Texas Capital Bancshares, Inc. Announces Operating Results for Q2 2020

DALLAS, July 22, 2020 (GLOBE NEWSWIRE) -- Texas Capital Bancshares, Inc. (NASDAQ: TCBI), the parent company of Texas Capital Bank, announced operating results for the second quarter of 2020.

"As we navigate these unprecedented times with a focus on protecting our employees and our clients, we continue to position the Company for long-term, sustainable earnings growth," said Larry Helm, Executive Chairman and CEO. "Our significant investments in infrastructure and technology over the past few years enabled meaningful cost realignment during the second quarter. We remain vigilant in managing credit, while continuing to selectively recruit and acquire frontline talent."

  • In response to pressures of the current economic environment and a refinement of our strategy, we took actions during the second quarter of 2020 which are expected to decrease our non-interest expenses, including a workforce reduction and write-offs of certain software assets.
  • We reported a net loss of $34.3 million, or $0.73 per diluted share, for the second quarter of 2020, a $17.6 million decline from the first quarter of 2020, resulting from a $40.3 million increase in revenue, comprised of a $58.7 million increase in non-interest income and an $18.4 million decrease in net interest income, offset by a $56.9 million increase to non-interest expense. Significant transactions affecting our income statement during the second quarter of 2020 included:
    • $100.0 million ($1.55 per share) provision for credit losses; driven by an increase in charge-offs and reserve build related to higher criticized loan levels and continued economic uncertainty from the COVID-19 pandemic,
    • $26.6 million ($0.41 per share) in non-recurring software expenses; including $20.7 million in write-offs of certain software assets and $5.9 million in technology expense related to the roll-out of our Paycheck Protection Program capabilities,
    • $18.0 million ($0.28 per share) in severance accruals related to the workforce reduction referenced above,
    • $10.5 million ($0.16 per share) in final merger-related expenses, and
    • $9.1 million ($0.14 per share) in mortgage servicing rights ("MSR") impairment.

While these expenses had a significant impact on our second quarter operating results, we believe that we are better positioned to improve our core profitability going forward as the non-interest expense items are not expected to recur in future periods.

  • In response to the COVID-19 pandemic over 90% of employees have been working virtually since early March with limited impact on the execution of our business and client experience. Additionally, we funded $717.5 million in loans under the Paycheck Protection Program and implemented a short-term loan modification program that complies with the CARES act to provide temporary relief to certain borrowers who meet the program's qualifications.

FINANCIAL SUMMARY

(Dollars and shares in thousands)Q2 2020 Q2 2019 % Change
QUARTERLY OPERATING RESULTS     
Net income/(loss)$(34,316) $77,812  (144)%
Net income/(loss) available to common stockholders$(36,753) $75,375  (149)%
Diluted earnings/(loss) per common share$(0.73) $1.50  (149)%
Diluted common shares50,416  50,384  %
ROA(0.36)% 1.05%  
ROE(5.48)% 12.20%  
BALANCE SHEET     
Loans held for sale ("LHS")$454,581  $1,057,586  (57)%
Loans held for investment ("LHI"), mortgage finance8,972,626  7,415,363  21%
LHI16,552,203  16,924,535  (2)%
Total LHI25,524,829  24,339,898  5%
Total assets36,613,127  29,970,384  22%
Demand deposits10,835,911  7,685,340  41%
Total deposits30,187,695  22,999,077  31%
Stockholders’ equity2,734,755  2,647,071  3%

DETAILED FINANCIALS

During the second quarter of 2020, we have continued to face unprecedented challenges as our country grapples with the continuing impact of the COVID-19 pandemic. Actions by U.S. federal, state and foreign governments to address the pandemic, including travel bans, business and entertainment venue closures and rapid changes in business and consumer behavior, have resulted in continuing high levels of uncertainty. economic weakness and market volatility. Due to these events, on May 22, 2020, we and Independent Bank Group, Inc. ("IBTX"), agreed to mutually terminate our merger agreement. The termination was approved by each company's board of directors after careful consideration of the significant impact of the COVID-19 pandemic on global markets and on the companies' ability to fully realize the benefits expected to be achieved through the merger.

We continue to focus on balance sheet strength and while we intend to operate with above-average liquidity in response to this uncertain economic environment, we believe opportunities exist to improve core earnings by reducing or replacing higher-cost funding sources and improving the earning asset mix. In the first few weeks of July 2020, we began to utilize low-yielding liquidity assets to increase the balance of our securities portfolio in an effort to improve yields during the second half of 2020.

For the second quarter of 2020, we reported a net loss of $34.3 million and net loss available to common stockholders of $36.8 million, compared to net income of $77.8 million and net income available to common stockholders of $75.4 million for the same period in 2019. On a fully diluted basis, earnings/(loss) per common share were $(0.73) for the quarter ended June 30, 2020 compared to $1.50 for the same period of 2019. The decline in net income for the second quarter of 2020 as compared to the same period in 2019 resulted primarily from a $73.0 million increase in the provision for credit losses, as well as an $80.6 million increase in non-interest expense, driven by the significant second quarter 2020 expenses described below, offset by a $46.1 million increase in non-interest income resulting primarily from a $45.0 million increase in net gain/(loss) on sale of loans held for sale.

We recorded a $100.0 million provision for credit losses for the second quarter of 2020 utilizing the Current Expected Credit Loss ("CECL") methodology adopted in the first quarter of 2020, compared to $96.0 million for the first quarter of 2020 and $27.0 million for the second quarter of 2019. The increase in provision for credit losses resulted primarily from an increase in charge-offs and reserve build related to higher criticized loan levels and continued economic uncertainty from the COVID-19 pandemic. We recorded $74.1 million in net charge-offs during the second quarter of 2020, including $62.4 million in energy net charge-offs and $8.1 million in leveraged lending net charge-offs, all of which were loans that had been previously identified as problem loans, compared to $57.7 million during the first quarter of 2020 and $20.0 million during the second quarter of 2019. Criticized loans totaled $1.0 billion at June 30, 2020, compared to $675.9 million at March 31, 2020 and $629.1 million at June 30, 2019. The increase in criticized loans was predominantly in special mention and was primarily due to the continued downgrade of loans that have been impacted by the COVID-19 pandemic or that are in categories that are expected to be more significantly impacted by COVID-19.

Non-performing assets ("NPAs") totaled $174.0 million at June 30, 2020, a decrease of $45.1 million compared to the first quarter of 2020 and an increase of $59.9 million compared to the second quarter of 2019. The linked quarter decrease is primarily related to charge-offs of energy and leveraged lending loans in the second quarter of 2020. Non-accrual energy loans totaled $103.9 million (60% of total NPAs) at June 30, 2020, $39.8 million of which relates to two loans that have been charged down to final resolution value and are expected to close in the third quarter of 2020, compared to $151.9 million at March 31, 2020. Non-accrual leveraged lending loans totaled $24.8 million (14% of total NPAs) at June 30, 2020, compared to $50.0 million at March 31, 2020. The ratio of NPAs to total LHI plus other real estate owned ("OREO") for the second quarter of 2020 was 0.68 percent, compared to 0.90 percent for the first quarter of 2020 and 0.47 percent for the second quarter of 2019.

In response to the COVID-19 pandemic, we implemented a short-term loan modification program in late March 2020 to provide temporary payment relief to borrowers who meet the program's qualifications. This program allows for a deferral of payments for 90 days, which we may extend for an additional 90 days, for a maximum of 180 days on a cumulative basis. The deferred payments along with interest accrued during the deferral period are due and payable on the maturity date of the existing loan. As of June 30, 2020, we have granted temporary modifications on 482 loans (336 during the second quarter of 2020) with a total outstanding loan balance of $1.2 billion, resulting in the deferral of $10.8 million ($7.1 million in the second quarter of 2020) in interest payments.

Net interest income was $209.9 million for the second quarter of 2020, compared to $228.3 million for the first quarter of 2020 and $243.6 million for the second quarter of 2019. The linked quarter decrease in net interest income was due primarily to a decrease in average LHS, as a result of holding purchased loans for shorter durations, as well as decreases in yields on LHI, excluding  mortgage finance, and liquidity assets offset by an increase in yields on LHI, mortgage finance, and a decrease in funding costs. The decline in net interest income on LHS resulting from shorter hold times was offset by an increase in non-interest income as noted below. Net interest margin for the second quarter of 2020 was 2.30 percent, a decrease of 48 basis points from the first quarter of 2020 and a decrease of 111 basis points from the second quarter of 2019. The shift in earning assets, primarily the increase in liquidity assets and decrease in loans held for sale, significantly contributed to the decrease in net interest margin. LHI yields, excluding mortgage finance loans, decreased 85 basis points from the first quarter of 2020, and decreased 169 basis points compared to the second quarter of 2019. LHI, mortgage finance yields for the second quarter of 2020 increased 30 basis points compared to the first quarter of 2020 as a result of decreases in incentive pricing in the second quarter of 2020, and decreased 17 basis points compared to the second quarter of 2019. Additionally, total cost of deposits for the second quarter of 2020 decreased 48 basis points to 0.42 percent compared to 0.90 percent for the first quarter of 2020, and decreased 87 basis points from 1.29 percent for the second quarter of 2019.

Non-interest income increased $58.7 million during the second quarter of 2020 compared to the first quarter of 2020, and increased $46.1 million compared to the second quarter of 2019. The linked quarter increase was primarily related to an increase in net gain/(loss) on sale of LHS, as well as increases in brokered loans fees and other non-interest income. The year-over-year increase was primarily related to an increase in net gain/(loss) on sale of LHS, as well as increases in brokered loan fees and servicing income, partially offset by a decrease in other non-interest income. The linked quarter and year-over-year increase in net gain/(loss) on sale of LHS was due to lower hedge costs in the second quarter of 2020 as a result of holding purchased loans for shorter durations than in prior periods, and is offset by the decline in net interest income on LHS noted above.

Non-interest expense for the second quarter of 2020 increased $56.9 million, or 34 percent, compared to the first quarter of 2020, and increased $80.6 million, or 57 percent, compared to the second quarter of 2019. The linked quarter increase was primarily related to increases in salaries and employee benefits and communications and technology expense. The year-over-year increase was primarily due to increases in salaries and employee benefits, communications and technology expense, servicing-related expenses and merger-related expenses. The year-over-year and linked quarter increases in salaries and employee benefits and communication and technology expense were primarily due to the severance accruals and non-recurring software expenses, respectively, discussed above. The year-over-year increase in servicing-related expenses was primarily due to an increase in MSR amortization, resulting primarily from an increase in the cost basis of our MSR asset as well as from higher mortgage prepayment rates, and an increase in impairment expense.

Texas Capital Bank is well capitalized under regulatory guidelines as of June 30, 2020. Our CET 1, tier 1 capital, total capital and leverage ratios were 8.9%, 9.8%, 11.6% and 7.5%, respectively, at June 30, 2020, compared to 9.3%, 10.2%, 12.0% and 8.5%, respectively, at March 31, 2020. At June 30, 2020, our ratio of tangible common equity to total tangible assets was 7.0% percent compared to 7.3% at March 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, 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 may be deemed to include “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 regarding our financial condition, results of operations, business plans and future performance. These statements are not historical in nature and can generally be identified by such words as “believe,” “expect,” “estimate,” “anticipate,” “plan,” “may,” “will,” “forecast,” “could,” “projects,” “intend” and similar expressions. Because forward-looking statements relate to future results and occurrences, they are subject to inherent uncertainties, risks, and changes in circumstances that are difficult to predict. 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 volatility in oil and gas prices, the material risks and uncertainties for the U.S. and world economies, and for our business, resulting from the COVID-19 pandemic, expectations regarding rates of default and credit losses, volatility in the mortgage industry, our business strategies, our expectations about future financial performance, future growth and earnings, the appropriateness of our allowance for credit losses and provision for credit losses, our ability to identify, employ and retain a successor chief executive officer, the impact of changing regulatory requirements and legislative changes on our business, increased competition, interest rate risk, new lines of business, new product or service offerings and 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, 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)
 2nd Quarter1st Quarter4th Quarter3rd Quarter2nd Quarter
 20202020201920192019
CONSOLIDATED STATEMENTS OF INCOME     
Interest income$252,010 $306,008 $337,757 $355,101 $346,893 
Interest expense42,082 77,689 89,372 102,933 103,340 
Net interest income209,928 228,319 248,385 252,168 243,553 
Provision for credit losses100,000 96,000 17,000 11,000 27,000 
Net interest income after provision for credit losses109,928 132,319 231,385 241,168 216,553 
Non-interest income70,502 11,780 17,761 20,301 24,364 
Non-interest expense222,352 165,417 168,187 149,429 141,718 
Income/(loss) before income taxes(41,922)(21,318)80,959 112,040 99,199 
Income tax expense/(benefit)(7,606)(4,631)16,539 23,958 21,387 
Net income/(loss)(34,316)(16,687)64,420 88,082 77,812 
Preferred stock dividends2,437 2,438 2,437 2,438 2,437 
Net income/(loss) available to common stockholders$(36,753)$(19,125)$61,983 $85,644 $75,375 
Diluted earnings/(loss) per common share$(0.73)$(0.38)$1.23 $1.70 $1.50 
Diluted common shares50,416,331 50,474,802 50,461,723 50,416,402 50,383,870 
CONSOLIDATED BALANCE SHEET DATA     
Total assets$36,613,127 $35,879,416 $32,548,069 $33,526,437 $29,970,384 
LHI16,552,203 16,857,579 16,476,413 16,772,824 16,924,535 
LHI, mortgage finance8,972,626 7,588,803 8,169,849 7,951,432 7,415,363 
LHS454,581 774,064 2,577,134 2,674,225 1,057,586 
Liquidity assets(1)9,540,044 9,498,189 4,263,766 4,993,185 3,480,902 
Investment securities234,969 228,784 239,871 238,022 240,851 
Demand deposits10,835,911 9,420,303 9,438,459 10,289,572 7,685,340 
Total deposits30,187,695 27,134,263 26,478,593 27,413,303 22,999,077 
Other borrowings2,895,790 5,195,267 2,541,766 2,639,967 3,607,234 
Subordinated notes282,309 282,219 282,129 282,038 281,948 
Long-term debt113,406 113,406 113,406 113,406 113,406 
Stockholders’ equity2,734,755 2,803,533 2,801,321 2,735,993 2,647,071 
End of period shares outstanding50,435,672 50,407,778 50,337,741 50,317,654 50,297,552 
Book value$51.25 $52.64 $52.67 $51.39 $49.65 
Tangible book value(2)$50.89 $52.28 $52.31 $51.03 $49.28 
SELECTED FINANCIAL RATIOS     
Net interest margin2.30%2.78%2.95%3.16%3.41%
Return on average assets(0.36)%(0.20)%0.85%1.06%1.05%
Return on average common equity(5.48)%(2.85)%10.68%13.22%12.20%
Non-interest income to average earning assets0.77%0.14%0.21%0.25%0.34%
Efficiency ratio(3)79.3%68.9%63.2%54.8%52.9%
Efficiency ratio, adjusted(4)77.5%65.8%61.4%51.3%49.6%
Non-interest expense to average earning assets2.43%2.00%1.98%1.86%1.98%
Tangible common equity to total tangible assets(5)7.0%7.3%8.1%7.6%8.3%
Common Equity Tier 18.9%9.3%8.9%8.6%8.7%
Tier 1 capital9.8%10.2%9.7%9.4%9.6%
Total capital11.6%12.0%11.4%11.0%11.3%
Leverage7.5%8.5%8.4%8.6%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)Non-interest expense, excluding deposit-related marketing fees and servicing related expenses, divided by the sum of net interest income and non-interest income, net of deposit-related marketing fees and servicing related expenses. Deposit-related marketing fees totaled $1.7 million, $5.2 million, $9.4 million, $11.9 million and $11.6 million for the second and first quarters of 2020, as well as the fourth, third and second quarters of 2019, respectively.
(5)Stockholders’ equity excluding preferred stock and accumulated other comprehensive income, less goodwill and intangibles, divided by total assets, less accumulated other comprehensive income and goodwill and intangibles.
  


TEXAS CAPITAL BANCSHARES, INC.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(Dollars in thousands)
 June 30, 2020June 30, 2019%
Change
Assets   
Cash and due from banks$176,540 $163,675 8%
Interest-bearing deposits9,490,044 3,446,902 175%
Federal funds sold and securities purchased under resale agreements50,000 34,000 47%
Securities, available-for-sale234,969 240,851 (2)%
LHS, at fair value ($454.6 million at June 30, 2020 and $1,056.5 million at June 30, 2019)454,581 1,057,586 (57)%
LHI, mortgage finance8,972,626 7,415,363 21%
LHI (net of unearned income)16,552,203 16,924,535 (2)%
Less:  Allowance for credit losses on loans264,722 214,572 23%
LHI, net25,260,107 24,125,326 5%
Mortgage servicing rights, net75,451 47,785 58%
Premises and equipment, net28,603 28,197 1%
Accrued interest receivable and other assets824,963 807,728 2%
Goodwill and intangibles, net17,869 18,334 (3)%
Total assets$36,613,127 $29,970,384 22%
    
Liabilities and Stockholders’ Equity   
Liabilities:   
Deposits:   
Non-interest bearing$10,835,911 $7,685,340 41%
Interest bearing19,351,784 15,313,737 26%
Total deposits30,187,695 22,999,077 31%
    
Accrued interest payable20,314 23,115 (12)%
Other liabilities372,145 276,432 35%
Federal funds purchased and repurchase agreements195,790 507,234 (61)%
Other borrowings2,700,000 3,100,000 (13)%
Subordinated notes, net282,309 281,948 %
Trust preferred subordinated debentures113,406 113,406 %
Total liabilities33,871,659 27,301,212 24%
    
Redeemable non-controlling interest6,713 22,101 (70)%
    
Stockholders’ equity:   
Preferred stock, $.01 par value, $1,000 liquidation value:   
Authorized shares - 10,000,000   
Issued shares - 6,000,000 shares issued at June 30, 2020 and 2019150,000 150,000 %
Common stock, $.01 par value:   
Authorized shares - 100,000,000   
Issued shares - 50,436,089 and 50,297,969 at June 30, 2020 and 2019, respectively504 503 %
Additional paid-in capital983,144 972,219 1%
Retained earnings1,600,639 1,516,044 6%
Treasury stock (shares at cost: 417 at June 30, 2020 and 2019)(8)(8)%
Accumulated other comprehensive income, net of taxes476 8,313 N/M
Total stockholders’ equity2,734,755 2,647,071 3%
Total liabilities and stockholders’ equity$36,613,127 $29,970,384 22%


     
TEXAS CAPITAL BANCSHARES, INC. 
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) 
(Dollars in thousands except per share data) 
 Three Months Ended June 30,Six Months Ended June 30,
 2020201920202019
Interest income    
Interest and fees on loans$247,595 $329,842 $531,220 $642,545 
Investment securities2,024 2,260 4,207 3,720 
Federal funds sold and securities purchased under resale agreements77 157 691 536 
Interest-bearing deposits in other banks2,314 14,634 21,900 25,653 
Total interest income252,010 346,893 558,018 672,454 
Interest expense    
Deposits32,294 72,529 94,468 141,583 
Federal funds purchased176 5,202 845 8,718 
Other borrowings4,569 20,124 14,151 31,978 
Subordinated notes4,191 4,191 8,382 8,382 
Trust preferred subordinated debentures852 1,294 1,925 2,626 
Total interest expense42,082 103,340 119,771 193,287 
Net interest income209,928 243,553 438,247 479,167 
Provision for credit losses100,000 27,000 196,000 47,000 
Net interest income after provision for credit losses109,928 216,553 242,247 432,167 
Non-interest income    
Service charges on deposit accounts2,459 2,849 5,752 5,828 
Wealth management and trust fee income2,348 2,129 4,815 4,138 
Brokered loan fees10,764 7,336 18,779 12,402 
Servicing income6,120 3,126 10,866 5,860 
Swap fees1,468 601 4,225 1,632 
Net gain/(loss) on sale of LHS39,023 (5,986)26,023 (6,491)
Other8,320 14,309 11,822 31,009 
Total non-interest income70,502 24,364 82,282 54,378 
Non-interest expense    
Salaries and employee benefits100,255 76,889 176,922 154,712 
Net occupancy expense9,134 7,910 17,846 15,789 
Marketing7,988 14,087 16,510 25,795 
Legal and professional11,330 10,004 28,796 20,034 
Communications and technology42,760 11,022 56,551 20,220 
FDIC insurance assessment7,140 4,138 12,989 9,260 
Servicing-related expenses20,117 6,066 36,471 11,448 
Merger-related expenses10,486  17,756  
Other13,142 11,602 23,928 25,976 
Total non-interest expense222,352 141,718 387,769 283,234 
Income/(loss) before income taxes(41,922)99,199 (63,240)203,311 
Income tax expense/(benefit)(7,606)21,387 (12,237)43,798 
Net income/(loss)(34,316)77,812 (51,003)159,513 
Preferred stock dividends2,437 2,437 4,875 4,875 
Net income/(loss) available to common stockholders$(36,753)$75,375 $(55,878)$154,638 
Basic earnings/(loss) per common share$(0.73)$1.50 $(1.11)$3.07 
Diluted earnings/(loss) per common share$(0.73)$1.50 $(1.11)$3.07 


 
TEXAS CAPITAL BANCSHARES, INC.
SUMMARY OF CREDIT LOSS EXPERIENCE
(Dollars in thousands)
 2nd Quarter1st Quarter4th Quarter3rd Quarter2nd Quarter
 20202020201920192019
Allowance for credit losses on loans:     
Beginning balance$240,958 $195,047 $190,138 $214,572 $208,573 
Impact of CECL adoption 8,585    
Loans charged-off:     
Commercial12,287 20,653 13,968 21,124 4,880 
Energy62,368 37,730 797 16,655 15,173 
Real estate    177 
Total charge-offs74,655 58,383 14,765 37,779 20,230 
Recoveries:     
Commercial513 257 1,754 799 224 
Energy 423 209 107  
Total recoveries513 680 1,963 906 224 
Net charge-offs74,142 57,703 12,802 36,873 20,006 
Provision for credit losses on loans97,906 95,029 17,711 12,439 26,005 
Ending balance$264,722 $240,958 $195,047 $190,138 $214,572 
Allowance for off-balance sheet credit losses:     
Beginning balance$10,174 $8,640 $9,351 $10,790 $9,795 
Impact of CECL adoption 563    
Provision for off-balance sheet credit losses2,094 971 (711)(1,439)995 
Ending balance$12,268 $10,174 $8,640 $9,351 $10,790 
Total allowance for credit losses$276,990 $251,132 $203,687 $199,489 $225,362 
Total provision for credit losses$100,000 $96,000 $17,000 $11,000 $27,000 
Allowance for credit losses on loans to LHI1.04%0.99%0.79%0.77%0.88%
Allowance for credit losses on loans to average LHI1.03%1.02%0.79%0.76%0.90%
Net charge-offs to average LHI(1)1.16%0.98%0.21%0.58%0.34%
Net charge-offs to average LHI for last twelve months(1)0.73%0.53%0.31%0.41%0.27%
Total provision for credit losses to average LHI(1)1.57%1.63%0.27%0.17%0.45%
Total allowance for credit losses to LHI1.09%1.03%0.83%0.81%0.93%


(1)Interim period ratios are annualized.
  


TEXAS CAPITAL BANCSHARES, INC.     
SUMMARY OF NON-PERFORMING ASSETS AND PAST DUE LOANS   
(Dollars in thousands)     
 2nd Quarter1st Quarter4th Quarter3rd Quarter2nd Quarter
 20202020201920192019
      
Non-performing assets (NPAs):     
Non-accrual loans$174,031 $219,165 $225,384 $120,686 $114,084 
Other real estate owned (OREO)     
Total LHI NPAs$174,031 $219,165 $225,384 $120,686 $114,084 
      
Non-accrual loans to LHI0.68%0.90%0.91%0.49%0.47%
Total LHI NPAs to LHI plus OREO0.68%0.90%0.91%0.49%0.47%
Total LHI NPAs to earning assets0.49%0.63%0.71%0.37%0.39%
Allowance for credit losses on loans to non-accrual loans1.5x1.1x.9x1.6x1.9x
LHI past due 90 days and still accruing(1)$21,079 $21,274 $17,584 $29,648 $15,212 
LHI past due 90 days to LHI0.08%0.09%0.07%0.12%0.06%
LHS past due 90 days and still accruing(2)$10,152 $9,014 $8,207 $9,187 $11,665 


(1)At June 30, 2020, loans past due 90 days and still accruing includes premium finance loans of $14.8 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 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)
      
 2nd Quarter1st Quarter4th Quarter3rd Quarter2nd Quarter
 20202020201920192019
Interest income     
Interest and fees on loans$247,595 $283,625 $312,147 $329,344 $329,842 
Investment securities2,024 2,183 2,618 2,316 2,260 
Federal funds sold and securities purchased under resale agreements77 614 439 554 157 
Interest-bearing deposits in other banks2,314 19,586 22,553 22,887 14,634 
Total interest income252,010 306,008 337,757 355,101 346,893 
Interest expense     
Deposits32,294 62,174 70,987 80,967 72,529 
Federal funds purchased176 669 1,319 1,835 5,202 
Other borrowings4,569 9,582 11,712 14,703 20,124 
Subordinated notes4,191 4,191 4,191 4,191 4,191 
Trust preferred subordinated debentures852 1,073 1,163 1,237 1,294 
Total interest expense42,082 77,689 89,372 102,933 103,340 
Net interest income209,928 228,319 248,385 252,168 243,553 
Provision for credit losses100,000 96,000 17,000 11,000 27,000 
Net interest income after provision for credit losses109,928 132,319 231,385 241,168 216,553 
Non-interest income     
Service charges on deposit accounts2,459 3,293 2,785 2,707 2,849 
Wealth management and trust fee income2,348 2,467 2,342 2,330 2,129 
Brokered loan fees10,764 8,015 8,645 8,691 7,336 
Servicing income6,120 4,746 4,030 3,549 3,126 
Swap fees1,468 2,757 1,559 1,196 601 
Net gain/(loss) on sale of LHS39,023 (13,000)(7,757)(6,011)(5,986)
Other8,320 3,502 6,157 7,839 14,309 
Total non-interest income70,502 11,780 17,761 20,301 24,364 
Non-interest expense     
Salaries and employee benefits100,255 76,667 80,262 80,106 76,889 
Net occupancy expense9,134 8,712 9,075 8,125 7,910 
Marketing7,988 8,522 12,807 14,753 14,087 
Legal and professional11,330 17,466 21,032 11,394 10,004 
Communications and technology42,760 13,791 13,801 10,805 11,022 
FDIC insurance assessment7,140 5,849 5,613 5,220 4,138 
Servicing-related expenses20,117 16,354 2,960 8,165 6,066 
Merger-related expenses10,486 7,270 1,370   
Other13,142 10,786 21,267 10,861 11,602 
Total non-interest expense222,352 165,417 168,187 149,429 141,718 
Income/(loss) before income taxes(41,922)(21,318)80,959 112,040 99,199 
Income tax expense/(benefit)(7,606)(4,631)16,539 23,958 21,387 
Net income/(loss)(34,316)(16,687)64,420 88,082 77,812 
Preferred stock dividends2,437 2,438 2,437 2,438 2,437 
Net income/(loss) available to common shareholders$(36,753)$(19,125)$61,983 $85,644 $75,375 


 
TEXAS CAPITAL BANCSHARES, INC.
QUARTERLY FINANCIAL SUMMARY - UNAUDITED
Consolidated Daily Average Balances, Average Yields and Rates
(Dollars in thousands)
 2nd Quarter 2020 1st Quarter 2020 4th Quarter 2019 3rd Quarter 2019 2nd Quarter 2019
 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$38,829 $185 1.92% $42,799 $274 2.57% $40,904 $693 6.72% $39,744 $357 3.56% $38,887 $287 2.96%
Investment securities - Non-taxable(2)195,806 2,327 4.78% 195,578 2,417 4.97% 197,591 2,437 4.89% 200,090 2,480 4.92% 192,115 2,498 5.21%
Federal funds sold and securities purchased under resale agreements245,434 77 0.13% 199,727 614 1.24% 102,320 439 1.70% 100,657 554 2.18% 28,436 157 2.22%
Interest-bearing deposits in other banks10,521,240 2,314 0.09% 6,225,948 19,586 1.27% 5,387,000 22,553 1.66% 4,184,217 22,887 2.17% 2,491,827 14,634 2.36%
LHS, at fair value380,624 2,547 2.69% 3,136,381 27,480 3.52% 3,567,836 33,411 3.72% 2,555,269 26,206 4.07% 2,494,883 27,607 4.44%
LHI, mortgage finance loans8,676,521 74,518 3.45% 7,054,682 55,324 3.15% 7,870,888 63,114 3.18% 8,118,025 68,660 3.36% 7,032,963 63,523 3.62%
LHI(1)(2)17,015,041 170,970 4.04% 16,598,775 201,781 4.89% 16,667,259 216,686 5.16% 16,901,391 235,557 5.53% 16,781,733 239,829 5.73%
Less allowance for credit losses on loans236,823    201,837    189,353    212,898    206,654   
LHI, net of allowance25,454,739 245,488 3.88% 23,451,620 257,105 4.41% 24,348,794 279,800 4.56% 24,806,518 304,217 4.87% 23,608,042 303,352 5.15%
Total earning assets36,836,672 252,938 2.76% 33,252,053 307,476 3.72% 33,644,445 339,333 4.00% 31,886,495 356,701 4.44% 28,854,190 348,535 4.84%
Cash and other assets1,075,864    976,520    974,866    1,000,117    940,793   
Total assets$37,912,536    $34,228,573    $34,619,311    $32,886,612    $29,794,983   
Liabilities and Stockholders’ Equity                   
Transaction deposits$3,923,966 $5,998 0.61% $3,773,067 $13,582 1.45% $3,817,294 $16,428 1.71% $3,577,905 $18,442 2.04% $3,475,404 $18,037 2.08%
Savings deposits12,537,467 13,510 0.43% 11,069,429 35,961 1.31% 11,111,326 40,603 1.45% 10,331,078 45,586 1.75% 8,896,537 40,994 1.85%
Time deposits3,434,388 12,786 1.50% 2,842,535 12,631 1.79% 2,453,655 13,956 2.26% 2,706,434 16,939 2.48% 2,227,460 13,498 2.43%
Total interest bearing deposits19,895,821 32,294 0.65% 17,685,031 62,174 1.41% 17,382,275 70,987 1.62% 16,615,417 80,967 1.93% 14,599,401 72,529 1.99%
Other borrowings3,612,263 4,745 0.53% 3,020,255 10,251 1.37% 2,822,465 13,031 1.83% 2,896,477 16,538 2.27% 4,018,231 25,326 2.53%
Subordinated notes282,252 4,191 5.97% 282,165 4,191 5.97% 282,074 4,191 5.89% 281,979 4,191 5.90% 281,889 4,191 5.96%
Trust preferred subordinated debentures113,406 852 3.02% 113,406 1,073 3.80% 113,406 1,163 4.07% 113,406 1,237 4.33% 113,406 1,294 4.58%
Total interest bearing liabilities23,903,742 42,082 0.71% 21,100,857 77,689 1.48% 20,600,220 89,372 1.72% 19,907,279 102,933 2.05% 19,012,927 103,340 2.18%
Demand deposits10,865,896    10,003,495    10,933,887    9,992,406    7,929,266   
Other liabilities293,698    270,868    278,964    264,506    220,305   
Stockholders’ equity2,849,200    2,853,353    2,806,240    2,722,421    2,632,485   
Total liabilities and stockholders’ equity$37,912,536    $34,228,573    $34,619,311    $32,886,612    $29,794,983   
Net interest income(2) $210,856    $229,787    $249,961    $253,768    $245,195  
Net interest margin  2.30%   2.78%   2.95%   3.16%   3.41%


(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
Julie Anderson, 214.932.6673
julie.anderson@texascapitalbank.com

MEDIA CONTACT
Shannon Wherry, 469.399.8527
shannon.wherry@texascapitalbank.com

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