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): October 18, 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 2.02. Results of Operations and Financial Condition.
(a)On October 19, 2022, Texas Capital Bancshares, Inc. (the “Company”) issued a press release and made available presentation slides regarding its operating and financial results for its fiscal quarter ended September 30, 2022. A copy of the press release is attached hereto as Exhibit 99.1. A copy of the presentation is attached hereto as Exhibit 99.2.
The information in Item 2.02 of this report (including Exhibits 99.1 and 99.2) shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section, nor shall such information be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act of 1934, as amended, except as expressly set forth by specific reference in such a filing.
Item 5.02. Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
On October 18, 2022, the Board of Directors of the Company appointed John Cummings, age 62, to serve as Chief Administrative Officer of the Company with primary responsibility for the Company’s operations, among other matters.
Mr. Cummings joined Texas Capital Bank as Chief Administrative Officer in January 2022 with nearly 40 years of management and leadership experience in the financial services industry. Prior to joining Texas Capital Bank, he spent nine years at Citigroup Inc. serving most recently as head of its Wealth Advisory business. He previously served as Chief Operating Officer and Head of U.S. Investment Products for Citigroup Personal Wealth Management. Before Citigroup, Inc., Mr. Cummings was with Merrill Lynch & Co. for 27 years, where he began his career and advanced through assignments within Finance, Corporate Services, Sales and Head of Global Technology & Operations before serving as Chief Operating Officer of the Global Private Client business and Head of the Retirement, Trust Company, Clearing and Digital Investments businesses. Mr. Cummings has served on the Board of Directors of the Depository Trust Company, Level 8 and on the Advisory Board for Columbia University Master of Science in Technology Management program. He earned a Bachelor of Arts degree in economics from Fairfield University and is FINRA Series 7 and 24 certified.
Mr. Cummings will receive a base salary of $500,000 per year and will participate in the Company’s annual incentive compensation plan. He will be eligible for severance benefits under the Company’s Executive Change-in-Control Plan and will be provided customary health and insurance benefits under the Company’s health and welfare benefits programs.
There is no arrangement or understanding between Mr. Cummings and any other person pursuant to which Mr. Cummings was selected to serve as an executive officer of the Company. There are no family relationships between Mr. Cummings and any of our directors or executive officers. Other than his compensation while serving as the Chief Administrative Officer of Texas Capital Bank, which was the same as the compensation noted above for his service as Chief Administrative Officer of the Company, there have been no transactions since the beginning of the Company’s last fiscal year, and there are no currently proposed transactions, in which the Company was or is to be a participant and in which Mr. Cummings or any member of his immediate family had or will have any interest that are required to be reported under Item 404(a) of Regulation S-K.
Item 8.01. Other Events.
As previously announced, the Company will host a conference call and live webcast on Thursday, October 20, 2022 at 10:00 a.m. EDT to review the Company’s financial results for the period ended September 30, 2022.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits
99.1 Press Release, datedOctober 19, 2022 announcing Texas Capital Bancshares, Inc.'s operating and financial results for its fiscal quarter endedSeptember30, 2022
99.2 PresentationdatedOctober19, 2022discussing Texas Capital Bancshares, Inc.’s operating and financial results for its fiscal quarter endedSeptember30, 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: | October 19, 2022 | TEXAS CAPITAL BANCSHARES, INC. | |
|---|---|---|---|
| By: | /s/ J. Matthew Scurlock | ||
| J. Matthew Scurlock<br>Chief Financial Officer |
Document
Exhibit 99.1
| INVESTOR CONTACT |
|---|
| Jocelyn Kukulka, 469.399.8544 |
| jocelyn.kukulka@texascapitalbank.com |
| MEDIA CONTACT |
| Julia Monter, 469.399.8425 |
| julia.monter@texascapitalbank.com |
TEXAS CAPITAL BANCSHARES, INC. ANNOUNCES THIRD QUARTER 2022 RESULTS
Third quarter 2022 net income of $41.4 million and net income available to common
stockholders of $37.1 million, or $0.74 per diluted share
Achieved year-over-year operating leverage ahead of guidance
DALLAS - October 19, 2022 - Texas Capital Bancshares, Inc. (NASDAQ: TCBI), the parent company of Texas Capital Bank, announced operating results for the third quarter of 2022.
Net income available to common stockholders was $37.1 million, or $0.74 per diluted share, for the third quarter of 2022, compared to $29.8 million, or $0.59 per diluted share, for the second quarter of 2022 and $39.1 million, or $0.76 per diluted share, for the third quarter of 2021.
“The quarterly financial results demonstrate dedication towards our stated goals as we achieved year-over-year quarterly operating leverage,” said Rob C. Holmes, President and CEO. “Additionally, we calibrated our capital and expenses and built a financially resilient balance sheet with strong reserves and capital geared towards supporting our clients through market and rate driven cycles.”
| FINANCIAL RESULTS | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| (dollars and shares in thousands) | |||||||||
| 3rd Quarter | 2nd Quarter | 3rd Quarter | |||||||
| 2022 | 2022 | 2021 | |||||||
| OPERATING RESULTS | |||||||||
| Net income | $ | 41,418 | $ | 34,159 | $ | 43,390 | |||
| Net income available to common stockholders | $ | 37,105 | $ | 29,847 | $ | 39,078 | |||
| Diluted earnings per common share | $ | 0.74 | $ | 0.59 | $ | 0.76 | |||
| Diluted common shares | 50,418 | 50,802 | 51,140 | ||||||
| Return on average assets | 0.52 | % | 0.44 | % | 0.47 | % | |||
| Return on average common equity | 5.36 | % | 4.35 | % | 5.41 | % | |||
| BALANCE SHEET | |||||||||
| Loans held for investment | $ | 14,878,959 | $ | 17,517,866 | $ | 15,221,404 | |||
| Loans held for investment, mortgage finance | 4,908,822 | 6,549,507 | 8,528,313 | ||||||
| Total loans held for investment | 19,787,781 | 24,067,373 | 23,749,717 | ||||||
| Loans held for sale | 3,142,178 | 4,266 | 9,660 | ||||||
| Total assets | 30,408,513 | 32,338,963 | 36,404,320 | ||||||
| Non-interest bearing deposits | 11,494,685 | 12,555,367 | 14,970,462 | ||||||
| Total deposits | 24,498,563 | 25,440,021 | 29,813,668 | ||||||
| Stockholders’ equity | 2,885,775 | 3,006,832 | 3,147,752 |
THIRD QUARTER 2022 COMPARED TO SECOND QUARTER 2022
For the third quarter of 2022, net income available to common stockholders was $37.1 million, or $0.74 per diluted share, compared to $29.8 million, or $0.59 per diluted share, for the second quarter of 2022.
We recorded a $12.0 million provision for credit losses for the third quarter of 2022, compared to a $22.0 million provision for credit losses for the second quarter of 2022. The $12.0 million provision for credit losses recorded in the third quarter of 2022 resulted primarily from updated views on the downside risks to the economic forecast, partially offset by a decline in criticized loans.
Net interest income was $239.1 million for the third quarter of 2022, compared to $205.5 million for the second quarter of 2022. The increase in net interest income was primarily due to an increase in yields on earning assets, partially offset by an increase in funding costs. Net interest margin for the third quarter of 2022 was 3.05%, an increase of 37 basis points from the second quarter of 2022. Loans held for investment (“LHI”), excluding mortgage finance, yields increased 108 basis points from the second quarter of 2022 and LHI, mortgage finance yields increased 54 basis points from the second quarter of 2022. Total cost of deposits was 0.93% for the third quarter of 2022, a 60 basis point increase from the second quarter of 2022.
Non-interest income for the third quarter of 2022 decreased $909,000, or 3%, compared to the second quarter of 2022, primarily due to decreases in brokered loan fees and investment banking and trading income, partially offset by an increase in other non-interest income.
Non-interest expense for the third quarter of 2022 increased $32.7 million, or 20%, compared to the second quarter of 2022. The third quarter of 2022 included $13.7 million in salaries and benefits expense and $3.0 million in legal and professional expense related to the sale of our insurance premium finance subsidiary. The remaining increase in non-interest expense for the third quarter of 2022 was primarily due to an increase in salaries and benefits expense resulting from an increase in headcount.
THIRD QUARTER 2022 COMPARED TO THIRD QUARTER 2021
Net income available to common stockholders was $37.1 million, or $0.74 per diluted share, for the third quarter of 2022, compared to $39.1 million, or $0.76 per diluted share, for the third quarter of 2021.
The third quarter of 2022 included a $12.0 million provision for credit losses, resulting primarily from updated views on the downside risks to the economic forecast, partially offset by a decline in criticized loans, compared to a $5.0 million provision for credit losses for the third quarter of 2021.
Net interest income increased to $239.1 million for the third quarter of 2022, compared to $190.5 million for the third quarter of 2021, primarily due to an increase in yields on average earning assets, partially offset by an increase in funding costs. Net interest margin increased 94 basis points to 3.05% for the third quarter of 2022, as compared to the third quarter of 2021. LHI, excluding mortgage finance, yields increased 141 basis points compared to the third quarter of 2021 and LHI, mortgage finance yields increased 103 basis points from the third quarter of 2021. Total cost of deposits increased 74 basis points compared to the third quarter of 2021.
Non-interest income for the third quarter of 2022 increased $554,000, or 2%, compared to the third quarter of 2021. The increase was primarily due to increases in service charges on deposit accounts and investment banking and trading income, as well as the elimination of net losses recorded in the prior year on the sale of loans held for sale, partially offset by decreases in brokered loan fees and other non-interest income.
Non-interest expense for the third quarter of 2022 increased $44.1 million, or 29%, compared to the third quarter of 2021. The third quarter of 2022 included $13.7 million in salaries and benefits expense and $3.0 million in legal and professional expense related to the sale of our insurance premium finance subsidiary. Also contributing to the increase in non-interest expense were increases in salaries and benefits expense, resulting from an increase in headcount, and marketing expense, partially offset by a decrease in communications and technology expense related to the elimination of write-offs of certain software assets recorded in the prior year.
CREDIT QUALITY
We recorded $2.7 million in net charge-offs during the third quarter of 2022, compared to net charge-offs of $2.6 million and of $3.1 million during the second quarter of 2022 and the third quarter of 2021, respectively. Criticized loans totaled $484.0 million at September 30, 2022, compared to $603.5 million at June 30, 2022 and $728.9 million at September 30, 2021. Non-accrual LHI totaled $35.9 million at September 30, 2022, compared to $50.5 million at June 30, 2022 and $87.5 million at September 30, 2021. The ratio of non-accrual LHI to total LHI for the third quarter of 2022 was 0.18%, compared to 0.21% for the second quarter of 2022 and 0.37% for the third quarter of 2021.
REGULATORY RATIOS AND CAPITAL
All regulatory ratios continue to be in excess of “well capitalized” requirements as of September 30, 2022. Our CET 1, tier 1 capital, total capital and leverage ratios were 11.1%, 12.6%, 15.2% and 10.7%, respectively, at September 30, 2022, compared to 10.5%, 11.9%, 14.4% and 10.7%, respectively, at June 30, 2022 and 10.7%, 12.2%, 14.9% and 9.0% at September 30, 2021. At September 30, 2022, our ratio of tangible common equity to total tangible assets was 8.5%, compared to 8.3% at June 30, 2022 and 7.8% at September 30, 2021.
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.
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, TCBI’s 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. Several factors, many of which are beyond management’s 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, credit quality and risk, the COVID-19 pandemic, industry and technological changes, uncertainties related to our sale of BankDirect Capital Finance, LLC, cyber incidents or other failures, disruptions or security breaches, interest rates, commercial and residential real estate values, economic conditions, including inflation, recession, the threat of recession, and market conditions in Texas, the United States or globally, including 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, ratings or interpretations, business strategy execution, key personnel, competition, mortgage markets, fraud, environmental liability and severe weather, natural disasters, acts of war, terrorism, global conflict or other external events.
These and other factors that could cause actual results for TCBI on a consolidated basis to differ materially from those described in the forward-looking statements, including a discussion of the risks and uncertainties that may affect TCBI’s business, can be found in TCBI’s most recent Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and in other documents and filings with the SEC. 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) | |||||||||||||||
| 3rd Quarter | 2nd Quarter | 1st Quarter | 4th Quarter | 3rd Quarter | |||||||||||
| 2022 | 2022 | 2022 | 2021 | 2021 | |||||||||||
| CONSOLIDATED STATEMENTS OF INCOME | |||||||||||||||
| Interest income | $ | 322,071 | $ | 242,349 | $ | 208,530 | $ | 219,892 | $ | 216,589 | |||||
| Interest expense | 82,991 | 36,818 | 24,983 | 25,860 | 26,053 | ||||||||||
| Net interest income | 239,080 | 205,531 | 183,547 | 194,032 | 190,536 | ||||||||||
| Provision for credit losses | 12,000 | 22,000 | (2,000) | (10,000) | 5,000 | ||||||||||
| Net interest income after provision for credit losses | 227,080 | 183,531 | 185,547 | 204,032 | 185,536 | ||||||||||
| Non-interest income | 25,333 | 26,242 | 20,282 | 31,459 | 24,779 | ||||||||||
| Non-interest expense | 197,047 | 164,303 | 153,092 | 146,649 | 152,987 | ||||||||||
| Income before income taxes | 55,366 | 45,470 | 52,737 | 88,842 | 57,328 | ||||||||||
| Income tax expense | 13,948 | 11,311 | 13,087 | 23,712 | 13,938 | ||||||||||
| Net income | 41,418 | 34,159 | 39,650 | 65,130 | 43,390 | ||||||||||
| Preferred stock dividends | 4,313 | 4,312 | 4,313 | 4,313 | 4,312 | ||||||||||
| Net income available to common stockholders | $ | 37,105 | $ | 29,847 | $ | 35,337 | $ | 60,817 | $ | 39,078 | |||||
| Diluted earnings per common share | $ | 0.74 | $ | 0.59 | $ | 0.69 | $ | 1.19 | $ | 0.76 | |||||
| Diluted common shares | 50,417,884 | 50,801,628 | 51,324,027 | 51,208,161 | 51,139,555 | ||||||||||
| CONSOLIDATED BALANCE SHEET DATA | |||||||||||||||
| Total assets | $ | 30,408,513 | $ | 32,338,963 | $ | 31,085,377 | $ | 34,731,738 | $ | 36,404,320 | |||||
| Loans held for investment | 14,878,959 | 17,517,866 | 15,849,434 | 15,331,457 | 15,221,404 | ||||||||||
| Loans held for investment, mortgage finance | 4,908,822 | 6,549,507 | 5,827,965 | 7,475,497 | 8,528,313 | ||||||||||
| Loans held for sale | 3,142,178 | 4,266 | 8,085 | 8,123 | 9,660 | ||||||||||
| Interest bearing cash and cash equivalents | 3,399,638 | 4,032,931 | 5,136,680 | 7,765,996 | 8,317,926 | ||||||||||
| Investment securities | 3,369,622 | 3,552.699 | 3,642,015 | 3,583,808 | 3,663,874 | ||||||||||
| Non-interest bearing deposits | 11,494,685 | 12,555,367 | 13,434,723 | 13,390,370 | 14,970,462 | ||||||||||
| Total deposits | 24,498,563 | 25,440,021 | 25,377,938 | 28,109,365 | 29,813,668 | ||||||||||
| Short-term borrowings | 1,701,480 | 2,651,536 | 1,427,033 | 2,202,832 | 2,203,470 | ||||||||||
| Long-term debt | 930,766 | 917,098 | 929,414 | 928,738 | 928,062 | ||||||||||
| Stockholders’ equity | 2,885,775 | 3,006,832 | 3,090,038 | 3,209,616 | 3,147,752 | ||||||||||
| End of period shares outstanding | 49,897,726 | 49,878,041 | 50,710,441 | 50,618,494 | 50,605,626 | ||||||||||
| Book value | $ | 51.82 | $ | 54.27 | $ | 55.02 | $ | 57.48 | $ | 56.27 | |||||
| Tangible book value(1) | $ | 51.48 | $ | 53.93 | $ | 54.68 | $ | 57.14 | $ | 55.93 | |||||
| SELECTED FINANCIAL RATIOS | |||||||||||||||
| Net interest margin | 3.05 | % | 2.68 | % | 2.23 | % | 2.12 | % | 2.11 | % | |||||
| Return on average assets | 0.52 | % | 0.44 | % | 0.47 | % | 0.69 | % | 0.47 | % | |||||
| Return on average common equity | 5.36 | % | 4.35 | % | 4.97 | % | 8.36 | % | 5.41 | % | |||||
| Non-interest income to average earning assets | 0.33 | % | 0.34 | % | 0.25 | % | 0.34 | % | 0.27 | % | |||||
| Efficiency ratio(2) | 74.5 | % | 70.9 | % | 75.1 | % | 65.0 | % | 71.1 | % | |||||
| Non-interest expense to average earning assets | 2.53 | % | 2.16 | % | 1.86 | % | 1.60 | % | 1.69 | % | |||||
| Tangible common equity to total tangible assets(3) | 8.5 | % | 8.3 | % | 8.9 | % | 8.3 | % | 7.8 | % | |||||
| Common Equity Tier 1 | 11.1 | % | 10.5 | % | 11.5 | % | 11.1 | % | 10.7 | % | |||||
| Tier 1 capital | 12.6 | % | 11.9 | % | 13.0 | % | 12.6 | % | 12.2 | % | |||||
| Total capital | 15.2 | % | 14.4 | % | 15.7 | % | 15.3 | % | 14.9 | % | |||||
| Leverage | 10.7 | % | 10.7 | % | 9.9 | % | 9.0 | % | 9.0 | % |
(1) Stockholders’ equity excluding preferred stock, less goodwill and intangibles, divided by shares outstanding at period end.
(2) Non-interest expense divided by the sum of net interest income and non-interest income.
(3) 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) | |||||
| September 30, 2021 | % Change | ||||
| Assets | |||||
| Cash and due from banks | 240,609 | $ | 217,125 | 11 | % |
| Interest bearing cash and cash equivalents | 8,317,926 | (59) | % | ||
| Available-for-sale debt securities | 3,623,266 | (34) | % | ||
| Held-to-maturity debt securities | — | 100 | % | ||
| Equity securities | 40,608 | (19) | % | ||
| Investment securities | 3,663,874 | (8) | % | ||
| Loans held for sale | 9,660 | N/M | |||
| Loans held for investment, mortgage finance | 8,528,313 | (42) | % | ||
| Loans held for investment | 15,221,404 | (2) | % | ||
| Less: Allowance for credit losses on loans | 221,957 | 6 | % | ||
| Loans held for investment, net | 23,527,760 | (17) | % | ||
| Mortgage servicing rights, net | 1,158 | (100) | % | ||
| Premises and equipment, net | 21,119 | 29 | % | ||
| Accrued interest receivable and other assets | 628,335 | 3 | % | ||
| Other assets held for sale | — | 100 | % | ||
| Goodwill and intangibles, net | 17,363 | (91) | % | ||
| Total assets | 30,408,513 | $ | 36,404,320 | (16) | % |
| Liabilities and Stockholders’ Equity | |||||
| Liabilities: | |||||
| Non-interest bearing deposits | 11,494,685 | $ | 14,970,462 | (23) | % |
| Interest bearing deposits | 14,843,206 | (12) | % | ||
| Total deposits | 29,813,668 | (18) | % | ||
| Accrued interest payable | 8,920 | 107 | % | ||
| Other liabilities | 302,448 | (2) | % | ||
| Other liabilities held for sale | — | 100 | % | ||
| Short-term borrowings | 2,203,470 | (23) | % | ||
| Long-term debt | 928,062 | — | % | ||
| Total liabilities | 33,256,568 | (17) | % | ||
| Stockholders’ equity: | |||||
| Preferred stock, .01 par value, 1,000 liquidation value: | |||||
| Authorized shares - 10,000,000 | |||||
| Issued shares - 300,000 shares issued at September 30, 2022 and 2021 | 300,000 | — | % | ||
| Common stock, .01 par value: | |||||
| Authorized shares - 100,000,000 | |||||
| Issued shares - 50,840,022 and 50,606,043 at September 30, 2022 and 2021, respectively | 506 | 1 | % | ||
| Additional paid-in capital | 1,000,509 | 2 | % | ||
| Retained earnings | 1,887,457 | 9 | % | ||
| Treasury stock - 942,296 and 417 shares at cost at September 30, 2022 and 2021, respectively | (8) | N/M | |||
| Accumulated other comprehensive loss, net of taxes | (40,712) | N/M | |||
| Total stockholders’ equity | 3,147,752 | (8) | % | ||
| Total liabilities and stockholders’ equity | 30,408,513 | $ | 36,404,320 | (16) | % |
All values are in US Dollars.
| TEXAS CAPITAL BANCSHARES, INC. | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) | |||||||||||||||
| (dollars in thousands except per share data) | |||||||||||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||
| Interest income | |||||||||||||||
| Interest and fees on loans | $ | 282,473 | $ | 202,748 | $ | 688,420 | $ | 616,153 | |||||||
| Investment securities | 15,002 | 10,235 | 46,969 | 31,040 | |||||||||||
| Interest bearing cash and cash equivalents | 24,596 | 3,606 | 37,561 | 9,500 | |||||||||||
| Total interest income | 322,071 | 216,589 | 772,950 | 656,693 | |||||||||||
| Interest expense | |||||||||||||||
| Deposits | 60,317 | 14,719 | 94,513 | 50,994 | |||||||||||
| Short-term borrowings | 10,011 | 748 | 15,628 | 3,842 | |||||||||||
| Long-term debt | 12,663 | 10,586 | 34,651 | 27,052 | |||||||||||
| Total interest expense | 82,991 | 26,053 | 144,792 | 81,888 | |||||||||||
| Net interest income | 239,080 | 190,536 | 628,158 | 574,805 | |||||||||||
| Provision for credit losses | 12,000 | 5,000 | 32,000 | (20,000) | |||||||||||
| Net interest income after provision for credit losses | 227,080 | 185,536 | 596,158 | 594,805 | |||||||||||
| Non-interest income | |||||||||||||||
| Service charges on deposit accounts | 5,701 | 4,622 | 17,726 | 13,972 | |||||||||||
| Wealth management and trust fee income | 3,631 | 3,382 | 11,594 | 9,380 | |||||||||||
| Brokered loan fees | 3,401 | 6,032 | 11,504 | 22,276 | |||||||||||
| Servicing income | 212 | 292 | 677 | 15,236 | |||||||||||
| Investment banking and trading income | 7,812 | 4,127 | 23,117 | 17,985 | |||||||||||
| Net gain/(loss) on sale of loans held for sale | — | (1,185) | — | 1,317 | |||||||||||
| Other | 4,576 | 7,509 | 7,239 | 26,605 | |||||||||||
| Total non-interest income | 25,333 | 24,779 | 71,857 | 106,771 | |||||||||||
| Non-interest expense | |||||||||||||||
| Salaries and benefits | 129,336 | 87,503 | 333,319 | 261,855 | |||||||||||
| Occupancy expense | 9,433 | 8,324 | 27,192 | 24,463 | |||||||||||
| Marketing | 8,282 | 2,123 | 21,765 | 5,720 | |||||||||||
| Legal and professional | 16,775 | 11,055 | 38,365 | 28,479 | |||||||||||
| Communications and technology | 18,470 | 28,374 | 48,819 | 58,695 | |||||||||||
| Federal Deposit Insurance Corporation insurance assessment | 3,953 | 4,500 | 11,252 | 16,339 | |||||||||||
| Servicing-related expenses | — | 2,396 | — | 27,740 | |||||||||||
| Other | 10,798 | 8,712 | 33,730 | 29,072 | |||||||||||
| Total non-interest expense | 197,047 | 152,987 | 514,442 | 452,363 | |||||||||||
| Income before income taxes | 55,366 | 57,328 | 153,573 | 249,213 | |||||||||||
| Income tax expense | 13,948 | 13,938 | 38,346 | 60,404 | |||||||||||
| Net income | 41,418 | 43,390 | 115,227 | 188,809 | |||||||||||
| Preferred stock dividends | 4,313 | 4,312 | 12,938 | 14,408 | |||||||||||
| Net income available to common stockholders | $ | 37,105 | $ | 39,078 | $ | 102,289 | $ | 174,401 | |||||||
| Basic earnings per common share | $ | 0.74 | $ | 0.77 | $ | 2.03 | $ | 3.45 | |||||||
| Diluted earnings per common share | $ | 0.74 | $ | 0.76 | $ | 2.00 | $ | 3.41 | |||||||
| TEXAS CAPITAL BANCSHARES, INC. | |||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| SUMMARY OF CREDIT LOSS EXPERIENCE | |||||||||||||||
| (dollars in thousands) | |||||||||||||||
| 3rd Quarter | 2nd Quarter | 1st Quarter | 4th Quarter | 3rd Quarter | |||||||||||
| 2022 | 2022 | 2022 | 2021 | 2021 | |||||||||||
| Allowance for credit losses on loans: | |||||||||||||||
| Beginning balance | $ | 229,013 | $ | 211,151 | $ | 211,866 | $ | 221,957 | $ | 221,511 | |||||
| Loans charged-off: | |||||||||||||||
| Commercial | 232 | 2,868 | 110 | 3,776 | 4,348 | ||||||||||
| Energy | 2,903 | — | — | — | — | ||||||||||
| Real estate | — | — | 350 | — | — | ||||||||||
| Total charge-offs | 3,135 | 2,868 | 460 | 3,776 | 4,348 | ||||||||||
| Recoveries: | |||||||||||||||
| Commercial | 113 | 219 | 217 | 1,933 | 1,104 | ||||||||||
| Energy | 289 | — | 755 | 601 | 42 | ||||||||||
| Real estate | — | — | — | 205 | 112 | ||||||||||
| Total recoveries | 402 | 219 | 972 | 2,739 | 1,258 | ||||||||||
| Net charge-offs | 2,733 | 2,649 | (512) | 1,037 | 3,090 | ||||||||||
| Provision for credit losses on loans | 8,333 | 20,511 | (1,227) | (9,054) | 3,536 | ||||||||||
| Ending balance | $ | 234,613 | $ | 229,013 | $ | 211,151 | $ | 211,866 | $ | 221,957 | |||||
| Allowance for off-balance sheet credit losses: | |||||||||||||||
| Beginning balance | $ | 17,981 | $ | 16,492 | $ | 17,265 | $ | 18,211 | $ | 16,747 | |||||
| Provision for off-balance sheet credit losses | 3,667 | 1,489 | (773) | (946) | 1,464 | ||||||||||
| Ending balance | $ | 21,648 | $ | 17,981 | $ | 16,492 | $ | 17,265 | $ | 18,211 | |||||
| Total allowance for credit losses | $ | 256,261 | $ | 246,994 | $ | 227,643 | $ | 229,131 | $ | 240,168 | |||||
| Total provision for credit losses | $ | 12,000 | $ | 22,000 | $ | (2,000) | $ | (10,000) | $ | 5,000 | |||||
| Allowance for credit losses on loans to total loans held for investment | 1.19 | % | 0.95 | % | 0.97 | % | 0.93 | % | 0.93 | % | |||||
| Allowance for credit losses on loans to average total loans held for investment | 1.06 | % | 1.02 | % | 0.99 | % | 0.91 | % | 0.95 | % | |||||
| Net charge-offs to average total loans held for investment(1) | 0.05 | % | 0.05 | % | (0.01) | % | 0.02 | % | 0.05 | % | |||||
| Net charge-offs to average total loans held for investment for last 12 months(1) | 0.03 | % | 0.03 | % | 0.03 | % | 0.06 | % | 0.33 | % | |||||
| Total provision for credit losses to average total loans held for investment(1) | 0.22 | % | 0.39 | % | (0.04) | % | (0.17) | % | 0.09 | % | |||||
| Total allowance for credit losses to total loans held for investment | 1.30 | % | 1.03 | % | 1.05 | % | 1.00 | % | 1.01 | % |
(1)Interim period ratios are annualized.
| TEXAS CAPITAL BANCSHARES, INC. | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| SUMMARY OF NON-PERFORMING ASSETS AND PAST DUE LOANS | |||||||||||||||
| (dollars in thousands) | |||||||||||||||
| 3rd Quarter | 2nd Quarter | 1st Quarter | 4th Quarter | 3rd Quarter | |||||||||||
| 2022 | 2022 | 2022 | 2021 | 2021 | |||||||||||
| Non-accrual loans held for investment | $ | 35,864 | $ | 50,526 | $ | 59,327 | $ | 72,502 | $ | 87,532 | |||||
| Non-accrual loans held for sale(1) | 1,340 | — | — | — | — | ||||||||||
| Other real estate owned | — | — | — | — | — | ||||||||||
| Total non-performing assets | $ | 37,204 | $ | 50,526 | $ | 59,327 | $ | 72,502 | $ | 87,532 | |||||
| Non-accrual loans held for investment to total loans held for investment | 0.18 | % | 0.21 | % | 0.27 | % | 0.32 | % | 0.37 | % | |||||
| Total non-performing assets to total assets | 0.12 | % | 0.16 | % | 0.19 | % | 0.21 | % | 0.24 | % | |||||
| Allowance for credit losses on loans to non-accrual loans held for investment | 6.5x | 4.5x | 3.6x | 2.9x | 2.5x | ||||||||||
| Loans held for investment past due 90 days and still accruing | $ | 30,664 | $ | 3,206 | $ | 6,031 | $ | 3,467 | $ | 3,405 | |||||
| Loans held for investment past due 90 days to total loans held for investment | 0.15 | % | 0.01 | % | 0.03 | % | 0.02 | % | 0.01 | % | |||||
| Loans held for sale past due 90 days and still accruing(1)(2) | $ | 4,877 | $ | 1,602 | $ | 3,865 | $ | 3,986 | $ | 3,808 |
(1)Third quarter 2022 includes $1.3 million in non-accrual loans and $3.1 million in loans past due 90 days and still accruing associated to our insurance premium finance subsidiary that were transferred from loans held for investment to loans held for sale as of September 30, 2022.
(2)Includes loans guaranteed by U.S. government agencies that were repurchased out of Ginnie Mae securities. Loans are recorded as loans held for sale 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.
| TEXAS CAPITAL BANCSHARES, INC. | ||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) | ||||||||||||||||||||||||||||||
| (dollars in thousands) | ||||||||||||||||||||||||||||||
| 3rd Quarter | 2nd Quarter | 1st Quarter | 4th Quarter | 3rd Quarter | ||||||||||||||||||||||||||
| 2022 | 2022 | 2022 | 2021 | 2021 | ||||||||||||||||||||||||||
| Interest income | ||||||||||||||||||||||||||||||
| Interest and fees on loans | $ | 282,473 | $ | 218,290 | $ | 187,657 | $ | 204,379 | $ | 202,748 | ||||||||||||||||||||
| Investment securities | 15,002 | 14,665 | 17,302 | 11,780 | 10,235 | |||||||||||||||||||||||||
| Interest bearing deposits in other banks | 24,596 | 9,394 | 3,571 | $ | 3,733 | $ | 3,606 | |||||||||||||||||||||||
| Total interest income | 322,071 | 242,349 | 208,530 | 219,892 | 216,589 | |||||||||||||||||||||||||
| Interest expense | ||||||||||||||||||||||||||||||
| Deposits | 60,317 | 20,566 | 13,630 | 14,513 | 14,719 | |||||||||||||||||||||||||
| Short-term borrowings | 10,011 | 4,859 | 758 | 771 | 748 | |||||||||||||||||||||||||
| Long-term debt | 12,663 | 11,393 | 10,595 | 10,576 | 10,586 | |||||||||||||||||||||||||
| Total interest expense | 82,991 | 36,818 | 24,983 | 25,860 | 26,053 | |||||||||||||||||||||||||
| Net interest income | 239,080 | 205,531 | 183,547 | 194,032 | 190,536 | |||||||||||||||||||||||||
| Provision for credit losses | 12,000 | 22,000 | (2,000) | (10,000) | 5,000 | |||||||||||||||||||||||||
| Net interest income after provision for credit losses | 227,080 | 183,531 | 185,547 | 204,032 | 185,536 | |||||||||||||||||||||||||
| Non-interest income | ||||||||||||||||||||||||||||||
| Service charges on deposit accounts | 5,701 | 6,003 | 6,022 | 4,702 | 4,622 | |||||||||||||||||||||||||
| Wealth management and trust fee income | 3,631 | 4,051 | 3,912 | 3,793 | 3,382 | |||||||||||||||||||||||||
| Brokered loan fees | 3,401 | 4,133 | 3,970 | 5,678 | 6,032 | |||||||||||||||||||||||||
| Servicing income | 212 | 228 | 237 | 277 | 292 | |||||||||||||||||||||||||
| Investment banking and trading income | 7,812 | 11,126 | 4,179 | 6,456 | 4,127 | |||||||||||||||||||||||||
| Net gain/(loss) on sale of loans held for sale | — | — | — | — | (1,185) | |||||||||||||||||||||||||
| Other | 4,576 | 701 | 1,962 | 10,553 | 7,509 | |||||||||||||||||||||||||
| Total non-interest income | 25,333 | 26,242 | 20,282 | 31,459 | 24,779 | |||||||||||||||||||||||||
| Non-interest expense | ||||||||||||||||||||||||||||||
| Salaries and benefits | 129,336 | 103,885 | 100,098 | 89,075 | 87,503 | |||||||||||||||||||||||||
| Occupancy expense | 9,433 | 8,874 | 8,885 | 8,769 | 8,324 | |||||||||||||||||||||||||
| Marketing | 8,282 | 8,506 | 4,977 | 4,286 | 2,123 | |||||||||||||||||||||||||
| Legal and professional | 16,775 | 11,288 | 10,302 | 12,673 | 11,055 | |||||||||||||||||||||||||
| Communications and technology | 18,470 | 15,649 | 14,700 | 16,490 | 28,374 | |||||||||||||||||||||||||
| Federal Deposit Insurance Corporation insurance assessment | 3,953 | 3,318 | 3,981 | 4,688 | 4,500 | |||||||||||||||||||||||||
| Servicing-related expenses | — | — | — | 25 | 2,396 | |||||||||||||||||||||||||
| Other | 10,798 | 12,783 | 10,149 | 10,643 | 8,712 | |||||||||||||||||||||||||
| Total non-interest expense | 197,047 | 164,303 | 153,092 | 146,649 | 152,987 | |||||||||||||||||||||||||
| Income before income taxes | 55,366 | 45,470 | 52,737 | 88,842 | 57,328 | |||||||||||||||||||||||||
| Income tax expense | 13,948 | 11,311 | 13,087 | 23,712 | 13,938 | |||||||||||||||||||||||||
| Net income | 41,418 | 34,159 | 39,650 | 65,130 | 43,390 | |||||||||||||||||||||||||
| Preferred stock dividends | 4,313 | 4,312 | 4,313 | 4,313 | 4,312 | |||||||||||||||||||||||||
| Net income available to common shareholders | $ | 37,105 | $ | 29,847 | $ | 35,337 | $ | 60,817 | $ | 39,078 | ||||||||||||||||||||
| TEXAS CAPITAL BANCSHARES, INC. | ||||||||||||||||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| TAXABLE EQUIVALENT NET INTEREST INCOME ANALYSIS (UNAUDITED)(1) | ||||||||||||||||||||||||||||||
| (dollars in thousands) | ||||||||||||||||||||||||||||||
| 3rd Quarter 2022 | 2nd Quarter 2022 | 1st Quarter 2022 | 4th Quarter 2021 | 3rd Quarter 2021 | ||||||||||||||||||||||||||
| Average<br>Balance | Income/<br>Expense | Yield/<br>Rate | Average<br>Balance | Income/<br>Expense | Yield/<br>Rate | Average<br>Balance | Income/<br>Expense | Yield/<br>Rate | Average<br>Balance | Income/<br>Expense | Yield/<br>Rate | Average<br>Balance | Income/<br>Expense | Yield/<br>Rate | ||||||||||||||||
| Assets | ||||||||||||||||||||||||||||||
| Investment securities(2) | $ | 3,509,044 | $ | 15,002 | 1.58 | % | $ | 3,543,576 | $ | 15,065 | 1.60 | % | $ | 3,669.257 | $ | 17,743 | 1.91 | % | $ | 3,608,503 | $ | 12,225 | 1.34 | % | $ | 3,775,812 | $ | 10,684 | 1.12 | % |
| Interest bearing cash and cash equivalents | 4,453,806 | 24,596 | 2.19 | % | 4,747,377 | 9,394 | 0.79 | % | 8,552,300 | 3,571 | 0.17 | % | 9,760,735 | 3,733 | 0.15 | % | 9,046,095 | 3,606 | 0.16 | % | ||||||||||
| Loans held for sale | 1,029,983 | 11,316 | 4.36 | % | 8,123 | 62 | 3.07 | % | 7,633 | 113 | 6.01 | % | 8,348 | 51 | 2.41 | % | 18,791 | 54 | 1.14 | % | ||||||||||
| Loans held for investment, mortgage finance | 5,287,531 | 52,756 | 3.96 | % | 5,858,599 | 49,914 | 3.42 | % | 5,732,901 | 43,466 | 3.07 | % | 7,901,534 | 57,949 | 2.91 | % | 7,987,521 | 58,913 | 2.93 | % | ||||||||||
| Loans held for investment(3) | 16,843,922 | 218,512 | 5.15 | % | 16,616,234 | 168,407 | 4.07 | % | 15,686.319 | 144,134 | 3.73 | % | 15,348,322 | 146,436 | 3.79 | % | 15,266,167 | 143,864 | 3.74 | % | ||||||||||
| Less: Allowance for credit losses on loans | 229,005 | — | — | 211,385 | — | — | 212,612 | — | — | 223,034 | — | — | 220,984 | — | — | |||||||||||||||
| Loans held for investment, net | 21,902,448 | 271,268 | 4.91 | % | 22,263,448 | 218,321 | 3.93 | % | 21,206,608 | 187,600 | 3.59 | % | 23,026,822 | 204,385 | 3.52 | % | 23,032,704 | 202,777 | 3.49 | % | ||||||||||
| Total earning assets | 30,895,281 | 322,182 | 4.10 | % | 30,562,524 | 242,842 | 3.16 | % | 33,435,798 | 209,027 | 2.54 | % | 36,404,408 | 220,394 | 2.40 | % | 35,873,402 | 217,121 | 2.40 | % | ||||||||||
| Cash and other assets | 918,630 | 870,396 | 819,486 | 835,293 | 855,555 | |||||||||||||||||||||||||
| Total assets | $ | 31,813,911 | $ | 31,432,920 | $ | 34,255,284 | $ | 37,239,701 | $ | 36,728,957 | ||||||||||||||||||||
| Liabilities and Stockholders’ Equity | ||||||||||||||||||||||||||||||
| Transaction deposits | $ | 1,444,964 | $ | 5,239 | 1.44 | % | $ | 1,671,729 | $ | 3,920 | 0.94 | % | $ | 2,432,687 | $ | 3,962 | 0.66 | % | $ | 3,007,337 | $ | 4,664 | 0.62 | % | $ | 3,012,547 | $ | 4,737 | 0.62 | % |
| Savings deposits | 10,249,387 | 46,555 | 1.80 | % | 8,696,819 | 15,462 | 0.71 | % | 10,420,545 | 8,583 | 0.33 | % | 10,529,645 | 8,419 | 0.32 | % | 10,044,995 | 8,262 | 0.33 | % | ||||||||||
| Time deposits | 1,701,238 | 8,523 | 1.99 | % | 877,399 | 1,184 | 0.54 | % | 1,038,722 | 1,085 | 0.42 | % | 1,276,800 | 1,430 | 0.44 | % | 1,640,562 | 1,720 | 0.42 | % | ||||||||||
| Total interest bearing deposits | 13,395,589 | 60,317 | 1.79 | % | 11,245,947 | 20,566 | 0.73 | % | 13,891,954 | 13,630 | 0.40 | % | 14,813,782 | 14,513 | 0.39 | % | 14,698,104 | 14,719 | 0.40 | % | ||||||||||
| Short-term borrowings | 1,931,537 | 10,011 | 2.06 | % | 2,232,119 | 4,859 | 0.87 | % | 1,770,781 | 758 | 0.17 | % | 2,267,013 | 771 | 0.13 | % | 2,299,692 | 748 | 0.13 | % | ||||||||||
| Long-term debt | 921,707 | 12,663 | 5.45 | % | 929,616 | 11,393 | 4.92 | % | 929,005 | 10,595 | 4.63 | % | 928,307 | 10,576 | 4.52 | % | 927,626 | 10,586 | 4.53 | % | ||||||||||
| Total interest bearing liabilities | 16,248,833 | 82,991 | 2.03 | % | 14,407,682 | 36,818 | 1.02 | % | 16,591,740 | 24,983 | 0.61 | % | 18,009,102 | 25,860 | 0.57 | % | 17,925,422 | 26,053 | 0.58 | % | ||||||||||
| Non-interest bearing deposits | 12,214,531 | 13,747,876 | 14,235,749 | 15,804,061 | 15,363,568 | |||||||||||||||||||||||||
| Other liabilities | 305,554 | 227,701 | 243,141 | 238,833 | 275,317 | |||||||||||||||||||||||||
| Stockholders’ equity | 3,044,993 | 3,049,661 | 3,184,654 | 3,187,705 | 3,164,650 | |||||||||||||||||||||||||
| Total liabilities and stockholders’ equity | $ | 31,813,911 | $ | 31,432,920 | $ | 34,255,284 | $ | 37,239,701 | $ | 36,728,957 | ||||||||||||||||||||
| Net interest income | $ | 239,191 | $ | 206,024 | $ | 184,044 | $ | 194,534 | $ | 191,068 | ||||||||||||||||||||
| Net interest margin | 3.05 | % | 2.68 | % | 2.23 | % | 2.12 | % | 2.11 | % |
(1) Taxable equivalent rates used where applicable.
(2) Yields on investment securities are calculated using available-for-sale securities at amortized cost.
(3) Average balances include non-accrual loans.
10
a3q2022_earningsxpresent
© 2022 Texas Capital Bank Member FDIC October 19, 2022 Q3-2022 Earnings
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, TCBI’s 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. Several factors, many of which are beyond management’s 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, credit quality and risk, the COVID-19 pandemic, industry and technological changes, uncertainties related to our sale of BankDirect Capital Finance, LLC, cyber incidents or other failures, disruptions or security breaches, interest rates, commercial and residential real estate values, economic conditions, including inflation, recession, and market conditions in Texas, the United States or globally, including 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, ratings or interpretations, business strategy execution, key personnel, competition, mortgage markets, fraud, environmental liability and severe weather, natural disasters, acts of war, terrorism, global conflict or other external events. These and other factors that could cause actual results for TCBI on a consolidated basis to differ materially from those described in the forward-looking statements, including a discussion of the risks and uncertainties that may affect TCBI’s business, can be found in TCBI’s most recent Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and in other documents and filings we make with the SEC. The information contained in this communication speaks only as of its date. Except to the extent required by applicable law or regulation, TCBI disclaims 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 Serving strong core Texas markets with expanded coverage and a complete set of capabilities Improving client relevance and diversifying our revenue base Attracting high-quality talent with significant experience Our Distinct Opportunity Operating from a de-risked position of financial strength
4 Performance Metrics Return on Average Assets 0.18% 0.67% 0.47% >1.10% Return on Average Tangible Common Equity5 2.1% 8.4% 4.9% >12.5% CET1 9.4% 11.1% 11.1% 9%–10% Where We Started Where We Are Going Balance Sheet 2020 2021 YTD 2022 2025 FY Average Liquidity Assets4 (% of Total Average Assets) 28% 37% 27% >20% FY Average Indexed Deposits (% of Total Deposits) 36% 27% 20% <15% Where We Started Where We Are Going Income Statement 2020 2021 YTD 2022 2025 Investment Banking and Trading Income (% of Total Revenue)1 2.5% 2.8% 3.3% ~10% Treasury Product Fees2 (% of Total Revenue)1 1.6% 2.6% 3.2% ~5% Non-interest Income3 (% of Total Revenue)1 11.2% 13.4% 10.3% 15%–20% Strategic Performance Drivers Announced September 1st Talent Frontline Talent Growth 1.0x 1.4x 1.8x 2.3x
5 Our Path Forward Operating Model Aligned to our Vision, Grounded in our Values Clear Strategic Direction and Fortitude to Deliver Organized Around Client Delivery Product & Industry Specialization Frontline Growth Technology New Products and Services Treasury Solutions Private Wealth Investment Banking Expanding Coverage Business Banking Middle Market Banking Corporate Banking Evaluating Opportunities for Growth Disciplined Capital Management Structured Criteria Guiding Programmatic Investment Optimizing Capital Allocation Across the Portfolio Committed to Financial Resilience Resulting business model poised to generate structurally higher, more sustainable earnings through enhanced fee income and decreased thru-cycle asset sensitivity Our ability to serve our clients, access markets, and support our community through cycles is a strategic multiplier Risk Management Granular Risk Rating System Values Driven Culture Improved Portfolio Positioning Capital and Liquidity 3Q22 CET1: 11.1% 3Q22 Avg. Liquidity Assets4: 22% of Avg. Assets YoY TBV6 per Share Growth: -8.0%
6 Expanding Coverage and Enhanced Product and Services Financial Performance Q3’ 21 Q4’ 21 Q1’ 22 Q2’ 22 Q3’ 22 YoY Assets Under Management ($B) $2.5 $2.7 $2.7 $2.6 $2.6 3% Treasury Product Fees2 ($M) $5.8 $6.0 $7.4 $7.6 $7.4 27% Wealth Management & Trust Fee Income ($M) $3.4 $3.8 $3.9 $4.1 $3.6 7% Investment Banking and Trading Income ($M) $4.1 $6.5 $4.2 $11.1 $7.8 89% Income From Areas of Focus ($M) $13.4 $16.3 $15.5 $22.8 $18.9 41% Financial Performance (Period End) Q3’ 21 Q4’ 21 Q1’ 22 Q2’ 22 Q3’ 22 YoY Business, Middle Market, and Corporate Banking Talent 1.4x 1.7x 2.1x 2.3x 2.5x Business, Middle Market, and Corporate Banking Deposits ($B) $7.0 $7.7 $7.1 $7.3 $6.9 (1%) C&I Loans7 Excl Insurance Premium Finance Loans ($B) $7.2 $7.8 $8.1 $9.4 $10.0 38% Real Estate Loans ($B) $5.2 $4.8 $4.9 $5.1 $5.0 (4%) Treasury Solutions Private Wealth Investment Banking Business Banking Middle Market Banking Corporate Banking Strong growth trends in core operating deposits; Treasury Product Fees up 27%, YoY Gross PxV continues to trend favorably as rapidly expanding product suite gaining traction with clients AUM increased 3% YoY; pressured market conditions offset by continued strong net organic flows Focused investment across the platform in products, client experience, and talent Platform build remains on schedule with client receptivity despite challenging market conditions YTD income up 29% (89% YoY); Capital Solutions, Syndicated Finance, Sales & Trading all contributing Poised for improved contribution with average frontline tenure of less than 6 months Targeted investments in providing financial services to Texas communities and small businesses Continued focus on best-in-class Texas-based clients; loans are up 17% YoY Partnership with Texas Capital Securities resulting in additional mandates Industry vertical segmentation maturing; client acquisition strategy continues to be substantiated Non-credit fee income is ramping; gross PxV is up 40% YoY
7 Focused on the Future Current Financial Priorities Building Tangible Book Value // Reinvesting organically generated capital to improve client relevance and create a more valuable franchise Investment // Re-aligning the expense base to directly support the business and investing aggressively to take advantage of market opportunities that we are uniquely positioned to serve Revenue Growth // Growing top- line revenue as a result of expanded banking capabilities for best-in-class clients in our Texas and national markets Flagship Results Proactive, disciplined engagement with the best clients in our markets to provide the talent, products, and offerings they need through their entire life-cycles Structurally higher, more sustainable earnings driving greater performance and lower annual variability Consistent communication, enhanced accountability, and a bias for action ensure execution and delivery Commitment to financial resilience allowing us to serve clients, access markets, and support communities through all cycles Higher quality earnings and a lower cost of capital drive a significant expansion in incremental shareholder returns
8 Financial Performance Financial Highlights ($M) Q3 2021 Q2 2022 Q3 2022 Net Interest Income $190.5 $205.5 $239.1 Non-Interest Revenue 24.8 26.2 25.3 Total Revenue 215.3 231.8 264.4 Non-Interest Expense 153.0 164.3 197.0 PPNR8 62.3 67.5 67.4 Provision for Credit Losses 5.0 22.0 12.0 Income Tax Expense 13.9 11.3 13.9 Net Income 43.4 34.2 41.4 Preferred Stock Dividends 4.3 4.3 4.3 Net Income to Common 39.1 29.8 37.1 Key Performance Metrics Return on Average Assets 0.47% 0.44% 0.52% PPNR8 / Average Assets 0.67% 0.86% 0.84% Efficiency Ratio9 71% 71% 75% Return On Average Common Equity 5.41% 4.35% 5.36% Earnings Per Share $0.76 $0.59 $0.74 Tangible Book Value6 per Share $55.93 $53.93 $51.48 Net income to common of $37.1 million, $0.74 per diluted share, or $0.98 per diluted share excluding divestiture transaction expenses Deliberate balance sheet positioning coupled with sustained execution on defined growth initiatives drove a 16.3% increase in net interest income QoQ as interest rates continued to increase Strategic focus on expanding products and services resulting in positive trends in targeted fee categories—treasury, wealth management fees and investment banking fees increased 41% YoY Service charges on deposits down slightly QoQ due to increased client fee credits from higher deposit rates but up 23.4% YoY Non-interest expense continues to grow as expected, with a larger- portion increasingly allocated to higher-value activities directly supporting our defined strategy Total non-interest expense up $32.7 million, or 19.9% QoQ, including $16.7 million of transaction expenses related to the divestiture of insurance premium finance loan portfolio Transaction expenses: $13.7 million in salaries and benefits and $3.0 million in legal and professional Excluding the transaction expenses, total non-interest expense increased $16.1 million, or 9.8% QoQ, driven by an $11.8 million increase in salaries and benefits, and a $2.8 million increase in technology Provision expense of $12 million was predominantly related to updated views on the downside risks to the economic forecast offset by QoQ improvement in criticized assets Tangible book value per share decline QoQ was attributed to $163.2 million additional AOCI impairment during the quarter from valuations on both the securities portfolio and the cash flow hedges portfolio
9 $7.2B $7.8B $8.1B $9.4B $10.0B $2.7B $2.7B $2.9B $3.1B $3.1B Q3 2021 Q4 2021 Q1 2022 Q2 2022 Q3 2022 Q3 2022 EOP $8.4B $7.6B $8.0B $7.9B $5.7B $5.9B $5.3B $4.9B Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 Q2 2022 Q3 2022 MFLs $5.2B $4.8B $4.9B $5.1B $5.0B Q3 2021 Q4 2021 Q1 2022 Q2 2022 Q3 2022 52% 47% 49% 51% 53% 55% 57% 59% 61% Loan Portfolio 11 Average Mortgage Finance Loans11 Period End Loan Trends (excl. PPP) Utilization Rates10 C&I Loans7 Excl Insurance Premium Finance Loans grew $569 million or 6% QoQ Real Estate Loans declined 2% QoQ on par with expectations as payoffs remain elevated; thru-cycle strategy centered on client selection In the industry-wide contracting market, average MFLs11 declined 10% QoQ comparing favorably to observed sector trends C&I Loans7 Excl Insurance Premium Finance Loans Real Estate Loans 51% LTM Average Insurance Premium Finance Loans
10 3.25% 0.39% 1.62% 0.39% 1.79% 0.19% 0.93% 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% Q4 2021 Q1 2022 Q2 2022 Q3 2022 0.19% 0.19% 0.20% 0.33% 0.93% 0.28% 0.28% 0.30% 0.47% 1.04% Q3 2021 Q4 2021 Q1 2022 Q2 2022 Q3 2022 Avg Cost of Total Deposits Total Cost of Funds Q3 2022 EOP $15.4B $13.7B $12.2B $11.5B $7.6B $6.6B $9.3B $9.2B $7.1B $4.7B $4.1B $3.8B Q3 2021 Q2 2022 Q3 2022 Q3 2022 EOP $17.5B $15.7B $13.6B $13.9B $13.2B $10.7B $12.0B $11.7B $1.6B $1.2B $1.1B $0.9B $0.7B $0.6B $1.4B $1.3B $14.4B $15.1B $15.4B $15.8B $14.2B $13.7B $12.2B $11.5B Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 Q2 2022 Q3 2022 Interest-bearing Core Interest-bearing Brokered Non-interest Bearing Deposits and Fundings Funding CostsDeposit Composition (Average) Non-interest Bearing Indexed Funding base continuing multi-year transition to target state composition NIB balances of 47% Mortgage Finance deposit volumes remain pressured in current market environment Indexed deposits further reduced by $700 million; now at long-term target level 15% of total deposits Average Cost of Total Deposits increased 60 bps QoQ; a cumulative beta of 25% since the beginning of the current tightening cycle 57% cumulative beta in the last tightening cycle (Sep-15 to Jun-19) Interest Bearing Average Deposit Trends 23% 25% 52% 15% 38% 47% $30.1B $25.0B $25.6B $24.5B $33.5B $32.0B $30.1B $30.6B $28.1B $25.0B $25.6B $24.5B Current Cycle Rates Paid Betas12 Int. Bearing Rate Int. Bearing excl. Indexed Rate Fed Funds Upper TargetTotal Deposit Rate 19% 26% 55% 16% 36% 48% Cumulative Betas 47% 41% 25%
11 -9.9% 5.9% 9.9% 7.3% 14.4% 17.7% 12.9% Q3 2021 Q2 2022 Q3 2022 -100bps Shock +100bps Shock +200bps Shock Net Interest Income Sensitivity Standard Model Assumptions 100bp & 200bp Parallel Shocks Loan Balances: Static Deposit Balances: Static Indexed Deposits: Ratio held constant at 15% Loan Spreads: Current Levels Total Deposit Beta: ~50% Investment Portfolio: Ratio held constant Loan Repricing Detail // Gross LHI excl. MFLs11 and BDCF TCBI NII Sensitivity The asset sensitivity profile of the bank decreased QoQ primarily driven by $2.25 billion in swaps executed during the quarter which reduced asset sensitivity by approx 2% Swaps executed during the quarter had an average receive fixed rate of 3.1% and duration of 37 months Actions create a more stable medium-term NIM profile, while lowering rates-fall risk LHI excl. MFLs11: 8% fixed / 92% variable $4.9 billion (33%) of LHI excl. MFLs11 have contractual floors All loans with floors are acting as variable rate loans MFLs11 represent 22% of the total Loan portfolio with the majority tied to 1 month LIBOR which rose 136 bps in Q3 2022 Overall Mortgage Finance NII will not be as sensitive to changes in index rates as the rest of the portfolio due to the pricing dynamic of the associated deposits held in non-interest bearing accounts Bank’s overall Net Interest Income sensitivity (7.3%, $77M and 12.9%, $135M for Q3 2022) inclusive of Mortgage Finance NII impact $163M Base NII13 $727M $920M $1,045M Hedging Profile $91M $135M $77M ($104M) $43M $105M ($M) Notional Balance Fixed Rate Q2 2022 750 5.01% Q3 2022 3,000 3.61% Q4 2022 3,000 3.61% 2023 3,000 3.61% 2024 2,750 3.54% ($14.9B) Q3 2022 Fixed 8% Prime 20% 1 Month 66% 3 Month 4% 6 Month 2% Variable 92% Total 100%
12 $26.2 -$0.3 -$0.4 -$0.7 -$3.3 $3.8 $25.3 $4.1M $7.8M $3.4M $3.6M$4.6M $5.7M 2.22% 2.04% 2.02% 2.11% 2.12% 2.23% 2.68% 3.05% Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 Q2 2022 Q3 2022 Non-Interest Income Walk ($M)Fee Income DetailNon-Interest Income Q3-2022 Earnings Overview Deposit Service Charges Investment Banking and Trading Wealth Management Q3 2021 Q3 2022 Q 2 2 0 2 2 D e p os it S e rv ic e C h a rg e s W e a lth M a n ag e m e nt Q 3 2 0 2 2 B ro ke re d Lo a n F ee s In ve st m e n t B a n ki n g & T ra d in g O th er I n co m e +23% +7% +89% Net Interest Income Net Interest Margin $24.8M $26.2M $25.3M Q3 2021 Q2 2022 Q3 2022 % of Revenue 12% 11% 10% $205.5M $7.9M $58.3M -$1.9M $15.5M -$39.8M -$6.4M $239.1M Q2 2022 Loan Volume Loan Yield Loan Fees Investment Securities & Cash Deposits Borrowings Q3 2022
13 0.24% 0.21% 0.19% 0.16% 0.12% 3.07% 2.56% 2.20% 2.51% 2.45% Q3 2021 Q4 2021 Q1 2022 Q2 2022 Q3 2022 NPAs / Total Assets Criticized / Loans HFI 37% 38% 65% 24% 1% 11% 4% 3% 52% 34% 31% Q3 2021 Q2 2022 Q3 2022 Commercial Mortgage Energy Real Estate $87.5M $103.9M $115.6M $65.5M $60.4M $64.7M $16.7M Q3 2021 Q2 2022 Q3 2022 Medium-term CET1 Target 10.70% 10.46% 11.08% 10.00% 1.52% 1.45% 1.51% 2.73% 2.51% 2.66% Q3 2021 Q2 2022 Q3 2022 Criticized Composition | YoYCredit Quality Q3-2022 Earnings Overview 34% $729M $484M Expense base continues repositioning for enhanced client experience and future scale Capital remains above historical averages with Total Capital Ratio and TCE6/Tangible Assets in the top 20 percentile of peers14 Reserve levels in top 30 percentile among peers14 Enterprise disciplines supporting a values-driven credit culture, driving criticized loans down 34% YoY Q2 $144.6 million mortgage finance downgrade has been resolved; no losses recognized by CRT investors or TCBICET1 Tier 1 Capital Tier 2 Capital $153.0M $164.3M $197.0M Salaries & Benefits Other NIE Divestiture Transaction Costs Non-interest Expense $604M Regulatory Capital Levels 59% 57% 33% 43% 8% 63% 37% Q3 2021 Q2 2022 Q3 2022 14.95% 15.25% Asset Quality Ratios 14.42% 1.42% 1.20% 1.51% 2.5x 4.5x 6.5x ACL on Loans / Loans HFI excl MFLs ACL on Loans / Non- accrual Loans HFI
14 Full Year 2022 Guidance Full Year 2022 Guidance Average Mortgage Finance Loans11 Mid-30% Decline Total Revenue Mid-to-High Single Digit % Growth Non-Interest Expense Mid Teens % Growth Quarterly Operating Leverage (YoY Growth in Quarterly PPNR8) Maintain Forward curve15 assumes 2022 terminal rate of 4.50% Fed Funds Non-interest expense growth guidance excludes insurance premium finance loan portfolio divestiture transaction expenses Guidance Commentary
15 1. Total Revenue in 2020 and 2021 excludes Correspondent Lending; See slide: Appendix // Correspondent Lending Historical Contribution 2. Includes service charges on deposit accounts, as well as fees related to our commercial card program, merchant transactions, wire fees, and FX transactions, all of which are included in other non-interest income and totaled $3.1M for FY 2020, $4.4M for 2021, $4.7M for Q3-YTD 2022 and $1.2M, $1.3M, $1.3M, $1.6M, and $1.7M for Q3 2021, Q4 2021, Q1 2022, Q2 2022, and Q3 2022 respectively 3. Non-interest Income for 2020 and 2021 excludes Correspondent Lending; See slide: Appendix // Correspondent Lending Historical Contribution 4. Includes interest-bearing cash and cash equivalents, available-for-sale debt securities, and equity securities 5. See slide: Appendix // Return on Average Tangible Common Equity (ROTCE) 6. Stockholders’ equity excluding preferred stock, less goodwill and intangibles (includes $15.5M of BankDirect Capital Finance (“BDCF”) goodwill and intangibles reclassed to other assets held for sale as of 9/30/2022) 7. C&I Loans includes Commercial and Energy loans and excludes PPP loans 8. Net interest income and non-interest income, less non-interest expense 9. Non-interest expense divided by the sum of net interest income and non-interest income 10. Outstanding loans divided by total commitments excluding Mortgage Finance Loans and leases 11. Total Mortgage Finance Loans (MFLs) include Mortgage Warehouse loans and Correspondent Lending Loans held for sale 12. Beta taken as the difference of Q3 2022 and Q4 2021 cost of total deposits, cost of interest-bearing deposits, and cost of indexed deposits divided by the change in fed funds upper target over the same period 13. Baseline scenarios hold constant balances, market rates, and assumptions as of period end reporting 14. Compared to major exchange traded peer banks with $20-100B in assets as of Q2 2022, excluding PR headquartered banks and merger targets Source: S&P Capital IQ Pro 15. Forward curve as of September 16, 2022 Appendix // Footnotes
16 Appendix // Correspondent Lending Historical Contribution Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 LHS (Average) LHS (Period-end) $70.6M $75.5M $95.3M $105.4M $121.1M $1.3M $1.2M $0.0M Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 MSR (Period-end) Risk Weighted ~50% Risk Weighted 250% ($M) Q1 2020 Q2 2020 Q3 2020 Q4 2020 FY 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 FY 2021 Net Interest Income 24.5 1.5 2.8 1.4 30.2 0.9 0.3 0.0 0.0 1.2 Non-interest Income Brokered Loan Fees 2.6 2.8 5.8 3.9 15.1 2.2 0.7 0.0 0.0 2.9 Servicing Income 4.6 5.9 7.1 8.6 26.2 8.8 5.7 0.0 0.0 14.5 Gain/(Loss) on Sale of LHS (13.0) 39.0 25.2 6.8 58.0 5.6 (3.1) (1.2) 0.0 1.3 Non-Interest Expense Salaries & Benefits 3.6 3.5 4.5 3.4 15.0 3.0 3.1 0.4 0.3 6.8 Marketing 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Legal & Professional 0.8 0.6 0.8 0.9 3.1 1.0 0.8 0.3 0.2 2.3 Communications & Tech 0.7 1.4 1.0 1.0 4.1 0.4 0.3 1.3 0.5 2.5 Servicing-Related Expenses 16.4 20.1 12.3 15.9 64.7 13.0 12.4 2.4 0.0 27.8 Other Expense 0.5 0.5 0.4 0.7 2.1 0.7 0.6 0.6 0.2 2.1
17 Appendix // Return on Average Tangible Common Equity (ROTCE) ROTCE is a non-GAAP financial measure. ROTCE represents the measure of net income available to common shareholders as a percentage of average tangible common equity. ROTCE is used by management in assessing financial performance and use of equity. A reconcilement of ROTCE to the most directly comparable U.S. GAAP measure, ROCE, for all periods presented below. (1) Ratios are annualized (2) Includes BDCF goodwill and intangibles reclassed to other assets held for sale as of 9/30/2022 2020 ($000s) YTD 20221 ($000s) Net Income Available to Common Stockholders Average Common Equity Less: Average Goodwill and Intangibles Average Tangible Common Equity ROCE ROTCE $56,539 $2,686,747 17,857 $2,668,890 2.1% 2.1% $102,289 $2,792,591 17,0922 $2,775,499 4.9% 4.9% 2021 ($000s) $235,218 $2,815,656 17,447 $2,798,209 8.4% 8.4%