 
Diluted common shares 51,208   51,140   50,794   51,141   50,583 
Return on average assets 0.69%  0.47%  0.61%  0.67%  0.18%
Return on average common equity 8.36%  5.41%  8.50%  8.35%  2.10%
          
BALANCE SHEET         
Loans held for investment (“LHI”)$15,331,457  $15,221,404  $15,351,451     
LHI, mortgage finance 7,475,497   8,528,313   9,079,409     
Total LHI 22,806,954   23,749,717   24,430,860     
Loans held for sale (“LHS”) 8,123   9,660   283,165     
Total assets 34,731,738   36,404,320   37,726,096     
Demand deposits 13,390,370   14,970,462   12,740,947     
Total deposits 28,109,365   29,813,668   30,996,589     
Stockholders’ equity 3,209,616   3,147,752   2,871,224     
                
                

FOURTH QUARTER 2021 COMPARED TO THIRD QUARTER 2021

For the fourth quarter of 2021, net income was $65.1 million, or $1.19 per diluted share, compared to $43.4 million, or $0.76 per diluted share, for the third quarter of 2021.

We recorded a $10.0 million negative provision for credit losses for the fourth quarter of 2021, compared to a $5.0 million provision for credit losses for the third quarter of 2021, resulting primarily from a decrease in criticized loans.

Net interest income was $194.0 million for the fourth quarter of 2021, compared to $190.5 million for the third quarter of 2021. The increase in net interest income was primarily driven by increases in LHI and investment securities yields. Net interest margin for the fourth quarter of 2021 was 2.12%, an increase of 1 basis point from the third quarter of 2021. LHI, excluding mortgage finance, yields increased 5 basis points from the third quarter of 2021 and LHI, mortgage finance yields decreased 2 basis points from the third quarter of 2021. Total cost of deposits of 0.19% for the fourth quarter of 2021 remained unchanged as compared to the third quarter of 2021.

Non-interest income for the fourth quarter of 2021 increased $6.7 million, or 27%, compared to the third quarter of 2021. The increase was primarily related to increases in investment banking and trading income, resulting from an increase in loan syndication fees, and other non-interest income. The increase in other non-interest income resulted from a one-time gain recognized in the fourth quarter of 2021 on the sale of a foreclosed asset.

Non-interest expense for the fourth quarter of 2021 decreased $6.3 million, or 4%, compared to the third quarter of 2021. The decrease was primarily due to decreases in communications and technology expense and servicing-related expenses, partially offset by less significant broad-based increases across all remaining non-interest expense categories. These broad-based increases were as expected and in support of our long-term strategy. The decrease in communications and technology expense resulted from a $12.0 million write-off of certain software assets in the third quarter of 2021. The decline in servicing-related expenses resulted primarily from the sale of our mortgage servicing rights (“MSR”) portfolio and transition of the mortgage correspondent aggregation (“MCA”) program to a third party earlier in 2021.

FOURTH QUARTER 2021 COMPARED TO FOURTH QUARTER 2020

Net income was $65.1 million, or $1.19 per diluted share, for the fourth quarter of 2021, compared to $60.2 million, or $1.14 per diluted share, for the fourth quarter of 2020.

The fourth quarter of 2021 included a $10.0 million negative provision for credit losses, compared to a $32.0 million provision for credit losses for the fourth quarter of 2020. The decrease resulted primarily from improvements in the economic outlook as the economy recovered from the impacts of the COVID-19 pandemic during 2021 and a decrease in criticized loans.

Net interest income decreased to $194.0 million for the fourth quarter of 2021, compared to $213.2 million for the fourth quarter of 2020, primarily due to declines in total average loans and LHI yields, partially offset by decreases in average interest-bearing deposits and cost of deposits. Net interest margin decreased 10 basis points to 2.12% for the fourth quarter of 2021, as compared to the fourth quarter of 2020. LHI, excluding mortgage finance loans, yields decreased 8 basis point compared to the fourth quarter of 2020 and LHI, mortgage finance yields decreased 38 basis points compared to the fourth quarter of 2020. Total cost of deposits decreased 10 basis points compared to the fourth quarter of 2020.

Non-interest income for the fourth quarter of 2021 decreased $21.2 million, or 40%, compared to the fourth quarter of 2020, as net gain/(loss) on sale of LHS, brokered loan fees and servicing income all decreased as a result of the MSR sale and MCA program transition earlier in 2021.

Non-interest expense for the fourth quarter of 2021 decreased $4.2 million, or 3%, compared to the fourth quarter of 2020. The decrease was primarily due to a decrease in servicing-related expenses, resulting from the MSR sale and MCA program transition earlier in 2021, partially offset by an increase in salaries and employee benefits.

CREDIT QUALITY

We recorded $1.0 million in net charge-offs during the fourth quarter of 2021, compared to $3.1 million during the third quarter of 2021 and $65.4 million during the fourth quarter of 2020. Criticized loans totaled $582.9 million at December 31, 2021, compared to $728.9 million at September 30, 2021 and $918.4 million at December 31, 2020. LHI non-performing assets (“LHI NPAs”) totaled $72.5 million at December 31, 2021, compared to $87.5 million at September 30, 2021 and $122.0 million at December 31, 2020. The ratio of LHI NPAs to total LHI for the fourth quarter of 2021 was 0.32%, compared to 0.37% for the third quarter of 2021 and 0.50% for the fourth quarter of 2020.

CAPITAL RATIOS

All regulatory ratios continue to be in excess of “well-capitalized” requirements as of December 31, 2021. Our CET 1, tier 1 capital, total capital and leverage ratios were 11.1%, 12.6%, 15.3% and 9.0%, respectively, at December 31, 2021, compared to 10.7%, 12.2%, 14.9% and 9.0%, respectively, at September 30, 2021, and 9.4%, 10.3%, 12.1% and 7.5%, respectively, at December 31, 2020. At December 31, 2021, our ratio of tangible common equity to total tangible assets was 8.3% compared to 7.8% at September 30, 2021 and 7.2% at December 31, 2020.

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 (the “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.

Forward Looking Statements

This communication contains “forward-looking statements” within the meaning of and pursuant to the Private Securities Litigation Reform Act of 1995 regarding, among other things, our financial condition, results of operations, business plans and future performance. These statements are not historical in nature and may often be identified by the use of words such as “expect,” “estimate,” “anticipate,” “plan,” “may,” “will,” “forecast,” “could,” “should,” “projects,” “targeted,” “continue,” “become,” “intend” and similar expressions.

Because forward-looking statements relate to future results and occurrences, they are subject to inherent and various uncertainties, risks, and changes in circumstances that are difficult to predict, may change over time, are based on management’s expectations and assumptions at the time the statements are made and are not guarantees of future results. 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 factors include, but are not limited to, (1) deterioration of the credit quality of our loan portfolio or declines in the value of collateral due to external factors or otherwise, (2) the unpredictability of economic and business conditions that may impact us or our customers, (3) the COVID-19 pandemic on us and our customers, employees and third-party service providers, (4) our ability to effectively manage our liquidity risk and any growth plans and the availability of capital and funding to us, (5) our ability to effectively manage our information technology systems, (6) the costs and effects of cyber-incidents or other failures, disruptions or security breaches of our systems or those of our third-party providers, (7) changes in interest rates, (8) changes in the method of determining the London Interbank Offered Rate, or LIBOR, or the replacement of LIBOR with an alternative reference rate, (9) adverse or unexpected economic or market conditions and other factors in Texas, the United States or internationally, (10) the concentration of our business in Texas and with the energy industry, (11) the failure to effectively balance our funding sources with cash demands by depositors and borrowers, the failure to maintain capital ratio as a result of adverse changes in our operating performance or financial condition or changes in applicable regulations or interpretations of regulations that impact our business or the characterization or risk weight of our assets, (12) material failures of our accounting estimates and risk management processes based on management judgment or the supporting assumptions or models, (13) the failure to effectively manage our interest rate risk, (14) the failure of our enterprise risk management framework, (15) uncertainty regarding the upcoming transition away from LIBOR, (16) our ability to comply with applicable governmental regulations, (17) risks related to U.S. federal government actions impacting us, (18) claims and litigation that may arise in the ordinary course of business, (19) the failure to successfully execute our business strategy, (20) the failure to identify, attract and retain key personnel, (21) increased or more competition from banks and other financial service providers in our markets, (22) the susceptibility of fraud on our business, (23) the failure to maintain adequate regulatory capital to support our business, (24) environmental liability associated with properties related to our lending activities, (25) severe weather, natural disasters, acts of war or terrorism and other external events and (26) risks relating to our securities.

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, our Quarterly Reports on Form 10-Q and in other filings we make with the Securities and Exchange Commission. The information contained in this communication speaks only as of its date. Except to the extent required by applicable law or regulation, we disclaim any obligation to update such factors or to publicly announce the results of any revisions to any of the forward-looking statements included herein to reflect future events or developments.

 
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
 2021 2021 2021 2021 2020
CONSOLIDATED STATEMENTS OF INCOME     
Interest income(1)$219,892  $216,589  $216,953  $223,151  $245,348 
Interest expense 25,860   26,053   27,496   28,339   32,153 
Net interest income 194,032   190,536   189,457   194,812   213,195 
Provision for credit losses (10,000)  5,000   (19,000)  (6,000)  32,000 
Net interest income after provision for credit losses 204,032   185,536   208,457   200,812   181,195 
Non-interest income(1) 31,459   24,779   37,639   44,353   52,678 
Non-interest expense 146,649   152,987   149,060   150,316   150,863 
Income before income taxes 88,842   57,328   97,036   94,849   83,010 
Income tax expense 23,712   13,938   23,555   22,911   22,834 
Net income 65,130   43,390   73,481   71,938   60,176 
Preferred stock dividends 4,313   4,312   6,317   3,779   2,437 
Net income available to common stockholders$60,817  $39,078  $67,164  $68,159  $57,739 
Diluted earnings per common share$1.19  $0.76  $1.31  $1.33  $1.14 
Diluted common shares 51,208,161   51,139,555   51,093,660   51,069,511   50,794,421 
      
CONSOLIDATED BALANCE SHEET DATA     
Total assets$34,731,738  $36,404,320  $35,228,542  $40,054,433  $37,726,096 
LHI 15,331,457   15,221,404   15,168,565   15,399,174   15,351,451 
LHI, mortgage finance 7,475,497   8,528,313   8,772,799   9,009,081   9,079,409 
LHS 8,123   9,660   63,747   176,286   283,165 
Interest-bearing deposits in other banks 7,765,996   8,317,926   6,768,650   11,212,276   9,032,807 
Investment securities 3,583,808   3,663,874   3,798,275   3,443,058   3,196,970 
Demand deposits 13,390,370   14,970,462   14,228,038   15,174,642   12,740,947 
Total deposits 28,109,365   29,813,668   28,839,563   33,391,970   30,996,589 
Other borrowings 2,202,832   2,203,470   2,014,481   2,515,587   3,111,751 
Long-term debt 928,738   928,062   927,386   664,968   395,896 
Stockholders’ equity 3,209,616   3,147,752   3,114,957   3,159,482   2,871,224 
      
End of period shares outstanding 50,618,494   50,605,626   50,592,201   50,557,767   50,470,450 
Book value$57.48  $56.27  $55.64  $53.59  $53.92 
Tangible book value(2)$57.14  $55.93  $55.29  $53.24  $53.57 
      
SELECTED FINANCIAL RATIOS     
Net interest margin 2.12%  2.11%  2.02%  2.04%  2.22%
Return on average assets 0.69%  0.47%  0.76%  0.73%  0.61%
Return on average common equity 8.36%  5.41%  9.74%  10.08%  8.50%
Non-interest income to average earning assets 0.34%  0.27%  0.40%  0.46%  0.55%
Efficiency ratio(3) 65.0%  71.1%  65.6%  62.9%  56.7%
Non-interest expense to average earning assets 1.60%  1.69%  1.59%  1.57%  1.56%
Tangible common equity to total tangible assets(4) 8.3%  7.8%  7.9%  6.7%  7.2%
Common Equity Tier 1 11.1%  10.7%  10.5%  10.2%  9.4%
Tier 1 capital 12.6%  12.2%  12.1%  12.2%  10.3%
Total capital 15.3%  14.9%  14.8%  14.0%  12.1%
Leverage 9.0%  9.0%  8.4%  8.3%  7.5%

(1) In the fourth quarter of 2021 and in connection with our approval from the Financial Industry Regulatory Authority to conduct securities transactions and business with the investing public, we established a policy regarding the accounting for loan syndication fees and reclassified these fees from interest and fees on loans in interest income to investment banking and trading income in non-interest income for all periods presented. Please see our forthcoming Annual Report on Form 10-K for additional details when it is filed with the U.S. Securities and Exchange Commission.
(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, less goodwill and intangibles, divided by total assets, less goodwill and intangibles.

 
TEXAS CAPITAL BANCSHARES, INC.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(dollars in thousands)
 December 31, 2021 December 31, 2020 %
Change
Assets   
Cash and due from banks$180,663  $173,573  4%
Interest-bearing deposits in other banks 7,765,996   9,032,807  (14)%
Investment securities 3,583,808   3,196,970  12%
LHS ($8.1 million and $239.1 million at December 31, 2021 and 2020, respectively, at fair value) 8,123   283,165  (97)%
LHI, mortgage finance 7,475,497   9,079,409  (18)%
LHI (net of unearned income) 15,331,457   15,351,451  %
Less: Allowance for credit losses on loans 211,866   254,615  (17)%
LHI, net 22,595,088   24,176,245  (7)%
Mortgage servicing rights, net    105,424  (100)%
Premises and equipment, net 20,901   24,546  (15)%
Accrued interest receivable and other assets 559,897   715,699  (22)%
Goodwill and intangibles, net 17,262   17,667  (2)%
Total assets$34,731,738  $37,726,096  (8)%
    
Liabilities and Stockholders’ Equity   
Liabilities:   
Deposits:   
Non-interest bearing$13,390,370  $12,740,947  5%
Interest bearing 14,718,995   18,255,642  (19)%
Total deposits 28,109,365   30,996,589  (9)%
    
Accrued interest payable 7,699   11,150  (31)%
Other liabilities 273,488   339,486  (19)%
Federal funds purchased and repurchase agreements 2,832   111,751  (97)%
Other borrowings 2,200,000   3,000,000  (27)%
Long-term debt 928,738   395,896  135%
Total liabilities 31,522,122   34,854,872  (10)%
    
Stockholders’ equity:   
Preferred stock, $.01 par value, $1,000 liquidation value:   
Authorized shares - 10,000,000   
Issued shares - 300,000 and 6,000,000 shares issued at December 31, 2021 and 2020, respectively 300,000   150,000  100%
Common stock, $.01 par value:   
Authorized shares - 100,000,000   
Issued shares - 50,618,911 and 50,470,867 at December 31, 2021 and 2020, respectively 506   504  %
Additional paid-in capital 1,008,559   991,898  2%
Retained earnings 1,948,274   1,713,056  14%
Treasury stock (shares at cost: 417 at December 31, 2021 and 2020) (8)  (8) %
Accumulated other comprehensive income/(loss), net of taxes (47,715)  15,774  N/M 
Total stockholders’ equity 3,209,616   2,871,224  12%
Total liabilities and stockholders’ equity$34,731,738  $37,726,096  (8)%
          


 
TEXAS CAPITAL BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(dollars in thousands except per share data)
 Three Months Ended December 31,Twelve Months Ended December 31,
 2021 2020 2021 2020
Interest income    
Interest and fees on loans(1)$204,379  $232,961  $820,532  $993,670 
Investment securities 11,780   9,594   42,820   17,475 
Federal funds sold    1   1   693 
Interest-bearing deposits in other banks 3,733   2,792   13,232   27,569 
Total interest income 219,892   245,348   876,585   1,039,407 
Interest expense    
Deposits 14,513   23,819   65,507   146,117 
Federal funds purchased    110   131   1,083 
Other borrowings 771   3,407   4,482   20,923 
Long-term debt 10,576   4,817   37,628   19,963 
Total interest expense 25,860   32,153   107,748   188,086 
Net interest income 194,032   213,195   768,837   851,321 
Provision for credit losses (10,000)  32,000   (30,000)  258,000 
Net interest income after provision for credit losses 204,032   181,195   798,837   593,321 
Non-interest income    
Service charges on deposit accounts 4,702   3,004   18,674   11,620 
Wealth management and trust fee income 3,793   2,681   13,173   9,998 
Brokered loan fees 5,678   12,610   27,954   46,423 
Servicing income 277   8,834   15,513   27,029 
Investment banking and trading income(1) 6,456   10,288   24,441   22,687 
Net gain/(loss) on sale of LHS    6,761   1,317   58,026 
Other 10,553   8,500   37,158   27,198 
Total non-interest income 31,459   52,678   138,230   202,981 
Non-interest expense    
Salaries and employee benefits 89,075   78,449   350,930   340,529 
Net occupancy expense 8,769   8,373   33,232   34,955 
Marketing 4,286   3,435   10,006   23,581 
Legal and professional 12,673   12,129   41,152   52,132 
Communications and technology 16,490   15,405   75,185   103,054 
FDIC insurance assessment 4,688   6,592   21,027   25,955 
Servicing-related expenses 25   15,844   27,765   64,585 
Merger-related expenses          17,756 
Other 10,643   10,636   39,715   41,809 
Total non-interest expense 146,649   150,863   599,012   704,356 
Income before income taxes 88,842   83,010   338,055   91,946 
Income tax expense 23,712   22,834   84,116   25,657 
Net income 65,130   60,176   253,939   66,289 
Preferred stock dividends 4,313   2,437   18,721   9,750 
Net income available to common stockholders$60,817  $57,739  $235,218  $56,539 
     
Basic earnings per common share$1.20  $1.14  $4.65  $1.12 
Diluted earnings per common share$1.19  $1.14  $4.60  $1.12 

(1) In the fourth quarter of 2021 and in connection with our approval from the Financial Industry Regulatory Authority to conduct securities transactions and business with the investing public, we established a policy regarding the accounting for loan syndication fees and reclassified these fees from interest and fees on loans in interest income to investment banking and trading income in non-interest income for all periods presented. Please see our forthcoming Annual Report on Form 10-K for additional details when it is filed with the U.S. Securities and Exchange Commission.

 
TEXAS CAPITAL BANCSHARES, INC.
SUMMARY OF CREDIT LOSS EXPERIENCE
(dollars in thousands)
 4th Quarter 3rd Quarter 2nd Quarter 1st Quarter 4th Quarter
 2021 2021 2021 2021 2020
Allowance for credit losses on loans:     
Beginning balance$221,957  $221,511  $242,484  $254,615  $290,165 
Loans charged-off:     
Commercial 3,776   4,348   1,412   2,451   37,984 
Energy       686   5,732   33,283 
Real estate       1,192      180 
Total charge-offs 3,776   4,348   3,290   8,183   71,447 
Recoveries:     
Commercial 1,933   1,104   308   1,050   394 
Energy 601   42   609   715   5,696 
Real estate 205   112          
Total recoveries 2,739   1,258   917   1,765   6,090 
Net charge-offs 1,037   3,090   2,373   6,418   65,357 
Provision for credit losses on loans (9,054)  3,536   (18,600)  (5,713)  29,807 
Ending balance$211,866  $221,957  $221,511  $242,484  $254,615 
      
Allowance for off-balance sheet credit losses:     
Beginning balance$18,211  $16,747  $17,147  $17,434  $15,241 
Provision for off-balance sheet credit losses (946)  1,464   (400)  (287)  2,193 
Ending balance$17,265  $18,211  $16,747  $17,147  $17,434 
      
Total allowance for credit losses$229,131  $240,168  $238,258  $259,631  $272,049 
      
Total provision for credit losses$(10,000) $5,000  $(19,000) $(6,000) $32,000 
      
Allowance for credit losses on loans to LHI 0.93%  0.93%  0.93%  0.99%  1.04%
Allowance for credit losses on loans to average LHI 0.91%  0.95%  0.98%  1.03%  1.01%
Net charge-offs to average LHI(1) 0.02%  0.05%  0.04%  0.11%  1.03%
Net charge-offs to average LHI for last twelve months(1) 0.06%  0.33%  0.31%  0.59%  0.80%
Total provision for credit losses to average LHI(1)(0.17)%  0.09% (0.34)% (0.10)%  0.51%
Total allowance for credit losses to LHI 1.00%  1.01%  1.00%  1.06%  1.11%

(1) Interim period ratios are annualized.

 
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
 2021 2021 2021 2021 2020
      
LHI non-performing assets (NPAs):     
Non-accrual LHI$72,502  $87,532  $86,636  $97,730  $121,989 
Other real estate owned (OREO)              
Total LHI NPAs$72,502  $87,532  $86,636  $97,730  $121,989 
      
Non-accrual LHI to total LHI 0.32%  0.37%  0.36%  0.40%  0.50%
Total LHI NPAs to earning assets 0.21%  0.25%  0.25%  0.25%  0.33%
Allowance for credit losses on loans to non-accrual LHI2.9x  2.5x  2.6x  2.5x  2.1x 
      
LHI past due 90 days and still accruing(1)$3,467  $3,405  $7,671  $6,187  $12,541 
LHI past due 90 days to total LHI 0.02%  0.01%  0.03%  0.03%  0.05%
LHS non-accrual(2)$  $  $  $  $6,966 
LHS past due 90 days and still accruing(3)$3,986  $3,808  $2,695  $16,359  $16,667 

(1) At December 31, 2021, loans past due 90 days and still accruing included premium finance loans of $3.3 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.
(2) Includes one non-accrual loan previously reported in loans HFI that was transferred to loans HFS as of December 31, 2020 and subsequently sold at carrying value.
(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. The first quarter of 2021 and fourth quarter of 2020 also include 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 Quarter 3rd Quarter 2nd Quarter 1st Quarter 4th Quarter
 2021 2021 2021 2021 2020
Interest income     
Interest and fees on loans(1)$204,379  $202,748  $203,074  $210,331  $232,961 
Investment securities 11,780   10,235   10,918   9,887   9,594 
Federal funds sold          1   1 
Interest-bearing deposits in other banks 3,733   3,606   2,961   2,932   2,792 
Total interest income 219,892   216,589   216,953   223,151   245,348 
Interest expense     
Deposits 14,513   14,719   16,271   20,004   23,819 
Federal funds purchased    5   51   75   110 
Other borrowings 771   743   451   2,517   3,407 
Long-term debt 10,576   10,586   10,723   5,743   4,817 
Total interest expense 25,860   26,053   27,496   28,339   32,153 
Net interest income 194,032   190,536   189,457   194,812   213,195 
Provision for credit losses (10,000)  5,000   (19,000)  (6,000)  32,000 
Net interest income after provision for credit losses 204,032   185,536   208,457   200,812   181,195 
Non-interest income     
Service charges on deposit accounts 4,702   4,622   4,634   4,716   3,004 
Wealth management and trust fee income 3,793   3,382   3,143   2,855   2,681 
Brokered loan fees 5,678   6,032   6,933   9,311   12,610 
Servicing income 277   292   5,935   9,009   8,834 
Investment banking and trading income(1) 6,456   4,127   8,071   5,787   10,288 
Net gain/(loss) on sale of LHS    (1,185)  (3,070)  5,572   6,761 
Other 10,553   7,509   11,993   7,103   8,500 
Total non-interest income 31,459   24,779   37,639   44,353   52,678 
Non-interest expense     
Salaries and employee benefits 89,075   87,503   86,830   87,522   78,449 
Net occupancy expense 8,769   8,324   7,865   8,274   8,373 
Marketing 4,286   2,123   1,900   1,697   3,435 
Legal and professional 12,673   11,055   9,147   8,277   12,129 
Communications and technology 16,490   28,374   14,352   15,969   15,405 
FDIC insurance assessment 4,688   4,500   5,226   6,613   6,592 
Servicing-related expenses 25   2,396   12,355   12,989   15,844 
Other 10,643   8,712   11,385   8,975   10,636 
Total non-interest expense 146,649   152,987   149,060   150,316   150,863 
Income before income taxes 88,842   57,328   97,036   94,849   83,010 
Income tax expense 23,712   13,938   23,555   22,911   22,834 
Net income 65,130   43,390   73,481   71,938   60,176 
Preferred stock dividends 4,313   4,312   6,317   3,779   2,437 
Net income available to common shareholders$60,817  $39,078  $67,164  $68,159  $57,739 

(1) In the fourth quarter of 2021 and in connection with our approval from the Financial Industry Regulatory Authority to conduct securities transactions and business with the investing public, we established a policy regarding the accounting for loan syndication fees and reclassified these fees from interest and fees on loans in interest income to investment banking and trading income in non-interest income for all periods presented. Please see our forthcoming Annual Report on Form 10-K for additional details when it is filed with the U.S. Securities and Exchange Commission.

 
TEXAS CAPITAL BANCSHARES, INC.
QUARTERLY FINANCIAL SUMMARY - UNAUDITED
Consolidated Daily Average Balances, Average Yields and Rates
(dollars in thousands)
 4th Quarter 2021 3rd Quarter 2021 2nd Quarter 2021 1st Quarter 2021 4th Quarter 2020
 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$3,423,903 $10,106 1.17% $3,590,591 $8,546 0.94% $3,361,696 $9,222 1.10% $3,225,786 $8,112 1.02% $2,137,481 $7,748 1.44%
Investment securities - non-taxable(2) 184,600  2,119 4.55%  185,221  2,138 4.58%  181,574  2,147 4.74%  196,785  2,247 4.63%  200,781  2,337 4.63%
Federal funds sold 131   0.25%  653   0.12%  713   0.18%  4,605  1 0.07%  1,709  1 0.13%
Interest-bearing deposits in other banks 9,760,604  3,733 0.15%  9,045,442  3,606 0.16%  11,583,046  2,961 0.10%  11,840,942  2,932 0.10%  10,808,548  2,792 0.10%
LHS, at fair value 8,348  51 2.41%  18,791  54 1.14%  93,164  781 3.36%  243,326  1,595 2.66%  410,637  2,475 2.40%
LHI, mortgage finance loans 7,901,534  57,949 2.91%  7,987,521  58,913 2.93%  7,462,223  57,401 3.09%  8,177,759  64,942 3.22%  9,550,119  78,906 3.29%
LHI(1)(2)(3) 15,348,322  146,436 3.79%  15,266,167  143,864 3.74%  15,242,975  144,978 3.81%  15,457,888  143,935 3.78%  15,620,410  151,935 3.87%
Less allowance for credit
losses on loans
 223,034      220,984      241,676      254,697      290,189    
LHI, net of allowance 23,026,822  204,385 3.52%  23,032,704  202,777 3.49%  22,463,522  202,379 3.61%  23,380,950  208,877 3.62%  24,880,340  230,841 3.69%
Total earning assets 36,404,408  220,394 2.40%  35,873,402  217,121 2.40%  37,683,715  217,490 2.31%  38,892,394  223,764 2.33%  38,439,496  246,194 2.55%
Cash and other assets 835,293     855,555     996,946     1,064,679     1,031,195   
Total assets$37,239,701    $36,728,957    $38,680,661    $39,957,073    $39,470,691   
Liabilities and Stockholders’ Equity                   
Transaction deposits$3,007,337 $4,664 0.62% $3,012,547 $4,737 0.62% $3,795,152 $5,395 0.57% $3,991,966 $5,861 0.60% $4,384,493 $6,604 0.60%
Savings deposits 10,529,645  8,419 0.32%  10,044,995  8,262 0.33%  11,296,382  8,990 0.32%  12,889,974  10,788 0.34%  12,982,189  12,671 0.39%
Time deposits 1,276,800  1,430 0.44%  1,640,562  1,720 0.42%  1,755,993  1,886 0.43%  2,204,242  3,355 0.62%  2,355,199  4,544 0.77%
Total interest bearing deposits 14,813,782  14,513 0.39%  14,698,104  14,719 0.40%  16,847,527  16,271 0.39%  19,086,182  20,004 0.43%  19,721,881  23,819 0.48%
Other borrowings 2,267,013  771 0.13%  2,299,692  748 0.13%  2,349,718  502 0.09%  2,686,398  2,592 0.39%  3,022,077  3,517 0.46%
Long-term debt 928,307  10,576 4.52%  927,626  10,586 4.53%  881,309  10,723 4.88%  464,731  5,743 5.01%  395,841  4,817 4.84%
Total interest bearing liabilities 18,009,102  25,860 0.57%  17,925,422  26,053 0.58%  20,078,554  27,496 0.55%  22,237,311  28,339 0.52%  23,139,799  32,153 0.55%
Demand deposits 15,804,061     15,363,568     15,139,546     14,421,505     13,174,114   
Other liabilities 238,833     275,317     274,401     309,644     303,480   
Stockholders’ equity 3,187,705     3,164,650     3,188,160     2,988,613     2,853,298   
Total liabilities and stockholders’ equity$37,239,701    $36,728,957    $38,680,661    $39,957,073    $39,470,691   
Net interest income(2) $194,534    $191,068    $189,994    $195,425    $214,041  
Net interest margin  2.12%   2.11%   2.02%   2.04%   2.22%

(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.
(3) In the fourth quarter of 2021 and in connection with our approval from the Financial Industry Regulatory Authority to conduct securities transactions and business with the investing public, we established a policy regarding the accounting for loan syndication fees and reclassified these fees from interest and fees on loans in interest income to investment banking and trading income in non-interest income for all periods presented. Please see our forthcoming Annual Report on Form 10-K for additional details when it is filed with the U.S. Securities and Exchange Commission.

 

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