8-K
TEXAS CAPITAL BANCSHARES INC/TX (TCBI)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): September 5, 2022
TEXAS CAPITAL BANCSHARES, INC.
(Exact name of registrant as specified in its charter)
| Delaware | 001-34657 | 75-2679109 |
|---|---|---|
| (State or other jurisdiction of<br>incorporation) | (Commission<br>File Number) | (I.R.S. Employer<br>Identification Number) |
2000 McKinney Avenue, Suite 700, Dallas, Texas, U.S.A.
(Address of principal executive offices)
75201
(Zip Code)
Registrant’s telephone number, including area code: (214) 932-6600
N/A
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|---|---|
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
|---|---|---|
| Common Stock, par value $0.01 per share | TCBI | Nasdaq Stock Market |
| 5.75% Non-Cumulative Perpetual Preferred Stock Series B, par value $0.01 per share | TCBIO | Nasdaq Stock Market |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 7.01. Regulation FD Disclosure.
On September 6, 2022, Texas Capital Bancshares, Inc. (the “Company”), the parent company of Texas Capital Bank (the “Bank”), issued a press release announcing the execution of a Purchase Agreement, dated September 5, 2022 (the “Purchase Agreement”), by and between the Bank and AFCO Credit Corporation (“Purchaser”), pursuant to which Purchaser has agreed to acquire the Bank’s insurance premium financing business. A copy of the press release is furnished as Exhibit 99.1 hereto and is incorporated herein by reference.
In connection with the announcement of the Purchase Agreement, the Company will host a conference call and webcast at 9:00 a.m. Central Time on Tuesday, September 6, 2022, at which members of executive management will discuss the disposition. A copy of the slides which will be presented during the conference call about the disposition is attached hereto as Exhibit 99.2. The presentation can also be accessed on the Texas Capital Investor Relations website at https://investors.texascapitalbank.com.
Participants may pre-register for the call by visiting https://www.netroadshow.com/events/login?show=0a75c14c&confId=41685 with the conference ID 547919. Alternatively, participants may call +1.833.470.1428 and use the conference ID 547919 at least fifteen minutes prior to the call to join through an operator. International callers should dial +1.404.975.4839 and enter the same access code. A live webcast can also be found on the Texas Capital Investor Relations website or at https://events.q4inc.com/attendee/755858622.
Replays of the conference call will be available on the webcast by visiting the Investor Relations website from September 6, 2022 through September 6, 2024 or by calling +1.866.813.9403 (U.S.) or +44.204.525.0658 (international) with the access code 009241 from September 6, 2022 through September 20, 2022.
The information in Item 7.01 of this Current Report, including Exhibits 99.1 and 99.2 attached hereto, is being furnished to the Securities and Exchange Commission and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section. This information shall not be deemed to be incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits
99.1 Press Release, datedSeptember 6, 2022
99.2 PresentationSlides, dated September 6, 2022
104 Cover Page Interactive Data File (embedded within the Inline XBRL document)
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Date: | September 6, 2022 | TEXAS CAPITAL BANCSHARES, INC. | |
|---|---|---|---|
| By: | /s/ J. Matthew Scurlock | ||
| J. Matthew Scurlock<br>Chief Financial Officer |
Document
INVESTOR CONTACT
Jocelyn Kukulka, 469.399.8544
investor.relations@texascapitalbank.com
MEDIA CONTACT
Julia Monter, 469.399.8425
julia.monter@texascapitalbank.com
FOR IMMEDIATE RELEASE
TEXAS CAPITAL BANCSHARES, INC. ANNOUNCES CONTINUED EXECUTION OF ITS STRATEGIC TRANSFORMATION THROUGH THE SALE OF ITS INSURANCE PREMIUM FINANCE BUSINESS
•Expected to be financially accretive and to offer significant capital generation, enhanced liquidity profile, greater funding flexibility
•Enhances financial resiliency to support the growth of our core Texas-based commercial client strategy
•Consistent with transformation initiatives to reallocate our balance sheet and improve client relevance
DALLAS – SEPTEMBER 6, 2022 – Texas Capital Bancshares, Inc. (“Texas Capital”) (NASDAQ: TCBI) announced today that it entered into a definitive agreement to sell BankDirect Capital Finance (“BankDirect”), its insurance premium finance subsidiary, to AFCO Credit Corporation (“AFCO”), an indirect wholly-owned subsidiary of Truist Financial Corp.(“Truist”) (NYSE: TFC).
The sale of BankDirect includes its business operations and loan portfolio of approximately $3.1 billion as of June 30, 2022. AFCO is purchasing BankDirect from Texas Capital in an all-cash transaction for a purchase price of approximately $3.4 billion, representing an 8.5% asset premium compared to the value of the purchased loan portfolio as of June 30, 2022. The purchase price is subject to customary adjustments, including for the net asset value of the loan portfolio, as set forth in the Purchase Agreement. This transaction represents the divestiture of the entire business unit including the equity interests of BankDirect and the associated loan balances held by Texas Capital Bank and no parent funding, deposits or capital will be transferred.
“The sale of BankDirect represents an important milestone for Texas Capital, further enabling us to re-focus our capital and expense base consistent with our strategy of creating the flagship full-service financial services firm in Texas,” said Rob C. Holmes, Chief Executive Officer and President of Texas Capital. “The sale follows a deliberate process designed to maximize shareholder value, strengthen our balance sheet, simplify our business model and free up incremental resources to be redeployed to our core businesses. BankDirect operates a nationwide business and generates desirable, granular commercial loans with superior credit quality. I want to thank the team at BankDirect for their long-term partnership and solid commitment to building an outstanding franchise resulting in the success of this transaction.”
The transaction is expected to increase Texas Capital’s capital levels. Relative to June 30, 2022, Common Equity Tier 1 ratio expected to increase 199 basis points and Tangible Book Value per Share accretion is estimated to be 6.5%. Additionally, the divestiture will improve Texas Capital’s liquidity position as the Loan to Deposit ratio is expected to decline and the Liquidity Assets to Assets ratio is expected to rise, before giving effect for future redeployment actions. Additionally, given the expected growth in the core business strategy, Texas Capital is reaffirming forward guidance of delivering year-over-year quarterly operating leverage by year-end.
The sale is expected to close in the fourth quarter of 2022, subject to various customary closing conditions.
Morgan Stanley & Co. LLC and Texas Capital Securities served as financial advisors to Texas Capital. Cravath, Swaine & Moore LLP served as legal counsel to Texas Capital. RBC Capital Markets and Truist Securities served as financial advisors, and Willkie Farr & Gallagher LLP served as legal counsel to Truist in this transaction.
Conference Call Information
Texas Capital will host a public conference call to discuss the transaction at 9:00 a.m. Central Time today. The presentation can also be accessed on the Texas Capital Investor Relations website at
https://investors.texascapitalbank.com.
Participants may pre-register for the call by visiting
https://www.netroadshow.com/events/login?show=0a75c14c&confId=41685 and will receive a unique PIN number to be used when dialing in for the call for immediate access. Alternatively, participants may call +1.833.470.1428 and use the conference ID 547919 at least fifteen minutes prior to the call to join through an operator. International callers should dial +1.404.975.4839 and enter the same access code.
A live webcast can also be found on the Texas Capital Investor Relations website or at
https://events.q4inc.com/attendee/755858622. Replays of the conference call will be available on the webcast by visiting the Investor Relations website from September 6, 2022 through September 6, 2023 or by calling +1.866.813.9403 (U.S.) or +44.204.525.0658 (international) with the access code 009241 from September 6, 2022 through September 20, 2022.
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 full-service financial services firm that delivers customized solutions to businesses, entrepreneurs, and individual customers. Founded in 1998, the institution is headquartered in Dallas with offices in Austin, Houston, San Antonio, and Fort Worth, and has built a network of clients across the country. With the ability to service clients through their entire lifecycles, Texas Capital Bank has established commercial banking, consumer banking, investment banking and wealth management capabilities. TCBI Securities, Inc., doing business as Texas Capital Securities, is a member of FINRA and SIPC and has registered with the SEC and other state securities regulators as a broker dealer. TCBI Securities, Inc. is a subsidiary of Texas Capital Bank. Securities and other investment products offered by TCBI Securities, Inc. are not FDIC insured, may lose value and are not bank guaranteed.
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, uncertainties as to the timing of the sale of BankDirect Capital Finance and the risk that the transaction may not be completed in a timely manner or at all, the possibility that any or all of the conditions to the consummation of the sale of BankDirect Capital Finance may not be satisfied or waived, risks related to diverting management’s attention from Texas Capital’s ongoing business operations, uncertainties as to Texas Capital’s ability and the amount of time necessary to realize the expected benefits of the transaction, changes in the economic and financial conditions of Texas Capital’s business and uncertainties and matters beyond the control of management, credit quality and risk, the COVID-19 pandemic, industry and technological changes, cyber incidents or other failures, disruptions or security breaches, interest rates, commercial and residential real estate values, economic conditions, including inflation and the threat of recession, as well as market conditions in Texas, the United States or internationally, as well as governmental
and consumer responses to those economic and market conditions, fund availability, accounting estimates and risk management processes, the transition away from the London Interbank Offered Rate (LIBOR), legislative and regulatory changes, business strategy execution, key personnel, competition, mortgage markets, fraud, environmental liability and severe weather, natural disasters, acts of war or terrorism or other external events.
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.
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© 2022 Texas Capital Bank Member FDIC September 6, 2022 Sale of BankDirect Capital Finance: Continued Execution of Strategic Initiatives
2 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, uncertainties as to the timing of the sale of BankDirect Capital Finance and the risk that the transaction may not be completed in a timely manner or at all, the possibility that any or all of the conditions to the consummation of the sale of BankDirect Capital Finance may not be satisfied or waived, risks related to diverting management's attention from Texas Capital's ongoing business operations, uncertainties as to Texas Capital's ability and the amount of time necessary to realize the expected benefits of the transaction, changes in the economic and financial conditions of Texas Capital's business and uncertainties and matters beyond the control of management, credit quality and risk, the COVID-19 pandemic, industry and technological changes, cyber incidents or other failures, disruptions or security breaches, interest rates, commercial and residential real estate values, economic conditions, including inflation and the threat of recession, as well as market conditions in Texas, the United States or internationally, as well as governmental and consumer responses to those economic and market conditions, fund availability, accounting estimates and risk management processes, the transition away from the London Interbank Offered Rate (LIBOR), legislative and regulatory changes, business strategy execution, key personnel, competition, mortgage markets, fraud, environmental liability and severe weather, natural disasters, acts of war or terrorism or other external events. 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.
3 Executing on Texas Capital’s Strategic Transformation Priorities ◼ Texas Capital has entered into a definitive agreement to sell BankDirect Capital Finance, the insurance premium finance business, to AFCO Credit Corporation, an indirect wholly-owned subsidiary of Truist Financial Corp ◼ All-cash transaction with estimated proceeds of $3.4 billion1 representing an 8.5%2 asset premium ◼ Sale includes all business operations including the associated loan portfolio of approximately $3.1 billion as of June 30, 2022 ◼ Divestiture of 100% of the equity interests of BankDirect and the loan portfolio balance held by Texas Capital Bank for the account of BankDirect ◼ Represents sale of business unit assets, with no parent deposits, funding or capital transferred ◼ Expected to close in the fourth quarter of 2022, subject to various customary closing conditions ◼ Building the Flagship Full-Service Financial Services Firm in Texas ◼ Continued strategic reallocation of capital, liquidity, funding and expenses to support the value accretive growth of our Texas focused offering ◼ Remixing of the balance sheet and business model supporting expanded front-line coverage and improved relevance through targeted products and services driving ancillary income and commercial operating deposits ◼ Premium: Asset premium of 8.5%2 ◼ Capital & Book Value3: Robust increase in Texas Capital’s capital levels and tangible book value from June 30, 2022 levels ◼ Expected increases to key capital ratios, including a +199bps increase in Common Equity Tier 1 Ratio estimated ◼ Expected accretion to Tangible Book Value per Share of +6.5% estimated ◼ Funding & Liquidity4: Enhancement of liquidity profile allowing for continued strategic funding reallocation ◼ Pre-redeployment, Loans / Deposits ratio expected to decline and Liquidity Assets / Assets to improve ◼ Earnings Guidance: Given strong growth momentum in core business strategy, delivering year-over-year quarterly operating leverage is on track by year-end Transaction Overview Strategic Rationale Expected Financial Impact of Transaction 1. Subject to customary adjustments including for net asset value of the loan portfolio at time of closing 2. Represents estimated asset premium based on loan portfolio as of June 30, 2022. Asset premium is equal to the purchase price less the loan portfolio balance as of closing divided by the purchase price. Actual asset premium realized in transaction will adjust up or down based on size of loan portfolio divested at time of closing 3. Estimated book value and capital impacts shown based on illustrative time zero impacts inclusive of asset premium, estimated one-time expenses and reserve release associated with transaction; shown relative to June 30, 2022 reported financials for illustrative purposes and do not give effect for future redeployment actions 4. Based on gross impacts prior to capacity redeployment; shown relative to June 30, 2022 reported financials for illustrative purposes
4 Transaction Overview Business Divested ◼ $3.1 billion of premium finance loans as of June 30, 2022 ◼ Sale of business operations ◼ No funding or capital transferred ◼ All assets related to premium finance business including nationwide locations and associated leases transferred with business unit Premium Received ◼ 8.5%1 premium to loan balance purchased Consideration ◼ 100% cash ◼ Estimated proceeds of $3.4 billion2 Acquiror ◼ AFCO Credit Corporation, an indirect wholly-owned subsidiary of Truist Financial Corp Closing Timing ◼ Targeted close in Q4’22 ◼ Transaction subject to customary closing conditions Other ◼ Key senior managers and employees to go to AFCO Credit Corporation with divested business Loans (as of 6/30/2022) $3.1Bn Origination Volume (’21A) $4.0Bn Portfolio Composition Mix (as of 6/30/2022) 61% Fixed / 39% Variable Duration (as of 6/30/2022) P&C: 4-5 Months Life: ~26 Months Yield on Loans (as of 6/30/2022) / Interest Income YTD (as of 6/30/2022) 3.8% / $53MM Net Charge Offs (’22Q2 LTM) 0.01% Employees (as of 6/30/2022) 122 Headquarters / National Office Locations Chicago / 5 Direct Operating Expenses (’21A) $36MM Summary of Key Terms Overview of Premium Finance Business 1. Represents estimated asset premium based on loan portfolio as of June 30, 2022. Asset premium is equal to the purchase price less the loan portfolio balance as of closing divided by the purchase price. Actual asset premium realized in transaction will adjust up or down based on size of loan portfolio divested at time of closing 2. Subject to customary adjustments including for net asset value of the loan portfolio at time of closing
5 Premium Finance 9% PPP Loans 2% Commercial & Industrial 28% // $6.8B Real Estate 24% Mortgage Finance 37% Key Highlights ◼ Divestiture enhances capacity to concentrate efforts and reposition our capital base in support of businesses where Texas Capital can be relevant to clients by offering broader commercial banking solutions rather than solely a loan product ◼ Year-to-date 2022 C&I loan growth of $1.5 billion, or ~20%, demonstrates emerging platform capabilities and progress relative to published strategic objectives describing target balance sheet composition Focused Portfolio Remix Commercial & Industrial 39% // $9.3bn Real Estate 21% Mortgage Finance 27% Premium Finance 13% December 31, 2020 June 30, 2022 $24.1 billion $24.5 billion June 30, 2022 excluding Premium Finance Commercial & Industrial 44% // $9.3bn Real Estate 25% Mortgage Finance 31% $21.0 billion Loan Portfolio Transformation Over Time Gross Loans HFI: