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): January 18, 2023
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 January 18, 2023, 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 and year ended December 31, 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 8.01. Other Events.
Announcement of Share Repurchase Program
On January 18, 2023, our board of directors authorized a new share repurchase program under which we may repurchase up to $150.0 million in shares of our outstanding common stock. Any repurchases under the repurchase program will be made in accordance with applicable securities laws from time to time in open market or private transactions. The extent to which we repurchase shares, and the timing of such repurchases, will be at management’s discretion and will depend upon a variety of factors, including market conditions, our capital position and amount of retained earnings, regulatory requirements and other considerations. No time limit was set for the completion of the share repurchase program, and the program may be suspended or discontinued at any time.
Announcement of Earnings Call
As previously announced, the Company will host a conference call and live webcast on Thursday, January 19, 2023 at 9:00 a.m. EDT to review the Company’s financial results for the period ended December 31, 2022.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits
99.1 Press Release, datedJanuarya1182023exhibit991.htm18, 2023announcing Texas Capital Bancshares, Inc.'s operating and financial results for its fiscal quarterand yearendedDecember 31, 2022
99.2 Presentation datedJanuary18, 2023discussing Texas Capital Bancshares, Inc.’s operating and financial results for its fiscal quarterand yearendedDecember 31, 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: | January 18, 2023 | 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 FOURTH QUARTER AND FULL YEAR 2022 RESULTS
Fourth quarter 2022 net income of $217.3 million and net income available to common
stockholders of $212.9 million, or $4.23 per diluted share
Repurchased $65.3 million shares of common stock at tangible book value
Completed the sale of BankDirect Capital Finance, LLC recognizing $248.5 million pre-tax gain on sale
Record level regulatory capital ratios, including 13.0% CET 1 and 17.7% Total Capital
DALLAS - January 18, 2023 - Texas Capital Bancshares, Inc. (NASDAQ: TCBI), the parent company of Texas Capital Bank, announced operating results for the fourth quarter and full year of 2022.
Net income available to common stockholders was $212.9 million, or $4.23 per diluted share, for the fourth quarter of 2022, compared to $37.1 million, or $0.74 per diluted share, for the third quarter of 2022 and $60.8 million, or $1.19 per diluted share, for the fourth quarter of 2021. The fourth quarter of 2022 included a $248.5 million ($3.83 per diluted share) gain and $13.0 million ($-0.20 per diluted share) in expenses related to the sale of the Company’s insurance premium finance subsidiary, BankDirect Capital Finance, LLC (“BDCF”), $9.8 million ($-0.15 per diluted share) in restructuring reserves related to the continued deployment of our target operating model and $8.0 million ($-0.12 per diluted share) in charitable contributions to the newly formed Texas Capital Bank Foundation.
“The quarterly financial results coupled with the strategic and transformative actions taken during 2022 position the Firm to execute on the unique opportunity in front of us, while serving the best clients in the best markets,” said Rob C. Holmes, President and CEO. “The financial resilience created over the last two years by the aggregate, focused actions taken have built the foundation of the Firm which will be our strategic advantage allowing us to both support our clients during times of market stress while delivering financial progress to all of our stakeholders.”
| FINANCIAL RESULTS | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (dollars and shares in thousands) | |||||||||||||||
| 4th Quarter | 3rd Quarter | 4th Quarter | Full Year | Full Year | |||||||||||
| 2022 | 2022 | 2021 | 2022 | 2021 | |||||||||||
| OPERATING RESULTS | |||||||||||||||
| Net income | $ | 217,251 | $ | 41,418 | $ | 65,130 | $ | 332,478 | $ | 253,939 | |||||
| Net income available to common stockholders | $ | 212,939 | $ | 37,105 | $ | 60,817 | $ | 315,228 | $ | 235,218 | |||||
| Diluted earnings per common share | $ | 4.23 | $ | 0.74 | $ | 1.19 | $ | 6.18 | $ | 4.60 | |||||
| Diluted common shares | 50,283 | 50,418 | 51,208 | 51,047 | 51,141 | ||||||||||
| Return on average assets | 2.80 | % | 0.52 | % | 0.69 | % | 1.04 | % | 0.67 | % | |||||
| Return on average common equity | 30.66 | % | 5.36 | % | 8.36 | % | 11.33 | % | 8.35 | % | |||||
| BALANCE SHEET | |||||||||||||||
| Loans held for investment | $ | 15,197,307 | $ | 14,878,959 | $ | 15,331,457 | |||||||||
| Loans held for investment, mortgage finance | 4,090,033 | 4,908,822 | 7,475,497 | ||||||||||||
| Total loans held for investment | 19,287,340 | 19,787,781 | 22,806,954 | ||||||||||||
| Loans held for sale | 36,357 | 3,142,178 | 8,123 | ||||||||||||
| Total assets | 28,414,642 | 30,408,513 | 34,731,738 | ||||||||||||
| Non-interest bearing deposits | 9,618,081 | 11,494,685 | 13,390,370 | ||||||||||||
| Total deposits | 22,856,880 | 24,498,563 | 28,109,365 | ||||||||||||
| Stockholders’ equity | 3,055,351 | 2,885,775 | 3,209,616 |
FOURTH QUARTER 2022 COMPARED TO THIRD QUARTER 2022
For the fourth quarter of 2022, net income available to common stockholders was $212.9 million, or $4.23 per diluted share, compared to $37.1 million, or $0.74 per diluted share, for the third quarter of 2022.
Provision for credit losses for the fourth quarter of 2022 was $34.0 million, compared to a $12.0 million provision for credit losses for the third quarter of 2022. The $34.0 million provision for credit losses recorded in the fourth quarter of 2022 resulted primarily from increases in net charge-offs, criticized loans and loans held for investment (“LHI”), excluding mortgage finance.
Net interest income was $247.6 million for the fourth quarter of 2022, compared to $239.1 million for the third quarter of 2022. The increase in net interest income was primarily due to an increase in yields on earning assets, partially offset by a decline in total average loans and an increase in funding costs. Net interest margin for the fourth quarter of 2022 was 3.26%, an increase of 21 basis points from the third quarter of 2022. LHI, excluding mortgage finance, yields increased 115 basis points from the third quarter of 2022 and LHI, mortgage finance yields increased 9 basis points from the third quarter of 2022. Total cost of deposits was 1.53% for the fourth quarter of 2022, a 60 basis point increase from the third quarter of 2022.
Non-interest income for the fourth quarter of 2022 increased $252.3 million, compared to the third quarter of 2022, primarily due to a $248.5 million gain recognized on the sale of our insurance premium finance subsidiary as well as an increase in investment banking and trading income.
Non-interest expense for the fourth quarter of 2022 increased $16.0 million, or 8%, compared to the third quarter of 2022. Fourth quarter expenses included $13.0 million in legal and professional expense related to the sale of BDCF, restructuring reserves of $9.8 million, primarily related to occupancy expense, reflecting the expected costs of the continued implementation of the Company’s target operating model and $8.0 million in charitable contributions to the newly formed Texas Capital Bank Foundation recorded in other non-interest expense. Third quarter expenses included $3.1 million in legal and professional expense and $13.7 million in salaries and benefits expense related to the sale of BDCF.
FOURTH QUARTER 2022 COMPARED TO FOURTH QUARTER 2021
Net income available to common stockholders was $212.9 million, or $4.23 per diluted share, for the fourth quarter of 2022, compared to $60.8 million, or $1.19 per diluted share, for the fourth quarter of 2021.
The fourth quarter of 2022 included a $34.0 million provision for credit losses, resulting primarily from updated views on the downside risks to the economic forecast and an increase in net charge-offs, compared to a $10.0 million negative provision for credit losses for the fourth quarter of 2021.
Net interest income increased to $247.6 million for the fourth quarter of 2022, compared to $194.0 million for the fourth 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 114 basis points to 3.26% for the fourth quarter of 2022, as compared to the fourth quarter of 2021. LHI, excluding mortgage finance, yields increased 251 basis points compared to the fourth quarter of 2021 and LHI, mortgage finance yields increased 114 basis points from the fourth quarter of 2021. Total cost of deposits increased 134 basis points compared to the fourth quarter of 2021.
Non-interest income for the fourth quarter of 2022 increased $246.2 million, compared to the fourth quarter of 2021. The increase was primarily due to a $248.5 million gain recognized on the sale of BDCF, as well as an increase in investment banking and trading income, partially offset by a decrease in brokered loan fees.
Non-interest expense for the fourth quarter of 2022 increased $66.4 million, or 45%, compared to the fourth quarter of 2021. The fourth quarter of 2022 included $13.0 million in legal and professional expense related to the sale of BDCF, restructuring reserves totaling $9.8 million and charitable contributions of $8.0 million, all of which are discussed above. Also contributing to the increase in non-interest expense was an increase in salaries and benefits expense, resulting from an increase in headcount as compared to the fourth quarter of 2021.
CREDIT QUALITY
Net charge-offs of $15.0 million were recorded during the fourth quarter of 2022, as expected losses on certain legacy credits have moved closer to resolution, compared to net charge-offs of $2.7 million and $1.0 million during the third quarter of 2022 and the fourth quarter of 2021, respectively. Criticized loans totaled $513.2 million at December 31, 2022, compared to $484.0 million at September 30, 2022 and $582.9 million at December 31, 2021. Non-accrual LHI totaled $48.3 million at December 31, 2022, compared to $35.9 million at September 30, 2022 and $72.5 million at December 31, 2021. The ratio of non-accrual LHI to total LHI for the fourth quarter of 2022 was 0.25%, compared to 0.18% for the third quarter of 2022 and 0.32% for the fourth quarter of 2021. The ratio of total allowance for credit losses to total LHI was 1.43% at December 31, 2022, compared to 1.30% and 1.00% at September 30, 2022 and December 31, 2021, respectively,
REGULATORY RATIOS AND CAPITAL
All regulatory ratios continue to be in excess of “well capitalized” requirements as of December 31, 2022. Our CET 1, tier 1 capital, total capital and leverage ratios were 13.0%, 14.7%, 17.7% and 11.5%, respectively, at December 31, 2022, compared to 11.1%,
12.6%, 15.2% and 10.7%, respectively, at September 30, 2022 and 11.1%, 12.6%, 15.3% and 9.0% at December 31, 2021. At December 31, 2022, our ratio of tangible common equity to total tangible assets was 9.7%, compared to 8.5% at September 30, 2022 and 8.3% at December 31, 2021.
During the fourth quarter of 2022, the Company repurchased 1,141,239 shares of its common stock for an aggregate purchase price of $65.3 million, at a weighted average price of $57.20 per share. On January 18, 2023, the Company’s board of directors authorized a new share repurchase program under which the Company may repurchase up to $150.0 million in shares of our outstanding common stock.
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 “believes,” “projects,” “expects,” “may,” “estimates,” “should,” “plans,” “targets,” “intends” “could,” “would,” “anticipates,” “potential,” “confident,” “optimistic” or the negative thereof, or other variations thereon, or comparable terminology, or by discussions of strategy, objectives, estimates, guidance, expectations and future plans.
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 unpredictability of economic and business conditions that may impact TCBI or its customers, the COVID-19 pandemic, the Company’s ability to effective manage its liquidity risk and any growth plans and the availability of capital and funding, the Company’s ability to effectively manage information technology systems, cyber incidents or other failures, disruptions or security breaches, interest rates, commercial and residential real estate values, adverse or unexpected 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, the failure to identify, attract and retain key personnel, increased or expanded competition from banks and other financial service providers in TCBI’s markets, the failure to maintain adequate regulatory capital, environmental liability associated with properties related to TCBI’s lending activities, and severe weather, natural disasters, acts of war, terrorism, global conflict or other external events, climate change and related legislative and regulatory initiatives.
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) | |||||||||||||||
| 4th Quarter | 3rd Quarter | 2nd Quarter | 1st Quarter | 4th Quarter | |||||||||||
| 2022 | 2022 | 2022 | 2022 | 2021 | |||||||||||
| CONSOLIDATED STATEMENTS OF INCOME | |||||||||||||||
| Interest income | $ | 371,287 | $ | 322,071 | $ | 242,349 | $ | 208,530 | $ | 219,892 | |||||
| Interest expense | 123,687 | 82,991 | 36,818 | 24,983 | 25,860 | ||||||||||
| Net interest income | 247,600 | 239,080 | 205,531 | 183,547 | 194,032 | ||||||||||
| Provision for credit losses | 34,000 | 12,000 | 22,000 | (2,000) | (10,000) | ||||||||||
| Net interest income after provision for credit losses | 213,600 | 227,080 | 183,531 | 185,547 | 204,032 | ||||||||||
| Non-interest income | 277,672 | 25,333 | 26,242 | 20,282 | 31,459 | ||||||||||
| Non-interest expense | 213,090 | 197,047 | 164,303 | 153,092 | 146,649 | ||||||||||
| Income before income taxes | 278,182 | 55,366 | 45,470 | 52,737 | 88,842 | ||||||||||
| Income tax expense | 60,931 | 13,948 | 11,311 | 13,087 | 23,712 | ||||||||||
| Net income | 217,251 | 41,418 | 34,159 | 39,650 | 65,130 | ||||||||||
| Preferred stock dividends | 4,312 | 4,313 | 4,312 | 4,313 | 4,313 | ||||||||||
| Net income available to common stockholders | $ | 212,939 | $ | 37,105 | $ | 29,847 | $ | 35,337 | $ | 60,817 | |||||
| Diluted earnings per common share | $ | 4.23 | $ | 0.74 | $ | 0.59 | $ | 0.69 | $ | 1.19 | |||||
| Diluted common shares | 50,282,663 | 50,417,884 | 50,801,628 | 51,324,027 | 51,208,161 | ||||||||||
| CONSOLIDATED BALANCE SHEET DATA | |||||||||||||||
| Total assets | $ | 28,414,642 | $ | 30,408,513 | $ | 32,338,963 | $ | 31,085,377 | $ | 34,731,738 | |||||
| Loans held for investment | 15,197,307 | 14,878,959 | 17,517,866 | 15,849,434 | 15,331,457 | ||||||||||
| Loans held for investment, mortgage finance | 4,090,033 | 4,908,822 | 6,549,507 | 5,827,965 | 7,475,497 | ||||||||||
| Loans held for sale | 36,357 | 3,142,178 | 4,266 | 8,085 | 8,123 | ||||||||||
| Interest bearing cash and cash equivalents | 4,778,623 | 3,399,638 | 4,032,931 | 5,136,680 | 7,765,996 | ||||||||||
| Investment securities | 3,585,114 | 3,369.622 | 3,552.699 | 3,642,015 | 3,583,808 | ||||||||||
| Non-interest bearing deposits | 9,618,081 | 11,494,685 | 12,555,367 | 13,434,723 | 13,390,370 | ||||||||||
| Total deposits | 22,856,880 | 24,498,563 | 25,440,021 | 25,377,938 | 28,109,365 | ||||||||||
| Short-term borrowings | 1,201,142 | 1,701,480 | 2,651,536 | 1,427,033 | 2,202,832 | ||||||||||
| Long-term debt | 931,442 | 930,766 | 917,098 | 929,414 | 928,738 | ||||||||||
| Stockholders’ equity | 3,055,351 | 2,885,775 | 3,006,832 | 3,090,038 | 3,209,616 | ||||||||||
| End of period shares outstanding | 48,783,763 | 49,897,726 | 49,878,041 | 50,710,441 | 50,618,494 | ||||||||||
| Book value per share | $ | 56.48 | $ | 51.82 | $ | 54.27 | $ | 55.02 | $ | 57.48 | |||||
| Tangible book value per share(1) | $ | 56.45 | $ | 51.48 | $ | 53.93 | $ | 54.68 | $ | 57.14 | |||||
| SELECTED FINANCIAL RATIOS | |||||||||||||||
| Net interest margin | 3.26 | % | 3.05 | % | 2.68 | % | 2.23 | % | 2.12 | % | |||||
| Return on average assets | 2.80 | % | 0.52 | % | 0.44 | % | 0.47 | % | 0.69 | % | |||||
| Return on average common equity | 30.66 | % | 5.36 | % | 4.35 | % | 4.97 | % | 8.36 | % | |||||
| Non-interest income to average earning assets | 3.70 | % | 0.33 | % | 0.34 | % | 0.25 | % | 0.34 | % | |||||
| Efficiency ratio(2) | 40.6 | % | 74.5 | % | 70.9 | % | 75.1 | % | 65.0 | % | |||||
| Non-interest expense to average earning assets | 2.84 | % | 2.53 | % | 2.16 | % | 1.86 | % | 1.60 | % | |||||
| Common equity to total assets | 9.7 | % | 8.5 | % | 8.4 | % | 9.0 | % | 8.4 | % | |||||
| Tangible common equity to total tangible assets(3) | 9.7 | % | 8.5 | % | 8.3 | % | 8.9 | % | 8.3 | % | |||||
| Common Equity Tier 1 | 13.0 | % | 11.1 | % | 10.5 | % | 11.5 | % | 11.1 | % | |||||
| Tier 1 capital | 14.7 | % | 12.6 | % | 11.9 | % | 13.0 | % | 12.6 | % | |||||
| Total capital | 17.7 | % | 15.2 | % | 14.4 | % | 15.7 | % | 15.3 | % | |||||
| Leverage | 11.5 | % | 10.7 | % | 10.7 | % | 9.9 | % | 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) | |||||
| December 31, 2021 | % Change | ||||
| Assets | |||||
| Cash and due from banks | 233,637 | $ | 180,663 | 29 | % |
| Interest bearing cash and cash equivalents | 7,765,996 | (38) | % | ||
| Available-for-sale debt securities | 3,538,201 | (26) | % | ||
| Held-to-maturity debt securities | — | 100 | % | ||
| Equity securities | 45,607 | (26) | % | ||
| Investment securities | 3,583,808 | — | % | ||
| Loans held for sale | 8,123 | N/M | |||
| Loans held for investment, mortgage finance | 7,475,497 | (45) | % | ||
| Loans held for investment | 15,331,457 | (1) | % | ||
| Less: Allowance for credit losses on loans | 211,866 | 20 | % | ||
| Loans held for investment, net | 22,595,088 | (16) | % | ||
| Premises and equipment, net | 20,901 | 26 | % | ||
| Accrued interest receivable and other assets | 559,897 | 28 | % | ||
| Goodwill and intangibles, net | 17,262 | (91) | % | ||
| Total assets | 28,414,642 | $ | 34,731,738 | (18) | % |
| Liabilities and Stockholders’ Equity | |||||
| Liabilities: | |||||
| Non-interest bearing deposits | 9,618,081 | $ | 13,390,370 | (28) | % |
| Interest bearing deposits | 14,718,995 | (10) | % | ||
| Total deposits | 28,109,365 | (19) | % | ||
| Accrued interest payable | 7,699 | N/M | |||
| Other liabilities | 273,488 | 26 | % | ||
| Short-term borrowings | 2,202,832 | (45) | % | ||
| Long-term debt | 928,738 | — | % | ||
| Total liabilities | 31,522,122 | (20) | % | ||
| Stockholders’ equity: | |||||
| Preferred stock, .01 par value, 1,000 liquidation value: | |||||
| Authorized shares - 10,000,000 | |||||
| Issued shares - 300,000 shares issued at December 31, 2022 and 2021 | 300,000 | — | % | ||
| Common stock, .01 par value: | |||||
| Authorized shares - 100,000,000 | |||||
| Issued shares - 50,867,298 and 50,618,911 at December 31, 2022 and 2021, respectively | 506 | 1 | % | ||
| Additional paid-in capital | 1,008,559 | 2 | % | ||
| Retained earnings | 1,948,274 | 16 | % | ||
| Treasury stock - 2,083,535 and 417 shares at cost at December 31, 2022 and 2021, respectively | (8) | N/M | |||
| Accumulated other comprehensive loss, net of taxes | (47,715) | N/M | |||
| Total stockholders’ equity | 3,209,616 | (5) | % | ||
| Total liabilities and stockholders’ equity | 28,414,642 | $ | 34,731,738 | (18) | % |
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 December 31, | Twelve Months Ended December 31, | ||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||
| Interest income | |||||||||||||||
| Interest and fees on loans | $ | 295,367 | $ | 204,379 | $ | 983,787 | $ | 820,532 | |||||||
| Investment securities | 16,210 | 11,780 | 63,179 | 42,820 | |||||||||||
| Interest bearing cash and cash equivalents | 59,710 | 3,733 | 97,271 | 13,233 | |||||||||||
| Total interest income | 371,287 | 219,892 | 1,144,237 | 876,585 | |||||||||||
| Interest expense | |||||||||||||||
| Deposits | 96,150 | 14,513 | 190,663 | 65,507 | |||||||||||
| Short-term borrowings | 13,449 | 771 | 29,077 | 4,613 | |||||||||||
| Long-term debt | 14,088 | 10,576 | 48,739 | 37,628 | |||||||||||
| Total interest expense | 123,687 | 25,860 | 268,479 | 107,748 | |||||||||||
| Net interest income | 247,600 | 194,032 | 875,758 | 768,837 | |||||||||||
| Provision for credit losses | 34,000 | (10,000) | 66,000 | (30,000) | |||||||||||
| Net interest income after provision for credit losses | 213,600 | 204,032 | 809,758 | 798,837 | |||||||||||
| Non-interest income | |||||||||||||||
| Service charges on deposit accounts | 5,150 | 4,702 | 22,876 | 18,674 | |||||||||||
| Wealth management and trust fee income | 3,442 | 3,793 | 15,036 | 13,173 | |||||||||||
| Brokered loan fees | 2,655 | 5,678 | 14,159 | 27,954 | |||||||||||
| Servicing income | 180 | 277 | 857 | 15,513 | |||||||||||
| Investment banking and trading income | 11,937 | 6,456 | 35,054 | 24,441 | |||||||||||
| Net gain/(loss) on sale of loans held for sale | (990) | — | (990) | 1,317 | |||||||||||
| Gain on disposal of subsidiary | 248,526 | — | 248,526 | — | |||||||||||
| Other | 6,772 | 10,553 | 14,011 | 37,158 | |||||||||||
| Total non-interest income | 277,672 | 31,459 | 349,529 | 138,230 | |||||||||||
| Non-interest expense | |||||||||||||||
| Salaries and benefits | 103,490 | 89,075 | 436,809 | 350,930 | |||||||||||
| Occupancy expense | 17,030 | 8,769 | 44,222 | 33,232 | |||||||||||
| Marketing | 10,623 | 4,286 | 32,388 | 10,006 | |||||||||||
| Legal and professional | 37,493 | 12,673 | 75,858 | 41,152 | |||||||||||
| Communications and technology | 20,434 | 16,490 | 69,253 | 75,185 | |||||||||||
| Federal Deposit Insurance Corporation insurance assessment | 3,092 | 4,688 | 14,344 | 21,027 | |||||||||||
| Servicing-related expenses | — | 25 | — | 27,765 | |||||||||||
| Other | 20,928 | 10,643 | 54,658 | 39,715 | |||||||||||
| Total non-interest expense | 213,090 | 146,649 | 727,532 | 599,012 | |||||||||||
| Income before income taxes | 278,182 | 88,842 | 431,755 | 338,055 | |||||||||||
| Income tax expense | 60,931 | 23,712 | 99,277 | 84,116 | |||||||||||
| Net income | 217,251 | 65,130 | 332,478 | 253,939 | |||||||||||
| Preferred stock dividends | 4,312 | 4,313 | 17,250 | 18,721 | |||||||||||
| Net income available to common stockholders | $ | 212,939 | $ | 60,817 | $ | 315,228 | $ | 235,218 | |||||||
| Basic earnings per common share | $ | 4.28 | $ | 1.20 | $ | 6.25 | $ | 4.65 | |||||||
| Diluted earnings per common share | $ | 4.23 | $ | 1.19 | $ | 6.18 | $ | 4.60 | |||||||
| TEXAS CAPITAL BANCSHARES, INC. | |||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| SUMMARY OF CREDIT LOSS EXPERIENCE | |||||||||||||||
| (dollars in thousands) | |||||||||||||||
| 4th Quarter | 3rd Quarter | 2nd Quarter | 1st Quarter | 4th Quarter | |||||||||||
| 2022 | 2022 | 2022 | 2022 | 2021 | |||||||||||
| Allowance for credit losses on loans: | |||||||||||||||
| Beginning balance | $ | 234,613 | $ | 229,013 | $ | 211,151 | $ | 211,866 | $ | 221,957 | |||||
| Loans charged-off: | |||||||||||||||
| Commercial | 14,404 | 232 | 2,868 | 110 | 3,776 | ||||||||||
| Energy | 2,702 | 2,903 | — | — | — | ||||||||||
| Real estate | — | — | — | 350 | — | ||||||||||
| Total charge-offs | 17,106 | 3,135 | 2,868 | 460 | 3,776 | ||||||||||
| Recoveries: | |||||||||||||||
| Commercial | 133 | 113 | 219 | 217 | 1,933 | ||||||||||
| Energy | 1,974 | 289 | — | 755 | 601 | ||||||||||
| Real estate | — | — | — | — | 205 | ||||||||||
| Total recoveries | 2,107 | 402 | 219 | 972 | 2,739 | ||||||||||
| Net charge-offs | 14,999 | 2,733 | 2,649 | (512) | 1,037 | ||||||||||
| Provision for credit losses on loans | 33,855 | 8,333 | 20,511 | (1,227) | (9,054) | ||||||||||
| Ending balance | $ | 253,469 | $ | 234,613 | $ | 229,013 | $ | 211,151 | $ | 211,866 | |||||
| Allowance for off-balance sheet credit losses: | |||||||||||||||
| Beginning balance | $ | 21,648 | $ | 17,981 | $ | 16,492 | $ | 17,265 | $ | 18,211 | |||||
| Provision for off-balance sheet credit losses | 145 | 3,667 | 1,489 | (773) | (946) | ||||||||||
| Ending balance | $ | 21,793 | $ | 21,648 | $ | 17,981 | $ | 16,492 | $ | 17,265 | |||||
| Total allowance for credit losses | $ | 275,262 | $ | 256,261 | $ | 246,994 | $ | 227,643 | $ | 229,131 | |||||
| Total provision for credit losses | $ | 34,000 | $ | 12,000 | $ | 22,000 | $ | (2,000) | $ | (10,000) | |||||
| Allowance for credit losses on loans to total loans held for investment | 1.31 | % | 1.19 | % | 0.95 | % | 0.97 | % | 0.93 | % | |||||
| Allowance for credit losses on loans to average total loans held for investment | 1.31 | % | 1.06 | % | 1.02 | % | 0.99 | % | 0.91 | % | |||||
| Net charge-offs to average total loans held for investment(1) | 0.31 | % | 0.05 | % | 0.05 | % | (0.01) | % | 0.02 | % | |||||
| Net charge-offs to average total loans held for investment for last 12 months(1) | 0.09 | % | 0.03 | % | 0.03 | % | 0.03 | % | 0.06 | % | |||||
| Total provision for credit losses to average total loans held for investment(1) | 0.70 | % | 0.22 | % | 0.39 | % | (0.04) | % | (0.17) | % | |||||
| Total allowance for credit losses to total loans held for investment | 1.43 | % | 1.30 | % | 1.03 | % | 1.05 | % | 1.00 | % |
(1)Interim period ratios are annualized.
| TEXAS CAPITAL BANCSHARES, INC. | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| SUMMARY OF NON-PERFORMING ASSETS AND PAST DUE LOANS | |||||||||||||||
| (dollars in thousands) | |||||||||||||||
| 4th Quarter | 3rd Quarter | 2nd Quarter | 1st Quarter | 4th Quarter | |||||||||||
| 2022 | 2022 | 2022 | 2022 | 2021 | |||||||||||
| Non-accrual loans held for investment | $ | 48,338 | $ | 35,864 | $ | 50,526 | $ | 59,327 | $ | 72,502 | |||||
| Non-accrual loans held for sale(1) | — | 1,340 | — | — | — | ||||||||||
| Other real estate owned | — | — | — | — | — | ||||||||||
| Total non-performing assets | $ | 48,338 | $ | 37,204 | $ | 50,526 | $ | 59,327 | $ | 72,502 | |||||
| Non-accrual loans held for investment to total loans held for investment | 0.25 | % | 0.18 | % | 0.21 | % | 0.27 | % | 0.32 | % | |||||
| Total non-performing assets to total assets | 0.17 | % | 0.12 | % | 0.16 | % | 0.19 | % | 0.21 | % | |||||
| Allowance for credit losses on loans to non-accrual loans held for investment | 5.2x | 6.5x | 4.5x | 3.6x | 2.9x | ||||||||||
| Loans held for investment past due 90 days and still accruing | $ | 131 | $ | 30,664 | $ | 3,206 | $ | 6,031 | $ | 3,467 | |||||
| Loans held for investment past due 90 days to total loans held for investment | — | % | 0.15 | % | 0.01 | % | 0.03 | % | 0.02 | % | |||||
| Loans held for sale past due 90 days and still accruing(1)(2) | $ | — | $ | 4,877 | $ | 1,602 | $ | 3,865 | $ | 3,986 |
(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) | ||||||||||||||||||||||||||||||
| 4th Quarter | 3rd Quarter | 2nd Quarter | 1st Quarter | 4th Quarter | ||||||||||||||||||||||||||
| 2022 | 2022 | 2022 | 2022 | 2021 | ||||||||||||||||||||||||||
| Interest income | ||||||||||||||||||||||||||||||
| Interest and fees on loans | $ | 295,367 | $ | 282,473 | $ | 218,290 | $ | 187,657 | $ | 204,379 | ||||||||||||||||||||
| Investment securities | 16,210 | 15,002 | 14,665 | 17,302 | 11,780 | |||||||||||||||||||||||||
| Interest bearing deposits in other banks | 59,710 | 24,596 | 9,394 | $ | 3,571 | $ | 3,733 | |||||||||||||||||||||||
| Total interest income | 371,287 | 322,071 | 242,349 | 208,530 | 219,892 | |||||||||||||||||||||||||
| Interest expense | ||||||||||||||||||||||||||||||
| Deposits | 96,150 | 60,317 | 20,566 | 13,630 | 14,513 | |||||||||||||||||||||||||
| Short-term borrowings | 13,449 | 10,011 | 4,859 | 758 | 771 | |||||||||||||||||||||||||
| Long-term debt | 14,088 | 12,663 | 11,393 | 10,595 | 10,576 | |||||||||||||||||||||||||
| Total interest expense | 123,687 | 82,991 | 36,818 | 24,983 | 25,860 | |||||||||||||||||||||||||
| Net interest income | 247,600 | 239,080 | 205,531 | 183,547 | 194,032 | |||||||||||||||||||||||||
| Provision for credit losses | 34,000 | 12,000 | 22,000 | (2,000) | (10,000) | |||||||||||||||||||||||||
| Net interest income after provision for credit losses | 213,600 | 227,080 | 183,531 | 185,547 | 204,032 | |||||||||||||||||||||||||
| Non-interest income | ||||||||||||||||||||||||||||||
| Service charges on deposit accounts | 5,150 | 5,701 | 6,003 | 6,022 | 4,702 | |||||||||||||||||||||||||
| Wealth management and trust fee income | 3,442 | 3,631 | 4,051 | 3,912 | 3,793 | |||||||||||||||||||||||||
| Brokered loan fees | 2,655 | 3,401 | 4,133 | 3,970 | 5,678 | |||||||||||||||||||||||||
| Servicing income | 180 | 212 | 228 | 237 | 277 | |||||||||||||||||||||||||
| Investment banking and trading income | 11,937 | 7,812 | 11,126 | 4,179 | 6,456 | |||||||||||||||||||||||||
| Net gain/(loss) on sale of loans held for sale | (990) | — | — | — | — | |||||||||||||||||||||||||
| Gain on disposal of subsidiary | 248,526 | — | — | — | — | |||||||||||||||||||||||||
| Other | 6,772 | 4,576 | 701 | 1,962 | 10,553 | |||||||||||||||||||||||||
| Total non-interest income | 277,672 | 25,333 | 26,242 | 20,282 | 31,459 | |||||||||||||||||||||||||
| Non-interest expense | ||||||||||||||||||||||||||||||
| Salaries and benefits | 103,490 | 129,336 | 103,885 | 100,098 | 89,075 | |||||||||||||||||||||||||
| Occupancy expense | 17,030 | 9,433 | 8,874 | 8,885 | 8,769 | |||||||||||||||||||||||||
| Marketing | 10,623 | 8,282 | 8,506 | 4,977 | 4,286 | |||||||||||||||||||||||||
| Legal and professional | 37,493 | 16,775 | 11,288 | 10,302 | 12,673 | |||||||||||||||||||||||||
| Communications and technology | 20,434 | 18,470 | 15,649 | 14,700 | 16,490 | |||||||||||||||||||||||||
| Federal Deposit Insurance Corporation insurance assessment | 3,092 | 3,953 | 3,318 | 3,981 | 4,688 | |||||||||||||||||||||||||
| Servicing-related expenses | — | — | — | — | 25 | |||||||||||||||||||||||||
| Other | 20,928 | 10,798 | 12,783 | 10,149 | 10,643 | |||||||||||||||||||||||||
| Total non-interest expense | 213,090 | 197,047 | 164,303 | 153,092 | 146,649 | |||||||||||||||||||||||||
| Income before income taxes | 278,182 | 55,366 | 45,470 | 52,737 | 88,842 | |||||||||||||||||||||||||
| Income tax expense | 60,931 | 13,948 | 11,311 | 13,087 | 23,712 | |||||||||||||||||||||||||
| Net income | 217,251 | 41,418 | 34,159 | 39,650 | 65,130 | |||||||||||||||||||||||||
| Preferred stock dividends | 4,312 | 4,313 | 4,312 | 4,313 | 4,313 | |||||||||||||||||||||||||
| Net income available to common shareholders | $ | 212,939 | $ | 37,105 | $ | 29,847 | $ | 35,337 | $ | 60,817 | ||||||||||||||||||||
| TEXAS CAPITAL BANCSHARES, INC. | ||||||||||||||||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| TAXABLE EQUIVALENT NET INTEREST INCOME ANALYSIS (UNAUDITED)(1) | ||||||||||||||||||||||||||||||
| (dollars in thousands) | ||||||||||||||||||||||||||||||
| 4th Quarter 2022 | 3rd Quarter 2022 | 2nd Quarter 2022 | 1st Quarter 2022 | 4th 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) | $ | 3,385,372 | $ | 16,210 | 1.70 | % | $ | 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 | % |
| Interest bearing cash and cash equivalents | 6,158,769 | 59,710 | 3.85 | % | 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 | % | ||||||||||
| Loans held for sale | 1,053,157 | 12,064 | 4.54 | % | 1,029,983 | 11,316 | 4.36 | % | 8,123 | 62 | 3.07 | % | 7,633 | 113 | 6.01 | % | 8,348 | 51 | 2.41 | % | ||||||||||
| Loans held for investment, mortgage finance | 4,279,367 | 43,708 | 4.05 | % | 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 | % | ||||||||||
| Loans held for investment(3) | 15,105,083 | 239,741 | 6.30 | % | 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 | % | ||||||||||
| Less: Allowance for credit losses on loans | 233,246 | — | — | 229,005 | — | — | 211,385 | — | — | 212,612 | — | — | 223,034 | — | — | |||||||||||||||
| Loans held for investment, net | 19,151,204 | 283,449 | 5.87 | % | 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 | % | ||||||||||
| Total earning assets | 29,748,502 | 371,433 | 4.89 | % | 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 | % | ||||||||||
| Cash and other assets | 989,900 | 918,630 | 870,396 | 819,486 | 835,293 | |||||||||||||||||||||||||
| Total assets | $ | 30,738,402 | $ | 31,813,911 | $ | 31,432,920 | $ | 34,255,284 | $ | 37,239,701 | ||||||||||||||||||||
| Liabilities and Stockholders’ Equity | ||||||||||||||||||||||||||||||
| Transaction deposits | $ | 1,105,466 | $ | 4,977 | 1.79 | % | $ | 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 | % |
| Savings deposits | 10,563,049 | 80,801 | 3.03 | % | 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 | % | ||||||||||
| Time deposits | 1,625,857 | 10,372 | 2.53 | % | 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 | % | ||||||||||
| Total interest bearing deposits | 13,294,372 | 96,150 | 2.87 | % | 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 | % | ||||||||||
| Short-term borrowings | 1,387,660 | 13,449 | 3.84 | % | 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 | % | ||||||||||
| Long-term debt | 931,107 | 14,088 | 6.00 | % | 921,707 | 12,663 | 5.45 | % | 929,616 | 11,393 | 4.92 | % | 929,005 | 10,595 | 4.63 | % | 928,307 | 10,576 | 4.52 | % | ||||||||||
| Total interest bearing liabilities | 15,613,139 | 123,687 | 3.14 | % | 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 | % | ||||||||||
| Non-interest bearing deposits | 11,642,969 | 12,214,531 | 13,747,876 | 14,235,749 | 15,804,061 | |||||||||||||||||||||||||
| Other liabilities | 426,543 | 305,554 | 227,701 | 243,141 | 238,833 | |||||||||||||||||||||||||
| Stockholders’ equity | 3,055,751 | 3,044,993 | 3,049,661 | 3,184,654 | 3,187,705 | |||||||||||||||||||||||||
| Total liabilities and stockholders’ equity | $ | 30,738,402 | $ | 31,813,911 | $ | 31,432,920 | $ | 34,255,284 | $ | 37,239,701 | ||||||||||||||||||||
| Net interest income | $ | 247,746 | $ | 239,191 | $ | 206,024 | $ | 184,044 | $ | 194,534 | ||||||||||||||||||||
| Net interest margin | 3.26 | % | 3.05 | % | 2.68 | % | 2.23 | % | 2.12 | % |
(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
a4q2022_earningsxpresent
© 2023 Texas Capital Bank Member FDIC January 18, 2022 Q4-2022 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 “believes,” “projects,” “expects,” “may,” “estimates,” “should,” “plans,” “targets,” “intends” “could,” “would,” “anticipates,” “potential,” “confident,” “optimistic” or the negative thereof, or other variations thereon, or comparable terminology, or by discussions of strategy, objectives, estimates, guidance, expectations and future plans. 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 unpredictability of economic and business conditions that may impact TCBI or its customers, the COVID-19 pandemic, the Company’s ability to effective manage its liquidity risk and any growth plans and the availability of capital and funding, the Company’s ability to effectively manage information technology systems, cyber incidents or other failures, disruptions or security breaches, interest rates, commercial and residential real estate values, adverse or unexpected 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, the failure to identify, attract and retain key personnel, increased or expanded competition from banks and other financial service providers in TCBI’s markets, the failure to maintain adequate regulatory capital, environmental liability associated with properties related to TCBI’s lending activities, and severe weather, natural disasters, acts of war, terrorism, global conflict or other external events, climate change and related legislative and regulatory initiatives. 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.
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 Foundational Tenants of Value Creation in Place Financial Priorities Described 9/1/2021 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
5 Prior Challenges Identified Current Positioning Limited Fee Income & Unfocused Loan Growth Narrow product offerings and low client relevance led to overdependence on loan growth to drive earnings Fee income in areas of focus up 68% compared to 2020; loan portfolio increasingly weighted towards best-in-class Texas based clients with C&I loans1 up $3.3 billion, or 48% over the same period Full Year IB and Trading Income up 43%; strong momentum entering 2023 with highest fee quarter for the Investment Bank in Q4 2022 Funding Strategy Overreliance on disconnected, high-cost, high-beta national deposit verticals created earnings volatility Rationalized national deposit verticals in 2021, resulting in ~$15 million of released expense reinvested into client-facing Treasury professionals and platform enhancements Proactive $6.8 billion, or 70%, reduction of 100% beta indexed deposits since Q4 2020 Lower-than-Peer Capital Ratios Utilizing leverage to drive financial performance limited ability to proactively manage capital Through a combination of capital raises, accretive divestitures, and enhanced capital management, CET1 increased to top decile in peer group2; repurchased 4% of 2020 shares outstanding Financially resilient balance sheet allows us to serve clients thru-cycle; Allowance for credit losses on loans to non-accrual LHI is 5.2x compared to 2.1x at the end of 2020 Misallocated Expenses Legacy investment agenda not connected to strategy and lacked scalability due to operational silos ~$175 million, run rate expenses unlocked since Jan ’21 with proceeds reinvested directly against defined strategy; 60% of total expense base aligned to our people in 2022 compared to 48% in 2020 Focused spend in technology and infrastructure improvements are yielding improved client experience and early operating efficiencies Cyclical Portfolio Concentrations Poor client selection led to sizeable credit losses and larger holds drove overexposure in less desirable sectors Divested disconnected assets, Correspondent Lending and BankDirect, and built mortgage warehouse lending into a full-service Mortgage Finance business via product and service expansion Recent and expected growth consistent with Texas Capital’s desired best-in-class client focus Operating Model Not Ready for Scale A siloed mindset and inflexible organizational structure limited our ability to be prepared for the next phase of growth Highly differentiated coverage model better aligns banker, product, and service expertise utilized by specific client types Expanded Treasury Solutions, a holistic Private Wealth offering, and unique Investment Banking capabilities, allows us to serve clients through the entirety of their life cycle Wholesale Business Transformation Over Two Years Addressed Key Challenges Identified During 2021 Strategic Update Strategic Foundation in Place | Pivoting Focus to Financial Performance TCBI Peer Key Metrics Q4 2020 Q4 2022 Group2 Book Value per Share $53.92 $56.48 Tangible Book Value per Share3 $53.57 $56.45 Tangible Book Value per Share3 Growth 5.4% (7.8%) Capital: Highest level in 20 years CET1 Ratio 9.4% 13.0% 11.0% Total Risk-Based Capital 12.1% 17.7% 13.1% Total Common Equity / Total Assets 7.2% 9.7% 9.6% Tangible Common Equity / Tangible Assets4 7.2% 9.7% 6.8% Liquidity Profile: Well-positioned; In excess of internal targets Cash & Securities / Total Assets 33% 30% 25% Loan / Deposit 80% 85% 82% Loan Portfolio: Executing commercial strategy; Differentiated relative to peers C&I Loans1 / Total LHI 28% 52% 18% Deposits: Refocused Non-Interest Bearing Deposits, excl MF5 / Total Deposits 16% 26% -- Indexed Deposits / Total Deposits 32% 13% --
6 C&I Loans1 52% Real Estate Loans 27% Mortgage Finance Loans 21% Insurance Premium Finance Loans 9% C&I Loans1 28% Real Estate Loans 24% Mortgage Finance Loans 37% PPP 2% Indexed 32% Interest Bearing 27% Non-interest Bearing, excl Mortgage Finance 16% Mortgage Finance Non-interest Bearing 25% Indexed 13% Interest Bearing 45% Non-interest Bearing, excl Mortgage Finance 26% Mortgage Finance Non-interest Bearing 16% Changes in Balance Sheet Composition Q4 2020 Two years into the balance sheet transformation investments to support the development of a C&I offering have begun to optimize the business mix Portfolio concentrations de-risked through proactive exits and focused calling efforts on best-in-class Texas-based clients C&I Loans1 comprise 52% of total loans, an increase of $3.3 billion, or 48% since Q4 2020 Adherence to defined operating routines continuing to improve capital efficiency through consistent emphasis on client relevance. Q2 through Q4 2022, 75% of commitments reviewed by the Balance Sheet Committee involved Treasury or other non-loan products Sustained focus on earning the right to be our client’s primary treasury bank, which will over time continue to build the deposit base consistent with TCBI’s long-term strategy Excluding Mortgage Finance deposits, full year average operating deposits are up 15% Deliberate reduction in highest cost, highest beta, shortest duration deposit sources; indexed deposits are down $6.8 billion from 32% of total deposits in Q4 2020, to 13% at Q4 2022 Inside of our published target of <15% Q4 2022 $31.0 Billion $22.9 Billion $19.3 Billion Period End Deposit Trends Period End LHI Trends $24.4 Billion $3.6B $6.0B $10.3B $7.8B $4.9B $8.5B $9.8B $3.0B $10.1B$0.6B $6.8B $5.2B $9.1B $2.2B $10.3B $4.1B $5.8B
7 Treasury Product Fees7 $29.4 Investment Banking Income $35.1Wealth Income $15.0 Other Fee Income $21.5 Net Interest Income $875.8 Fee Income $101.0 Gain on Sale of BDCF $248.5 Treasury Product Fees7 $14.7 Investment Banking Income $22.7 Wealth Income $10.0 Other Fee Income $56.3 Net Interest Income, excl MCA6 $821.1 Fee Income, excl MCA6 $103.7 MCA, $129.5 Capabilities to Deliver Structurally Higher, More Sustainable Earnings Core Treasury Platform Swaps Full Suite of Highly Integrated ProductsLoan Syndications Enhanced Wire Platform Adapted the Coverage Model More than 20 new Investment Banking, Treasury Management, and Private Wealth-related services supporting our stated focus of being relevant to clients beyond with simply the loan product Expanded the Product Set Focused Technology Investment 1.9x new client facing professionals excluding BDCF, across defined industry and geographic coverage Developed market-leading, cloud-native software including: Texas Capital Initio™, the Firm’s proprietary account opening and onboarding solution Texas Capital CoreTex™, our modern and API-driven services platform Texas Capital C360™, a cross-LOB operations management system; and, DaaS, a completely modernized cloud-based data platform New Products Since 2020 2020 Revenue Contributions ($M) 2022 Revenue Contributions ($M) 2020 Product Build Largely Complete; Focus is on Driving Scale Year End 2022Treasury Solutions Investment Banking Private Wealth 2025 2021 & 2022 Accomplishments 6 API Integration Mixed Payments File Zelle P2P & Small Business Small Business Solution Expanded Merchant Offering Healthcare Revenue Cycle Management M&A Advisory Capital Markets Corporate Sales & Trading MBS Hedging & Pool Trading Gestation Financing Whole Loan Trading Rates & Forex Hedging Financial Sponsors Coverage Online Banking Portals Alternative Investments Family Governance Insurance Brokerage Services Outsourced DAF Portfolio Mortgage Program Securities-based Lending Financial Planning in Market Estate Planning in Market Concierge Private Banking Trust / Fiduciary Services Tactical & Thematic Portfolio 360o Client Relationship Portal
8 9.4 10.2 10.5 10.7 11.1 11.5 10.5 11.1 13.0 12.0 0.9 2.0 1.6 1.5 1.5 1.5 1.4 1.5 1.7 1.8 1.8 2.7 2.7 2.7 2.7 2.5 2.6 3.0 CET1 Tier 1 Capital Tier 2 Capital 79 73 83 80 81 85 95 81 84 81 76 73 72 73 76 81 82 TCBI Peer Median 9.2 11.4 7.0 8.5 7.9 5.4 4.3 3.6 5.0 3.2 3.4 3.8 3.7 3.6 3.6 3.6 3.4 3.6 0 2,000,000,000 4,000,000,000 6,000,000,000 8,000,000,000 10,000,000,000 12,000,000,000 14,000,000,000 16,000,000,000 Cash & Equivalents Securities 2.1 2.5 2.6 2.5 2.9 3.6 4.5 6.5 5.2 2.8 2.9 3.4 3.5 3.7 3.6 4.1 3.9 Peer MedianTCBI Financially Resilient Balance Sheet Total Capital Trends (%) Cash and Securities ($B)Total LHI / Deposit (%) CET1 Peer Median2 (%) 12.0 12.1 12.0 12.0 11.8 11.4 11.1 11.0 ACL on Loans / Total LHI (%) TCBI 1.04 0.99 0.93 0.93 0.93 0.97 0.95 1.19 1.31 Peer Median2 1.47 1.40 1.31 1.26 1.19 1.13 1.09 1.09 Cash and Securities / Total Assets (%) TCBI 33 37 31 34 33 29 24 23 30 Peer Median2 28 31 32 34 34 31 28 25 Disciplined and analytically rigorous approach to managing capital base to drive long-term shareholder value Poorly returning capital continues to mature enabling reinvestment into opportunities with higher risk-adjusted returns Executed share repurchases in 2022 at levels that generated EPS accretion and were neutral to TBVPS Multi-year portfolio de-risking benefits are evident today and position the Firm well for the future Established a dual risk rating system, ensuring newly originated credits align client selection and underwriting ACL on Loans to LHI increased 38 bps, or $41.6 million since Q4 2021; 49 bps greater than CECL Day 1 Meaningful reduction of high-cost deposits resulting in an increasingly efficient balance sheet and appropriate levels of liquidity Well-positioned loan to deposit ratio supports next phase of strategy execution Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022 12.1 2023 Target 14.0 14.8 14.9 15.3 15.7 14.4 15.2 17.7 Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022 Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022 Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022 ACL on Loans / Non-Accrual LHI (x) 2 2
9 Balance Sheet FY Average Liquidity Assets10 (% of Total Average Assets) 28% 37% 27% >20% FY Average Indexed Deposits (% of Total Deposits) 36% 27% 18% <15% Where We Started Where We Are Going Performance Metrics 2020 2021 2022 2025 Return on Average Assets 0.18% 0.67% 1.04% >1.10% Return on Average Tangible Common Equity11 2.1% 8.4% 11.4% >12.5% Adj. Return on Average Assets12 0.33% 0.69% 0.55% >1.10% Adj. Return on Average Tangible Common Equity11 4.2% 8.7% 5.8% >12.5% CET1 9.4% 11.1% 13.0% 9%–10% Where We Started Where We Are Going Income Statement 2020 2021 2022 2025 Investment Banking and Trading Income (% of Total Revenue) 2.2% 2.7% 2.9% ~10% Treasury Product Fees7 (% of Total Revenue) 1.4% 2.5% 2.4% ~5% Non-interest Income (% of Total Revenue) 19.3% 15.2% 28.5% 15%–20% Investment Banking and Trading Income (% of Adj. Total Revenue8) 2.5% 2.8% 3.6% ~10% Treasury Product Fees7 (% of Adj. Total Revenue8) 1.6% 2.6% 3.0% ~5% Adj. Non-interest Income9 (% of Adj. Total Revenue8) 11.2% 13.4% 10.3% 15%–20% 2021 Strategic Update Performance Drivers Talent Frontline Talent Growth 1.0x 1.4x 1.7x 2.3x Frontline Talent Growth Excl BDCF 1.0x 1.4x 1.9x 2.3x
10 Financial Performance Q4 ‘21 Q1 ‘22 Q2 ‘22 Q3 ‘22 Q4 ‘22 FY 2021 FY 2022 FY Growth Assets Under Management ($B) $2.7 $2.7 $2.6 $2.6 $3.0 $2.7 $3.0 11% Treasury Product Fees7 ($M) $6.0 $7.4 $7.6 $7.4 $7.0 $23.1 $29.4 27% Wealth Management & Trust Fee Income ($M) $3.8 $3.9 $4.1 $3.6 $3.4 $13.2 $15.0 14% Investment Banking and Trading Income ($M) $6.5 $4.2 $11.1 $7.8 $11.9 $24.4 $35.1 43% Income From Areas of Focus ($M) $16.3 $15.5 $22.8 $18.9 $22.4 $60.7 $79.5 31% Geographic and industry specific coverage now in place with a more normalized pace of hiring going forward Clear strategic direction aligning clients to bankers with a solution set tailored to their unique needs Robust weekly pipeline meetings to focus resources on delivering exceptional client outcomes Routine and intentional calling with Treasury Solutions and Investment Banking Partners to deliver the whole Firm Focused Coverage and Enhanced Product and Services Financial Performance (Period End) Q4 ‘21 Q1 ‘22 Q2 ‘22 Q3 ‘22 Q4 ‘22 FY 2021 FY 2022 FY Growth Business, Middle Market, and Corporate Banking Talent 1.7x 2.1x 2.3x 2.5x 2.5x 1.7x 2.5x Business, Middle Market, and Corporate Banking Deposits ($B) $7.7 $7.1 $7.3 $6.9 $6.6 $7.7 $6.6 (14%) C&I Loans1 ($B) $7.8 $8.1 $9.4 $10.0 $10.1 $7.8 $10.1 29% Real Estate Loans ($B) $4.8 $4.9 $5.1 $5.0 $5.2 $4.8 $5.2 9% Treasury Solutions Private Wealth Investment Banking Business, Middle Market & Corporate Banking FY Treasury Product Fees are up 27% YoY; Service Charges +23% and Other Fees +48% Expanded products and differentiated onboarding solutions coming on-line in 1H23 AUM grew 11% YoY from strong organic growth despite negative markets (S&P -19%) Wholesale platform enhancement targeted for completion by mid-2023 Advised sale of BDCF validating M&A expertise; FY IB and Trading Revenue +43% YoY Expanding full-year pipelines suggest increasing contribution, though not evenly distributed by quarter
11 Financial Performance Non-GAAP Adjustements12 ($M) Q3 2022 Q4 2022 Non-interest Revenue 25.3 277.7 Gain on Sale of BDCF 0.0 248.5 Non-interest Revenue, Adjusted 25.3 29.2 Non-interest Expense 197.0 213.1 Transaction Costs 16.7 13.0 Restructuring Expenses 0.0 9.8 Charitable Contribution 0.0 8.0 Non-Interest Expense, Adjusted 180.4 182.3 Financial Highlights ($M) Adjusted (Non-GAAP)12 Adjusted (Non-GAAP)12 2021 2022 2021 2022 Q4 2021 Q3 2022 Q4 2022 Q3 2022 Q4 2022 Net Interest Income $768.8 $875.8 $768.8 $875.8 $194.0 $239.1 $247.6 $239.1 $247.6 Non-Interest Revenue 138.2 349.5 138.2 101.0 31.5 25.3 277.7 25.3 29.2 Total Revenue 907.1 1,225.3 907.0 976.8 225.5 264.4 525.3 264.4 276.7 Non-Interest Expense 599.0 727.5 587.0 680.1 146.6 197.0 213.1 180.4 182.3 PPNR13 308.1 497.8 320.0 296.6 78.8 67.4 312.2 84.0 94.4 Provision for Credit Losses (30.0) 66.0 (30.0) 66.0 (10.0) 12.0 34.0 12.0 34.0 Income Tax Expense 84.1 99.3 86.8 53.9 23.7 13.9 60.9 17.7 11.8 Net Income 253.9 332.5 263.2 176.8 65.1 41.4 217.3 54.3 48.6 Preferred Stock Dividends 18.7 17.3 18.7 17.3 4.3 4.3 4.3 4.3 4.3 Net Income to Common 235.2 315.2 244.5 159.5 60.8 37.1 212.9 50.0 44.3 Performance Metrics Return on Average Assets 0.67% 1.04% 0.69% 0.55% 0.69% 0.52% 2.80% 0.68% 0.63% PPNR13 / Average Assets 0.81% 1.55% 0.84% 0.93% 0.84% 0.84% 4.03% 1.05% 1.22% Efficiency Ratio14 66% 59% 65% 70% 65% 75% 41% 68% 66% Return On Average Common Equity 8.35% 11.33% 8.68% 5.73% 8.36% 5.36% 30.66% 7.23% 6.38% Earnings Per Share $4.60 $6.18 $4.78 $3.13 $1.19 $0.74 $4.23 $0.99 $0.88 Book Value per Share $57.48 $56.48 $57.48 $51.82 $56.48 Tangible Book Value per Share3 $57.14 $56.45 $57.14 $51.48 $56.45 Non-GAAP Adjustments12 ($M) 2021 2022 Non-interest Revenue 138.2 349.5 Gain on Sale of BDCF 0.0 248.5 Non-interest Revenue, Adjusted 138.2 101.0 Non-interest Expense 599.0 727.5 Software Write-Offs 12.0 0.0 Transaction Costs 0.0 29.6 Restructuring Expenses 0.0 9.8 Charitable Contribution 0.0 8.0 Non-Interest Expense, Adjusted 587.0 680.1
12 $7.8 $8.1 $9.4 $10.0 $10.1 $2.7 $2.9 $3.1 $3.1 Q4 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022 Q4 2022 EOP $7.9 $5.7 $5.9 $5.3 $4.3 $4.1 Q4 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022 $4.8 $4.9 $5.1 $5.0 $5.2 Q4 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022 51% 47% 49% 51% 53% 55% 57% 59% 61% Loan Portfolio Average Mortgage Finance Loans ($B) Period End Loan Trends (excl. PPP) ($B) Utilization Rates15 C&I Loans1 grew $143 million or 1% QoQ Real Estate Loans grew modestly at 4% QoQ as slowing payoffs offset reduction in client demand; thru-cycle strategy centered on client selection and adherence to proven concentration guidelines In the industry-wide contracting market, average Mortgage Finance Loans declined 19% QoQ; rate driven impacts pronounced amidst seasonal weakness Real Estate Loans 52% LTM Average C&I Loans1 Insurance Premium Finance Loans
13 Q4 2022 EOP $6.3 $6.4 $6.6 $6.5 $6.3 $6.0 $9.5 $7.8 $7.1 $5.7 $5.3 $3.6 $0.9 $0.7 $0.6 $1.4 $1.3 $1.1 $13.9 $13.2 $10.7 $12.0 $12.0 $12.2 Q4 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022 Q4 2022 Non-interest Bearing, excl MF Mortgage Finance Non-interest Bearing Interest Bearing Brokered Interest Bearing 0.19% 0.20% 0.33% 0.93% 1.53% 0.28% 0.30% 0.47% 1.04% 1.62% 0.39% 0.40% 0.73% 1.79% 2.87% Q4 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022 0.39% 2.68% 0.39% 2.87% 0.19% 1.53% 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 4.0% 4.5% Q4 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022 $15.8 $12.2 $11.6 $9.6 $7.6 $9.3 $9.9 $10.3 $7.2 $4.1 $3.4 $3.0 Q4 2021 Q3 2022 Q4 2022 Q4 2022 EOP Deposits and Fundings Funding CostsAverage Deposit Composition ($B) Non-interest Bearing Indexed Funding base continuing multi-year transition to target state composition Seasonality related to tax payments from escrow accounts drove a decline in Mortgage Finance deposits in Q4; balances anticipated to rebuild beginning in January Indexed deposits reduced by $788 million in Q4 2022 and down $4.3 billion YoY; represents 13% of total deposits and below long-term target level of 15% Average Cost of Total Deposits increased 60 bps QoQ; a cumulative beta of 32% since the beginning of the current tightening cycle 57% cumulative beta in the last tightening cycle (Sep-15 to Jun-19) Interest Bearing Average Deposit Trends ($B) 23% 25% 52% $30.6 $25.6 $30.6 $28.1 $25.0 $25.6 Current Cycle Rates Paid Betas16 Int. Bearing Rate Int. Bearing excl. Indexed Rate Fed Funds Upper TargetTotal Deposit Rate 16% 36% 48% Cumulative Betas 58% 54% 32% Avg Cost of Total Deposits Avg Cost of Int. Bearing Deposits Total Cost of Funds $24.9 $22.9 $24.9 $22.9 13% 40% 47% 5
14 (9.9%) (10.2%) 6.8% 7.3% 8.0% 17.4% 12.9% 14.5% Q4 2021 Q3 2022 Q4 2022 -100bps Shock +100bps Shock +200bps Shock Net Interest Income Sensitivity Standard Model Assumptions 100bp & 200bp Parallel Shocks Loan Balances: Static Deposit Balances: Static Indexed Deposits: Ratio held constant at 13% Loan Spreads: Current Levels Total Deposit Beta: ~50% Investment Portfolio: Ratio held constant Loan Repricing Detail // Gross LHI excl. Mortgage Finance TCBI NII Sensitivity ($M) The asset sensitivity profile of the bank increased QoQ driven by the increase in cash balances related to sale of BDCF and the continued remixing of the deposit base $255 million of securities purchased during the quarter at a yield of 4.7% reduced asset sensitivity by ~25bps Actions create a more stable medium-term NIM profile, while lowering rates-fall risk LHI excl. Mortgage Finance: 7% fixed / 93% variable $4.4 billion (29%) of LHI excl. Mortgage Finance have contractual floors All loans with floors are acting as variable rate loans Mortgage Finance represents 21% of the total Loan portfolio with the majority tied to 1-month SOFR which rose 159 bps in Q4 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 (8.0%, $77 million and 14.5%, $140 million at Q4 2022) inclusive of Mortgage Finance NII impact $135 Base NII17 $718M $1,045M $966M Hedging Profile $77 $(104) $49 $125 ($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% ($15.3B) Q4 2022 Fixed 7% Prime 18% 1 Month 68% 3 Month 5% 6 Month 2% Variable 93% Total 100% $140 $77 $(99)
15 $31.5 $20.3 $26.2 $25.3 $29.2 Q4 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022 $248.5 Q4-2022 Earnings Overview $89.1 $100.1 $103.9 $115.6 $101.5 $57.6 $53.0 $60.4 $64.7 $80.9 $16.7M $30.7M Q4 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022Deposit Service Charges Investment Banking and Trading Wealth Management Net Interest Income ($M) Non-Interest Income ($M) Fee Income Detail ($M) Net Interest Margin ($M) Non-interest Expense ($M) $239.1 $(38.3) $51.9 $(0.7) $36.3 $(35.8) $(4.9) $247.6 Q3 2022 Loan Volume Loan Yield Loan Fees Investment Securities & Cash Deposits Borrowings Q4 2022 $4.7 $5.7 $5.1 $3.8 $3.6 $3.4 $6.5 $7.8 $11.9 $146.6 $153.1 $164.3 $197.0 $213.1 61% 65% 63% 59% 48% 39% 35% 37% 33% 38% 8% 14% Salaries & Benefits Non-Recurring Items12Other NIE % of Adj Total Revenue12 14% 10% 11% 10% 11% $194.0 $183.5 $205.5 $239.1 $247.6 2.12% 2.23% 2.68% 3.05% 3.26% Q4 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022 Net Interest Income Net Interest Margin Q4 2021 Q4 2022Q3 2022 Non-interest Income Gain on Sale of BDCF
16 37% 60% 46% 62% 67% 18% 4% 45% 40% 50% 38% 33% Q4 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022 Commercial Mortgage Finance Energy Real Estate 45% 51% 36% 68% 73% 32% 2% 9% 8% 4% 6% 4% 46% 41% 28% 24% 23% Q4 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022 Commercial Mortgage Finance Energy Real Estate 0.21% 0.19% 0.16% 0.12% 0.17% 0.02% (0.01%) 0.05% 0.05% 0.31% 2.56% 2.20% 2.51% 2.45% 2.66% Q4 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022 NPAs / Total Assets NCOs / Avg. LHI Criticized / LHI 1.34% 1.51% 1.60% 1 2 3 2.9 x 6.5 x 5.2 x 1 2 3 Allowance for Credit Loss Reserve Ratios Special Mention Composition ($M) Q4-2022 Earnings Overview Q4 2021 Q3 2022 Q4 2022 Asset Quality Ratios ACL on Loans excl MF5 / Loans HFI excl MF5 ACL on Loans / Non- accrual Loans HFI Substandard Composition ($M) $427.8 $313.2 $449.2 $220.7 $255.1 Charge-offs ($M) $3.8 $0.5 $2.9 $3.1 $17.1 Recoveries ($M) $2.7 $1.0 $0.2 $0.4 $2.1 $155.1 $162.8 $154.3 $263.3 $258.0 Reserves to loans coverage ratio as a percent of LHI in the top 20 percent among peers ACL on Loans, excl. Mortgage Finance increased to $242.7 million in Q4 2022 from $224.5 million in Q3 2022 due to modest portfolio growth coupled with observed migration trends Enterprise disciplines supporting a values-driven credit culture, driving criticized loans down 12% YoY $15 million of net charge-offs recorded for the quarter as expected losses on legacy credits moved closer to resolution Downward grade migrations to special mention and substandard in Q4 2022 predominantly related to Commercial clients with consumer dependencies Substandard loans increased $34.4 million, or 16%, QoQ Total criticized loans increased 6% to $513.2 million from $484.0 million in Q3 2022
17 11.06% 11.45% 10.46% 11.08% 13.00% 12.00% 1.54% 1.58% 1.45% 1.51% 1.67% 2.72% 2.65% 2.51% 2.66% 3.03% Q4 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022 $57.14 $54.68 $53.93 $51.48 $56.45$57.48 $55.02 $54.27 $51.82 $56.48 Q4 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022 8.33% 8.93% 8.32% 8.45% 9.69% 8.38% 8.98% 8.37% 8.50% 9.70% Q4 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022 2023 Target Q4-2022 Earnings Overview Regulatory Capital Levels Tangible Common Equity / Tangible Assets4 Tangible Book Value per Share3 Period End AOCI ($M) $(47.7) $(205.4) $(272.2) $(435.4) $(418.9) 15.32% 15.68% 14.42% 15.25% 17.70% CET1 Tier 2 CapitalTier 1 Capital AOCI per Share $0.94 $4.05 $5.46 $8.73 $8.59 Capital is at record levels with CET1, Total Capital Ratio and Total Common Equity / Total Assets in top decile of peer group2 Capital discipline demonstrated through 2022 Q4 2022 repurchased 1.1 million shares (2% of prior quarter common stock) at a weighted average price of $57.20 In 2022 repurchases totaled 2.1 million shares at a weighted average price of $55.35 (4% of year-end 2021 common stock) Board authorized new repurchase plan of $150 million Tangible Common Equity / Tangible Assets4 finished the quarter at 9.69%, an important characteristic of our financially resilient business model and a key metric as we manage the balance sheet through-cycle Tangible Book Value per Share3 grew 10% QoQ primarily due to the realized gain on the sale of BDCF paired with a modest improvement in AOCI of $16 million from the prior quarter Tangible Common Equity / Tangible Assets4 Common Equity / Total Assets Peer2 Tangible Common Equity / Tangible Assets4 8.0% 7.6% 7.2% 6.8% Tangible Book Value per Share3 Book Value per Share
18 Full Year 2023 Guidance Full Year 2023 Guidance Total Revenue Mid Teens % Growth Non-Interest Expense, Adjusted12 Low Double Digit % Growth Quarterly Operating Leverage (YoY Growth in Quarterly PPNR13) Maintain Cash & Total Securities (% of Total Assets) >20% 2023 CET1 Target Medium Term CET1 Target >12% >10% Forward curve18 assumes a peak Fed Funds of 5.25% and a 2023 exit rate of 4.75% Assumes tax rate of 25% in 2023 Non-interest expense growth guidance excludes 2022 non-recurring expenses Guidance Commentary
19 1. C&I Loans includes Commercial and Energy loans and excludes PPP loans and Insurance Premium Finance Loans (in periods prior to divestiture in Q4 2022) 2. Compared to major exchange traded peer banks with $20-100 billion in assets as of Q3 2022, excluding PR headquartered banks and merger targets Source: S&P Capital IQ Pro 3. Stockholders’ equity excluding preferred stock, less goodwill and intangibles (Q3 2022 includes $15.5 million BDCF goodwill and intangibles reclassed to other assets held for sale), divided by shares outstanding at period end 4. Stockholders’ equity excluding preferred stock, less goodwill and intangibles (Q3 2022 includes $15.5 million BDCF goodwill and intangibles reclassed to other assets held for sale), divided by Total Assets, less goodwill and intangibles (Q3 2022 includes $15.5 million of BDCF goodwill and intangibles reclassed to other assets held for sale) 5. “MF” used as abbreviation for Mortgage Finance 6. See slide: Appendix // Correspondent Lending Historical Contribution 7. 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 $3.1 million for FY 2020, $4.4 million for FY 2021, $6.5 million for FY 2022 and $1.3 million, $1.3 million, $1.6 million, $1.7 million, and $1.9 million for Q4 2021, Q1 2022, Q2 2022, Q3 2022, and Q4 2022, respectively 8. Adj. Total Revenue in 2020 and 2021 excludes Correspondent Lending and in 2022 excludes the $248.5 million gain on sale of BDCF; See slide: Appendix // Correspondent Lending Historical Contribution 9. Adj. Non-interest Income in 2020 and 2021 excludes Correspondent Lending and Adj. Non-interest Income in 2022 excludes the $248.5 million gain on sale of BDCF; See slide: Appendix // Correspondent Lending Historical Contribution 10. Includes interest-bearing cash and cash equivalents and investment securities, excluding held-to-maturity debt securities 11. See slide: Non-GAAP Reconciliation // Return on Average Tangible Common Equity (ROATCE) 12. See slide: Non-GAAP Reconciliation // 2020, 2021, and 2022 Adjusted Earnings 13. Net interest income and non-interest income, less non-interest expense 14. Non-interest expense divided by the sum of net interest income and non-interest income 15. Outstanding loans divided by total commitments excluding Mortgage Finance Loans and leases 16. Beta taken as the difference of Q4 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 17. Baseline scenarios hold constant balances, market rates, and assumptions as of period end reporting 18. Forward curve as of January 3, 2023 Appendix // Footnotes
20 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
21 Non-GAAP Reconciliation // Return on Average Tangible Common Equity (ROATCE) 2020 ($M) 2021 ($M) 2022 ($M) As Reported Adjusted1 As Reported Adjusted1 As Reported Adjusted1 Net Income to Common $56.5 $112.6 $235.2 $244.5 $315.2 $159.5 Average Common Equity $2,686.7 $2,686.7 $2,815.7 $2,815.7 $2,783.3 $2,783.3 Less: Average Goodwill and Intangibles 17.9 17.9 17.4 17.4 14.5 14.5 Average Tangible Common Equity $2,668.8 $2,668.8 $2,798.3 $2,798.3 $2,768.8 $2,768.8 ROACE 2.1% 4.2% 8.4% 8.7% 11.3% 5.7% ROATCE 2.1% 4.2% 8.4% 8.7% 11.4% 5.8% ROATCE is a non-GAAP financial measure. ROATCE represents the measure of net income available to common shareholders as a percentage of average tangible common equity. ROATCE is used by management in assessing financial performance and use of equity. A reconcilement of ROATCE to the most directly comparable U.S. GAAP measure, ROACE, for all periods presented below. (1) See slide Non-GAAP Reconciliation // 2020, 2021, and 2022 Adjusted Earnings
22 Non-GAAP Reconciliation // 2020, 2021, and 2022 Adjusted Earnings Adjusted line items are non-GAAP financial measures that management believes aids in the discussion of results. A reconcilement of these adjusted items to the most directly comparable U.S. GAAP measures for all periods presented below. ($M, Except per Share) Q4 2021 Q3 2022 Q4 2022 2020 2021 2022 Net Interest Income $194.0 $239.1 $247.6 $851.3 $768.8 $875.8 Non-interest Revenue 31.5 25.3 277.7 203.0 138.2 349.5 Adjustments for Non-Recurring Items: Gain on Sale of BDCF 0.0 0.0 (248.5) 0.0 0.0 (248.5) Non-interest Revenue, Adjusted 31.5 25.3 29.2 203.0 138.2 101.0 Non-interest Expense 146.6 197.0 213.1 704.4 599.0 727.5 Adjustments: Software Write-offs 0.0 0.0 0.0 (36.0) (12.0) 0.0 Transaction Costs 0.0 (16.7) (13.0) (17.8) 0.0 (29.6) Restructuring Expenses 0.0 0.0 (9.8) (18.0) 0.0 (9.8) Charitable Contribution 0.0 0.0 (8.0) 0.0 0.0 (8.0) Non-interest Expense, Adjusted 146.6 180.4 182.3 632.6 587.0 680.1 PPNR13 78.8 67.4 312.2 349.9 308.1 497.8 PPNR13, Adjusted 78.8 84.0 94.4 421.7 320.0 296.6 Provision for Credit Losses (10.0) 12.0 34.0 258.0 (30.0) 66.0 Income Tax Expenses 23.7 13.9 60.9 25.7 84.1 99.3 Tax Impact of Adjustments Above 0.0 3.8 (49.2) 15.6 2.7 (45.4) Income Tax Expense, Adjusted 23.7 17.7 11.8 41.3 86.8 53.9 Net Income 65.1 41.4 217.3 66.3 253.9 332.5 Net Income, Adjusted 65.1 54.3 48.6 122.4 263.2 176.8 Preferred Stock Dividends 4.3 4.3 4.3 9.8 18.7 17.3 Net Income to Common 60.8 37.1 212.9 56.5 235.2 315.2 Net Income to Common, Adjusted 60.8 50.0 44.3 112.6 244.5 159.5 Average Assets $37,239.7 $31,813.9 $30,738.4 $37,516.2 $38,140.3 $32,049.8 Return on Average Assets 0.69% 0.52% 2.80% 0.18% 0.67% 1.04% Return on Average Assets, Adjusted 0.69% 0.68% 0.63% 0.33% 0.69% 0.55% PPNR13 / Average Assets 0.84% 0.84% 4.03% 0.93% 0.81% 1.55% PPNR13, Adjusted / Average Assets 0.84% 1.05% 1.22% 1.12% 0.84% 0.93% Average Common Equity $2,887.7 $2,745.0 $2,755.8 $2,686.7 $2,815.7 $2,783.3 Return on Average Common Equity 8.36% 5.36% 30.66% 2.10% 8.35% 11.33% Return on Average Common Equity, Adjusted 8.36% 7.23% 6.38% 4.19% 8.68% 5.73% Diluted Common Shares 51,208,161 50,417,884 50,282,663 50,582,979 51,140,974 51,046,742 Earnings per Share $1.19 $0.74 $4.23 $1.12 $4.60 $6.18 Earnings per Share, Adjusted $1.19 $0.99 $0.88 $2.23 $4.78 $3.13