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): April 20, 2021
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 |
| 6.50% Non-Cumulative Perpetual Preferred Stock Series A, par value $0.01 per share | TCBIP | 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 April 21, 2021, 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 March 31, 2021. 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 the exhibits hereto) shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall such information be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, except as expressly set forth by specific reference in such a filing.
Item 5.07. Submission of Matters to a Vote of Security Holders.
On April 20, 2021, the Company held its 2021 Annual Meeting of Stockholders (the "Annual Meeting"). The matters voted on at the Annual Meeting and final voting results are summarized below.
Proposal 1 - A Company proposal to elect ten directors for a term of one year or until their successors are elected and qualified:
| Number of Shares | |||
|---|---|---|---|
| Nominee | Voted For | Votes Withheld | Broker Non-Votes |
| Larry L. Helm | 32,501,946 | 1,665,127 | 3,285,506 |
| Rob C. Holmes | 33,566,285 | 600,788 | 3,285,506 |
| Jonathan E. Baliff | 33,159,700 | 1,007,373 | 3,285,506 |
| James H. Browning | 31,721,694 | 2,445,379 | 3,285,506 |
| David S. Huntley | 33,157,664 | 1,009,409 | 3,285,506 |
| Charles S. Hyle | 33,159,191 | 1,007,882 | 3,285,506 |
| Elysia Holt Ragusa | 31,571,139 | 2,595,934 | 3,285,506 |
| Steven P. Rosenberg | 32,738,876 | 1,428,197 | 3,285,506 |
| Robert W. Stallings | 30,673,136 | 3,493,937 | 3,285,506 |
| Dale W. Tremblay | 31,855,677 | 2,311,396 | 3,285,506 |
Each of the ten director nominees was elected for a one-year term to serve until the next annual meeting of stockholders or until their successors are elected and qualified.
Proposal 2 - A Company proposal to approve, on an advisory basis, the 2020 compensation of the Company's named executive officers, as described in the proxy statement:
| Number of Shares | |||
|---|---|---|---|
| Voted For | Voted Against | Abstentions | Broker Non-Votes |
| 32,879,166 | 1,269,900 | 18,007 | 3,285,506 |
The 2020 compensation of our named executive officers was approved on an advisory basis.
Proposal 3 - A Company proposal to ratify the appointment of Ernst & Young LLP as the Company's independent registered public accounting firm for the fiscal year ending December 31, 2021:
| Number of Shares | |||
|---|---|---|---|
| Voted For | Voted Against | Abstentions | Broker Non-Votes |
| 36,656,737 | 783,652 | 12,190 | — |
The appointment of Ernst & Young LLP as the Company's independent registered public accounting firm for the fiscal year ending December 31, 2021 was ratified.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits
99.1 Press Release, datedApril21, 2021 announcing Texas Capital Bancshares, Inc.'s operating and financial results for its fiscal quarterendedMarch31, 2021
99.2 Presentation datedApril21, 2021 discussing Texas Capital Bancshares, Inc.’s operating and financial results for its fiscal quarterendedMarch31, 2021
104 Cover Page Interactive Data File (embedded within the Inline XBRL document)
SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Date: | April 21, 2021 | TEXAS CAPITAL BANCSHARES, INC. | |
|---|---|---|---|
| By: | /s/ Julie Anderson | ||
| Julie Anderson<br>Chief Financial Officer |
Document
Exhibit 99.1
| INVESTOR CONTACT | MEDIA CONTACT |
|---|---|
| Jamie Britton, 214.932.6721 | Shannon Wherry, 469.399.8527 |
| jamie.britton@texascapitalbank.com | shannon.wherry@texascapitalbank.com |
TEXAS CAPITAL BANCSHARES, INC. ANNOUNCES OPERATING RESULTS FOR Q1 2021
DALLAS - April 21, 2021 - Texas Capital Bancshares, Inc. (NASDAQ: TCBI), the parent company of Texas Capital Bank, announced operating results for the first quarter of 2021.
"In my first 90 days as CEO, we have achieved momentum in establishing the foundation from which we can move forward," said Rob C. Holmes, President and CEO. "In the first quarter alone, we were able to execute the largest capital raise in our history and close on our first warehouse lending credit risk transfer transaction, both of which position TCBI for future growth. Looking ahead, we will continue to supplement our workforce with new talent, take steps to drive shareholder value and develop our fulsome long-term strategy. As promised, I look forward to sharing it with you in the third quarter."
•Net income of $71.9 million ($1.33 per diluted share) reported for the first quarter of 2021, an increase of $11.8 million on a linked quarter basis and an increase of $88.6 million from the first quarter of 2020.
•Total mortgage finance loans, including mortgage correspondent aggregation ("MCA") loans held for sale ("LHS"), decreased 2% on a linked quarter basis (decreasing 15% on an average basis) and increased 10% from the first quarter of 2020 (decreasing 17% on an average basis).
•Demand deposits increased 19% and total deposits increased 8% on a linked quarter basis (increasing 9% and 2%, respectively, on an average basis), and increased 61% and 23%, respectively, from the first quarter of 2020 (increasing 44% and 21%, respectively, on an average basis).
•Loans held for investment ("LHI"), excluding mortgage finance loans, were flat on a linked quarter basis (decreasing 1% on an average basis) and decreased 9% from the first quarter of 2020 (decreasing 7% on an average basis).
•Issuance of $300.0 million in 5.75% fixed rate non-cumulative perpetual preferred stock, completed in the first quarter of 2021, providing additional equity to be used for general corporate purchases, including funding regulatory capital infusions into the Bank. We also intend to use a portion of the net proceeds to redeem, subject to all applicable regulatory approvals, our existing 6.5% fixed rate non-cumulative perpetual preferred stock.
•Issuance of $275.0 million senior unsecured credit-linked notes in the first quarter of 2021. The net proceeds of this offering will be used to expand the Bank's warehouse lending program and better serve our clients in all market environments.
FINANCIAL SUMMARY
| (dollars and shares in thousands) | Q1 2021 | Q1 2020 | % Change | |||||
|---|---|---|---|---|---|---|---|---|
| QUARTERLY OPERATING RESULTS | ||||||||
| Net income | $ | 71,938 | $ | (16,687) | (531) | % | ||
| Net income available to common stockholders | $ | 68,159 | $ | (19,125) | (456) | % | ||
| Diluted earnings per common share | $ | 1.33 | $ | (0.38) | (450) | % | ||
| Diluted common shares | 51,070 | 50,475 | 1 | % | ||||
| ROA | 0.73 | % | (0.20) | % | ||||
| ROE | 10.08 | % | (2.85) | % | ||||
| BALANCE SHEET | ||||||||
| LHS | $ | 176,286 | $ | 774,064 | (77) | % | ||
| LHI, mortgage finance | 9,009,081 | 7,588,803 | 19 | % | ||||
| LHI | 15,399,174 | 16,857,579 | (9) | % | ||||
| Total LHI | 24,408,255 | 24,446,382 | — | % | ||||
| Total assets | 40,054,433 | 35,879,416 | 12 | % | ||||
| Demand deposits | 15,174,642 | 9,420,303 | 61 | % | ||||
| Total deposits | 33,391,970 | 27,134,263 | 23 | % | ||||
| Stockholders’ equity | 3,159,482 | 2,772,596 | 14 | % |
DETAILED FINANCIALS
For the first quarter of 2021, net income was $71.9 million, compared to net income of $60.2 million for the fourth quarter of 2020, and net loss of $16.7 million for the first quarter of 2020. On a fully diluted basis, earnings per common share were $1.33 for the quarter ended March 31, 2021, compared to earnings per common share of $1.14 for the quarter ended December 31, 2020 and loss per common share of $0.38 for the quarter ended March 31, 2020. The increase in net income for the first quarter of 2021 as compared to the fourth quarter of 2020 resulted primarily from a $38.0 million decrease in the provision for credit losses, offset by a decrease in net interest income.
We recorded a $6.0 million negative provision for credit losses for the first quarter of 2021, compared to a $32.0 million provision for credit losses for the fourth quarter of 2020 and a $96.0 million provision for credit losses for the first quarter of 2020. The linked quarter decrease in provision for credit losses resulted primarily from a decrease in charge-offs and improvement in the economic outlook as the economy begins to recover from the impacts of the COVID-19 pandemic. We recorded $6.4 million in net charge-offs during the first quarter of 2021, including $5.0 million in energy net charge-offs on loans that had been previously identified as problem loans, compared to $65.4 million during the fourth quarter of 2020 and $57.7 million during the first quarter of 2020. Criticized loans totaled $945.1 million at March 31, 2021, compared to $918.4 million at December 31, 2020 and $675.9 million at March 31, 2020. Criticized loan levels remain elevated when compared to pre-pandemic levels due to the downgrade of loans to borrowers that have been impacted by the COVID-19 pandemic.
Non-performing assets ("NPAs") totaled $97.7 million at March 31, 2021, a decrease of $24.3 million compared to the fourth quarter of 2020 and a decrease of $121.4 million compared to the first quarter of 2020. The linked quarter change in NPAs was primarily due to a decline in non-accrual energy loans. The ratio of total LHI NPAs to total LHI plus other real estate owned ("OREO") for the first quarter of 2021 was 0.40%, compared to 0.50% for the fourth quarter of 2020 and 0.90% for the first quarter of 2020.
Net interest income was $200.1 million for the first quarter of 2021, compared to $223.0 million for the fourth quarter of 2020 and $228.3 million for the first quarter of 2020. Net interest margin for the first quarter of 2021 was 2.09%, a decrease of 23 basis points from the fourth quarter of 2020 and a decrease of 69 basis points from the first quarter of 2020. The shift in earning assets, primarily the increases in liquidity assets and investment securities coupled with a decrease in total average loans, contributed to the linked-quarter and year-over-year decreases in net interest margin. LHI yields, excluding mortgage finance loans, decreased 21 basis points from the fourth quarter of 2020, and decreased 98 basis points compared to the first quarter of 2020. LHI, mortgage finance yields for the first quarter of 2021 decreased 7 basis points compared to the fourth quarter of 2020, and increased 7 basis points compared to the first quarter of 2020. Additionally, total cost of deposits for the first quarter of 2021 decreased 5 basis points to 0.24% compared to 0.29% for the fourth quarter of 2020, and decreased 66 basis points from .90% for the first quarter of 2020.
Non-interest income for the first quarter of 2021 decreased $3.8 million, or 9%, compared to the fourth quarter of 2020, and increased $27.3 million, or 232%, compared to the first quarter of 2020. The linked quarter decrease was primarily related to decreases in brokered loans fees, net gain/(loss) on sale of LHS and other non-interest income, partially offset by an increase in service charges on deposit accounts. The year-over-year increase was primarily related to increases in net gain/(loss) on sale of LHS, servicing income and other non-interest income. The linked quarter decreases in brokered loan fees and net gain/(loss) on sale of LHS were primarily due to a decrease in total mortgage finance volumes in the first quarter of 2021. The year-over-year increase in net gain/(loss) on sale of LHS was due to lower hedge costs in the first quarter of 2021 as a result of holding purchased loans for shorter durations than in prior periods, and is offset by the year-over-year decline in net interest income on LHS.
Non-interest expense for the first quarter of 2021 decreased $570,000, or less than 1 percent, compared to the fourth quarter of 2020, and decreased $15.1 million, or 9%, compared to the first quarter of 2020. The linked quarter decrease was primarily related to decreases in marketing expense, legal and professional expense and servicing-related expenses, offset by an increase in salaries and employee benefits, which is typically higher in the first quarter due to FICA and other seasonal payroll expenses that peak in the first quarter. The year-over-year decrease was primarily due to decreases in marketing expense, legal and professional expense, servicing-related expenses and merger-related expenses, offset by increases in salaries and employee benefits and communications and technology expenses.
All regulatory ratios continue to be in excess of "well-capitalized" requirements as of March 31, 2021. Our CET 1, tier 1 capital, total capital and leverage ratios were 10.2%, 12.3%, 14.0% and 8.3%, respectively, at March 31, 2021, compared to 9.4%, 10.3%, 12.1% and 7.5%, respectively, at December 31, 2020. At March 31, 2021, our ratio of tangible common equity to total tangible assets was 6.7% compared to 7.2% at December 31, 2020.
About Texas Capital Bancshares, Inc.
Texas Capital Bancshares, Inc. (NASDAQ®: TCBI), a member of the Russell 2000® Index and the S&P MidCap 400®, is the parent company of Texas Capital Bank, a commercial bank that delivers highly personalized financial services to businesses and entrepreneurs. Headquartered in Dallas, the bank has full-service locations in Austin, Dallas, Fort Worth, Houston and San Antonio.
Forward Looking Statements
This communication contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 regarding our financial condition, results of operations, business plans and future performance. These statements are not historical in nature and can generally be identified by such words as “believe,” “expect,” “estimate,” “anticipate,” “plan,” “may,” “will,” “forecast,” “could,” “should”, “projects,” “targeted,” “continue,” “intend” and similar expressions.
Because forward-looking statements relate to future results and occurrences, they are subject to inherent uncertainties, risks, and changes in circumstances that are difficult to predict. A number of factors, many of which are beyond our control, could cause actual results to differ materially from future results expressed or implied by such forward-looking statements. These factors include, but are not limited to, (1) the credit quality of our loan portfolio, (2) general economic conditions in the United States, globally and in our markets and the impact they may have on us and our customers, including the continued impact on our customers from volatility in oil and gas prices, (3) the material risks and uncertainties for the U.S. and world economies, and for our business, resulting from the COVID-19 pandemic and any other pandemic, epidemic or health related crisis, (4) expectations regarding rates of default and credit losses, (5) volatility in the mortgage industry, (6) our business strategies, (7) our expectations about future financial performance, future growth and earnings, (8) the appropriateness of our allowance for credit losses and provision for credit losses, (9) our ability to identify, employ and retain qualified employees, (10) the impact of changing regulatory requirements and legislative changes on our business, (11) increased competition, (12) interest rate risk, (13)greater than expected costs or difficulties related to the integration and development of new lines of business, new products or service offerings and new technologies, (14) technological changes, (15) the cost and effects of cyber incidents or other failures, interruptions or security breaches of our systems or those of third party providers and (16) our success at managing the risk and uncertainties involved in the foregoing factors. In addition, statements about the effects of the COVID-19 pandemic on the firm’s business, results, financial position and liquidity are subject to the risk that the actual impact may differ, possibly materially, from what is currently expected.
These and other factors that could cause results to differ materially from those described in the forward-looking statements, as well as a discussion of the risks and uncertainties that may affect our business, can be found in our Annual Report on Form 10-K, our Quarterly Reports on Form 10-Q and in other filings we make with the Securities and Exchange Commission. The information contained in this communication speaks only as of its date. Except to the extent required by applicable law or regulation, we disclaim any obligation to update such factors or to publicly announce the results of any revisions to any of the forward-looking statements included herein to reflect future events or developments.
| TEXAS CAPITAL BANCSHARES, INC. | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| SELECTED FINANCIAL HIGHLIGHTS (UNAUDITED) | |||||||||||||||
| (dollars in thousands except per share data) | |||||||||||||||
| 1st Quarter | 4th Quarter | 3rd Quarter | 2nd Quarter | 1st Quarter | |||||||||||
| 2021 | 2020 | 2020 | 2020 | 2020 | |||||||||||
| CONSOLIDATED STATEMENTS OF INCOME | |||||||||||||||
| Interest income | $ | 228,412 | $ | 255,163 | $ | 243,731 | $ | 252,010 | $ | 306,008 | |||||
| Interest expense | 28,339 | 32,153 | 36,162 | 42,082 | 77,689 | ||||||||||
| Net interest income | 200,073 | 223,010 | 207,569 | 209,928 | 228,319 | ||||||||||
| Provision for credit losses | (6,000) | 32,000 | 30,000 | 100,000 | 96,000 | ||||||||||
| Net interest income after provision for credit losses | 206,073 | 191,010 | 177,569 | 109,928 | 132,319 | ||||||||||
| Non-interest income | 39,092 | 42,886 | 60,348 | 70,502 | 11,780 | ||||||||||
| Non-interest expense | 150,316 | 150,886 | 165,741 | 222,352 | 165,417 | ||||||||||
| Income/(loss) before income taxes | 94,849 | 83,010 | 72,176 | (41,922) | (21,318) | ||||||||||
| Income tax expense/(benefit) | 22,911 | 22,834 | 15,060 | (7,606) | (4,631) | ||||||||||
| Net income/(loss) | 71,938 | 60,176 | 57,116 | (34,316) | (16,687) | ||||||||||
| Preferred stock dividends | 3,779 | 2,437 | 2,438 | 2,437 | 2,438 | ||||||||||
| Net income/(loss) available to common stockholders | $ | 68,159 | $ | 57,739 | $ | 54,678 | $ | (36,753) | $ | (19,125) | |||||
| Diluted earnings/(loss) per common share | $ | 1.33 | $ | 1.14 | $ | 1.08 | $ | (0.73) | $ | (0.38) | |||||
| Diluted common shares | 51,069,511 | 50,794,421 | 50,573,073 | 50,416,331 | 50,474,802 | ||||||||||
| CONSOLIDATED BALANCE SHEET DATA | |||||||||||||||
| Total assets | $ | 40,054,433 | $ | 37,726,096 | $ | 38,432,872 | $ | 36,613,127 | $ | 35,879,416 | |||||
| LHI | 15,399,174 | 15,351,451 | 15,789,958 | 16,552,203 | 16,857,579 | ||||||||||
| LHI, mortgage finance | 9,009,081 | 9,079,409 | 9,378,104 | 8,972,626 | 7,588,803 | ||||||||||
| LHS | 176,286 | 283,165 | 648,009 | 454,581 | 774,064 | ||||||||||
| Liquidity assets(1) | 11,212,276 | 9,032,807 | 10,461,544 | 9,540,044 | 9,498,189 | ||||||||||
| Investment securities | 3,443,058 | 3,196,970 | 1,367,313 | 234,969 | 228,784 | ||||||||||
| Demand deposits | 15,174,642 | 12,740,947 | 12,339,212 | 10,835,911 | 9,420,303 | ||||||||||
| Total deposits | 33,391,970 | 30,996,589 | 31,959,487 | 30,187,695 | 27,134,263 | ||||||||||
| Other borrowings | 2,515,587 | 3,111,751 | 2,908,183 | 2,895,790 | 5,195,267 | ||||||||||
| Long-term debt | 664,968 | 395,896 | 395,806 | 395,715 | 395,625 | ||||||||||
| Stockholders’ equity | 3,159,482 | 2,871,224 | 2,800,404 | 2,734,755 | 2,772,596 | ||||||||||
| End of period shares outstanding | 50,557,767 | 50,470,450 | 50,455,552 | 50,435,672 | 50,407,778 | ||||||||||
| Book value | $ | 53.59 | $ | 53.92 | $ | 52.53 | $ | 51.25 | $ | 52.03 | |||||
| Tangible book value(2) | $ | 53.24 | $ | 53.57 | $ | 52.18 | $ | 50.89 | $ | 51.67 | |||||
| SELECTED FINANCIAL RATIOS | |||||||||||||||
| Net interest margin | 2.09 | % | 2.32 | % | 2.22 | % | 2.30 | % | 2.78 | % | |||||
| Return on average assets | 0.73 | % | 0.61 | % | 0.59 | % | (0.36) | % | (0.20) | % | |||||
| Return on average common equity | 10.08 | % | 8.50 | % | 8.24 | % | (5.48) | % | (2.85) | % | |||||
| Non-interest income to average earning assets | 0.41 | % | 0.44 | % | 0.64 | % | 0.77 | % | 0.14 | % | |||||
| Efficiency ratio(3) | 62.9 | % | 56.7 | % | 61.9 | % | 79.3 | % | 68.9 | % | |||||
| Non-interest expense to average earning assets | 1.57 | % | 1.56 | % | 1.76 | % | 2.43 | % | 2.00 | % | |||||
| Tangible common equity to total tangible assets(4) | 6.7 | % | 7.2 | % | 6.9 | % | 7.0 | % | 7.3 | % | |||||
| Common Equity Tier 1 | 10.2 | % | 9.4 | % | 9.1 | % | 8.8 | % | 9.3 | % | |||||
| Tier 1 capital | 12.3 | % | 10.3 | % | 9.9 | % | 9.7 | % | 10.2 | % | |||||
| Total capital | 14.0 | % | 12.1 | % | 11.8 | % | 11.6 | % | 12.0 | % | |||||
| Leverage | 8.3 | % | 7.5 | % | 7.6 | % | 7.5 | % | 8.5 | % |
(1) Liquidity assets include Federal funds sold and interest-bearing deposits in other banks.
(2) Stockholders’ equity excluding preferred stock, less goodwill and intangibles, divided by shares outstanding at period end.
(3) Non-interest expense divided by the sum of net interest income and non-interest income.
(4) 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) | |||||
| March 31, 2020 | %<br>Change | ||||
| Assets | |||||
| Cash and due from banks | 215,835 | $ | 162,386 | 33 | % |
| Interest-bearing deposits | 9,468,189 | 18 | % | ||
| Federal funds sold and securities purchased under resale agreements | 30,000 | (100) | % | ||
| Securities, available-for-sale | 228,784 | N/M | |||
| LHS, at fair value | 774,064 | (77) | % | ||
| LHI, mortgage finance | 7,588,803 | 19 | % | ||
| LHI (net of unearned income) | 16,857,579 | (9) | % | ||
| Less: Allowance for credit losses on loans | 240,958 | 1 | % | ||
| LHI, net | 24,205,424 | — | % | ||
| Mortgage servicing rights, net | 70,619 | 71 | % | ||
| Premises and equipment, net | 29,663 | (21) | % | ||
| Accrued interest receivable and other assets | 892,305 | (24) | % | ||
| Goodwill and intangibles, net | 17,982 | (2) | % | ||
| Total assets | 40,054,433 | $ | 35,879,416 | 12 | % |
| Liabilities and Stockholders’ Equity | |||||
| Liabilities: | |||||
| Deposits: | |||||
| Non-interest bearing | 15,174,642 | $ | 9,420,303 | 61 | % |
| Interest bearing | 17,713,960 | 3 | % | ||
| Total deposits | 27,134,263 | 23 | % | ||
| Accrued interest payable | 16,969 | (67) | % | ||
| Other liabilities | 364,696 | (13) | % | ||
| Federal funds purchased and repurchase agreements | 295,267 | (61) | % | ||
| Other borrowings | 4,900,000 | (51) | % | ||
| Long-term debt | 395,625 | 68 | % | ||
| Total liabilities | 33,106,820 | 11 | % | ||
| Stockholders’ equity: | |||||
| Preferred stock, .01 par value, 1,000 liquidation value: | |||||
| Authorized shares - 10,000,000 | |||||
| Issued shares - 6,300,000 and 6,000,000 shares issued at March 31, 2021 and 2020, respectively | 150,000 | 200 | % | ||
| Common stock, .01 par value: | |||||
| Authorized shares - 100,000,000 | |||||
| Issued shares - 50,558,184 and 50,408,195 at March 31, 2021 and 2020, respectively | 504 | — | % | ||
| Additional paid-in capital | 979,939 | — | % | ||
| Retained earnings | 1,637,392 | 9 | % | ||
| Treasury stock (shares at cost: 417 at March 31, 2021 and 2020) | (8) | — | % | ||
| Accumulated other comprehensive income/(loss), net of taxes | 4,769 | N/M | |||
| Total stockholders’ equity | 2,772,596 | 14 | % | ||
| Total liabilities and stockholders’ equity | 40,054,433 | $ | 35,879,416 | 12 | % |
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 March 31, | |||||||||||||||
| 2021 | 2020 | ||||||||||||||
| Interest income | |||||||||||||||
| Interest and fees on loans | $ | 215,592 | $ | 283,625 | |||||||||||
| Investment securities | 9,887 | 2,183 | |||||||||||||
| Federal funds sold and securities purchased under resale agreements | 1 | 614 | |||||||||||||
| Interest-bearing deposits in other banks | 2,932 | 19,586 | |||||||||||||
| Total interest income | 228,412 | 306,008 | |||||||||||||
| Interest expense | |||||||||||||||
| Deposits | 20,004 | 62,174 | |||||||||||||
| Federal funds purchased | 75 | 669 | |||||||||||||
| Other borrowings | 2,517 | 9,582 | |||||||||||||
| Long-term debt | 5,743 | 5,264 | |||||||||||||
| Total interest expense | 28,339 | 77,689 | |||||||||||||
| Net interest income | 200,073 | 228,319 | |||||||||||||
| Provision for credit losses | (6,000) | 96,000 | |||||||||||||
| Net interest income after provision for credit losses | 206,073 | 132,319 | |||||||||||||
| Non-interest income | |||||||||||||||
| Service charges on deposit accounts | 4,716 | 3,293 | |||||||||||||
| Wealth management and trust fee income | 2,855 | 2,467 | |||||||||||||
| Brokered loan fees | 9,311 | 8,015 | |||||||||||||
| Servicing income | 9,009 | 4,746 | |||||||||||||
| Swap fees | 526 | 2,757 | |||||||||||||
| Net gain/(loss) on sale of LHS | 5,572 | (13,000) | |||||||||||||
| Other | 7,103 | 3,502 | |||||||||||||
| Total non-interest income | 39,092 | 11,780 | |||||||||||||
| Non-interest expense | |||||||||||||||
| Salaries and employee benefits | 87,522 | 77,193 | |||||||||||||
| Net occupancy expense | 8,274 | 8,712 | |||||||||||||
| Marketing | 1,697 | 8,522 | |||||||||||||
| Legal and professional | 8,277 | 17,466 | |||||||||||||
| Communications and technology | 15,969 | 13,791 | |||||||||||||
| FDIC insurance assessment | 6,613 | 5,849 | |||||||||||||
| Servicing-related expenses | 12,989 | 16,354 | |||||||||||||
| Merger-related expenses | — | 7,270 | |||||||||||||
| Other | 8,975 | 10,260 | |||||||||||||
| Total non-interest expense | 150,316 | 165,417 | |||||||||||||
| Income/(loss) before income taxes | 94,849 | (21,318) | |||||||||||||
| Income tax expense/(benefit) | 22,911 | (4,631) | |||||||||||||
| Net income/(loss) | 71,938 | (16,687) | |||||||||||||
| Preferred stock dividends | 3,779 | 2,438 | |||||||||||||
| Net income/(loss) available to common stockholders | $ | 68,159 | $ | (19,125) | |||||||||||
| Basic earnings/(loss) per common share | $ | 1.35 | $ | (0.38) | |||||||||||
| Diluted earnings/(loss) per common share | $ | 1.33 | $ | (0.38) | |||||||||||
| TEXAS CAPITAL BANCSHARES, INC. | |||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| SUMMARY OF CREDIT LOSS EXPERIENCE | |||||||||||||||
| (dollars in thousands) | |||||||||||||||
| 1st Quarter | 4th Quarter | 3rd Quarter | 2nd Quarter | 1st Quarter | |||||||||||
| 2021 | 2020 | 2020 | 2020 | 2020 | |||||||||||
| Allowance for credit losses on loans: | |||||||||||||||
| Beginning balance | $ | 254,615 | $ | 290,165 | $ | 264,722 | $ | 240,958 | $ | 195,047 | |||||
| Impact of CECL adoption | — | — | — | — | 8,585 | ||||||||||
| Loans charged-off: | |||||||||||||||
| Commercial | 2,451 | 37,984 | 2,436 | 12,287 | 20,653 | ||||||||||
| Energy | 5,732 | 33,283 | 141 | 62,368 | 37,730 | ||||||||||
| Real estate | — | 180 | — | — | — | ||||||||||
| Total charge-offs | 8,183 | 71,447 | 2,577 | 74,655 | 58,383 | ||||||||||
| Recoveries: | |||||||||||||||
| Commercial | 1,050 | 394 | 113 | 513 | 257 | ||||||||||
| Energy | 715 | 5,696 | 880 | — | 423 | ||||||||||
| Total recoveries | 1,765 | 6,090 | 993 | 513 | 680 | ||||||||||
| Net charge-offs | 6,418 | 65,357 | 1,584 | 74,142 | 57,703 | ||||||||||
| Provision for credit losses on loans | (5,713) | 29,807 | 27,027 | 97,906 | 95,029 | ||||||||||
| Ending balance | $ | 242,484 | $ | 254,615 | $ | 290,165 | $ | 264,722 | $ | 240,958 | |||||
| Allowance for off-balance sheet credit losses: | |||||||||||||||
| Beginning balance | $ | 17,434 | $ | 15,241 | $ | 12,268 | $ | 10,174 | $ | 8,640 | |||||
| Impact of CECL adoption | — | — | — | — | 563 | ||||||||||
| Provision for off-balance sheet credit losses | (287) | 2,193 | 2,973 | 2,094 | 971 | ||||||||||
| Ending balance | $ | 17,147 | $ | 17,434 | $ | 15,241 | $ | 12,268 | $ | 10,174 | |||||
| Total allowance for credit losses | $ | 259,631 | $ | 272,049 | $ | 305,406 | $ | 276,990 | $ | 251,132 | |||||
| Total provision for credit losses | $ | (6,000) | $ | 32,000 | $ | 30,000 | $ | 100,000 | $ | 96,000 | |||||
| Allowance for credit losses on loans to LHI | 0.99 | % | 1.04 | % | 1.15 | % | 1.04 | % | 0.99 | % | |||||
| Allowance for credit losses on loans to average LHI | 1.03 | % | 1.01 | % | 1.14 | % | 1.03 | % | 1.02 | % | |||||
| Net charge-offs to average LHI(1) | 0.11 | % | 1.03 | % | 0.02 | % | 1.16 | % | 0.98 | % | |||||
| Net charge-offs to average LHI for last twelve months(1) | 0.59 | % | 0.80 | % | 0.59 | % | 0.73 | % | 0.53 | % | |||||
| Total provision for credit losses to average LHI(1) | (0.10) | % | 0.51 | % | 0.47 | % | 1.57 | % | 1.63 | % | |||||
| Total allowance for credit losses to LHI | 1.06 | % | 1.11 | % | 1.21 | % | 1.09 | % | 1.03 | % |
(1)Interim period ratios are annualized.
| TEXAS CAPITAL BANCSHARES, INC. | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| SUMMARY OF NON-PERFORMING ASSETS AND PAST DUE LOANS | |||||||||||||||
| (dollars in thousands) | |||||||||||||||
| 1st Quarter | 4th Quarter | 3rd Quarter | 2nd Quarter | 1st Quarter | |||||||||||
| 2021 | 2020 | 2020 | 2020 | 2020 | |||||||||||
| Non-performing assets (NPAs): | |||||||||||||||
| Non-accrual loans | $ | 97,730 | $ | 121,989 | $ | 161,946 | $ | 174,031 | $ | 219,165 | |||||
| Other real estate owned (OREO) | — | — | — | — | — | ||||||||||
| Total LHI NPAs | $ | 97,730 | $ | 121,989 | $ | 161,946 | $ | 174,031 | $ | 219,165 | |||||
| Non-accrual loans to LHI | 0.40 | % | 0.50 | % | 0.64 | % | 0.68 | % | 0.90 | % | |||||
| Total LHI NPAs to LHI plus OREO | 0.40 | % | 0.50 | % | 0.64 | % | 0.68 | % | 0.90 | % | |||||
| Total LHI NPAs to earning assets | 0.25 | % | 0.33 | % | 0.43 | % | 0.49 | % | 0.63 | % | |||||
| Allowance for credit losses on loans to non-accrual loans | 2.5x | 2.1x | 1.8x | 1.5x | 1.1x | ||||||||||
| LHI past due 90 days and still accruing(1) | $ | 6,187 | $ | 12,541 | $ | 15,896 | $ | 21,079 | $ | 21,274 | |||||
| LHI past due 90 days to LHI | 0.03 | % | 0.05 | % | 0.06 | % | 0.08 | % | 0.09 | % | |||||
| LHS non-accrual(2) | $ | — | $ | 6,966 | $ | — | $ | — | $ | — | |||||
| LHS past due 90 days and still accruing(3) | $ | 16,359 | $ | 16,667 | $ | 15,631 | $ | 10,152 | $ | 9,014 |
(1)At March 31, 2021, loans past due 90 days and still accruing includes premium finance loans of $3.1 million. These loans are primarily secured by obligations of insurance carriers to refund premiums on canceled insurance policies. The refund of premiums from the insurance carriers can take 180 days or longer from the cancellation date.
(2)Includes one non-accrual loan previously reported in loans HFI that was transferred to loans HFS as of December 31, 2020 and subsequently sold at carrying value.
(3)Includes loans guaranteed by U.S. government agencies that were repurchased out of Ginnie Mae securities. Loans are recorded as LHS and carried at fair value on the balance sheet. Interest on these past due loans accrues at the debenture rate guaranteed by the U.S. government. Also includes loans that, pursuant to Ginnie Mae servicing guidelines, we have the unilateral right, but not obligation, to repurchase and thus must record as LHS on our balance sheet regardless of whether the repurchase option has been exercised.
| TEXAS CAPITAL BANCSHARES, INC. | ||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) | ||||||||||||||||||||||||||||||
| (dollars in thousands) | ||||||||||||||||||||||||||||||
| 1st Quarter | 4th Quarter | 3rd Quarter | 2nd Quarter | 1st Quarter | ||||||||||||||||||||||||||
| 2021 | 2020 | 2020 | 2020 | 2020 | ||||||||||||||||||||||||||
| Interest income | ||||||||||||||||||||||||||||||
| Interest and fees on loans | $ | 215,592 | $ | 242,776 | $ | 237,179 | $ | 247,595 | $ | 283,625 | ||||||||||||||||||||
| Investment securities | 9,887 | 9,594 | 3,674 | 2,024 | 2,183 | |||||||||||||||||||||||||
| Federal funds sold and securities purchased under resale agreements | 1 | 1 | 1 | 77 | 614 | |||||||||||||||||||||||||
| Interest-bearing deposits in other banks | 2,932 | 2,792 | 2,877 | 2,314 | 19,586 | |||||||||||||||||||||||||
| Total interest income | 228,412 | 255,163 | 243,731 | 252,010 | 306,008 | |||||||||||||||||||||||||
| Interest expense | ||||||||||||||||||||||||||||||
| Deposits | 20,004 | 23,819 | 27,830 | 32,294 | 62,174 | |||||||||||||||||||||||||
| Federal funds purchased | 75 | 110 | 128 | 176 | 669 | |||||||||||||||||||||||||
| Other borrowings | 2,517 | 3,407 | 3,365 | 4,569 | 9,582 | |||||||||||||||||||||||||
| Long-term debt | 5,743 | 4,817 | 4,839 | 5,043 | 5,264 | |||||||||||||||||||||||||
| Total interest expense | 28,339 | 32,153 | 36,162 | 42,082 | 77,689 | |||||||||||||||||||||||||
| Net interest income | 200,073 | 223,010 | 207,569 | 209,928 | 228,319 | |||||||||||||||||||||||||
| Provision for credit losses | (6,000) | 32,000 | 30,000 | 100,000 | 96,000 | |||||||||||||||||||||||||
| Net interest income after provision for credit losses | 206,073 | 191,010 | 177,569 | 109,928 | 132,319 | |||||||||||||||||||||||||
| Non-interest income | ||||||||||||||||||||||||||||||
| Service charges on deposit accounts | 4,716 | 3,004 | 2,864 | 2,459 | 3,293 | |||||||||||||||||||||||||
| Wealth management and trust fee income | 2,855 | 2,681 | 2,502 | 2,348 | 2,467 | |||||||||||||||||||||||||
| Brokered loan fees | 9,311 | 12,610 | 15,034 | 10,764 | 8,015 | |||||||||||||||||||||||||
| Servicing income | 9,009 | 8,834 | 7,329 | 6,120 | 4,746 | |||||||||||||||||||||||||
| Swap fees | 526 | 473 | 484 | 1,468 | 2,757 | |||||||||||||||||||||||||
| Net gain/(loss) on sale of LHS | 5,572 | 6,761 | 25,242 | 39,023 | (13,000) | |||||||||||||||||||||||||
| Other | 7,103 | 8,523 | 6,893 | 8,320 | 3,502 | |||||||||||||||||||||||||
| Total non-interest income | 39,092 | 42,886 | 60,348 | 70,502 | 11,780 | |||||||||||||||||||||||||
| Non-interest expense | ||||||||||||||||||||||||||||||
| Salaries and employee benefits | 87,522 | 78,449 | 84,096 | 100,791 | 77,193 | |||||||||||||||||||||||||
| Net occupancy expense | 8,274 | 8,373 | 8,736 | 9,134 | 8,712 | |||||||||||||||||||||||||
| Marketing | 1,697 | 3,435 | 3,636 | 7,988 | 8,522 | |||||||||||||||||||||||||
| Legal and professional | 8,277 | 12,129 | 11,207 | 11,330 | 17,466 | |||||||||||||||||||||||||
| Communications and technology | 15,969 | 15,405 | 31,098 | 42,760 | 13,791 | |||||||||||||||||||||||||
| FDIC insurance assessment | 6,613 | 6,592 | 6,374 | 7,140 | 5,849 | |||||||||||||||||||||||||
| Servicing-related expenses | 12,989 | 15,867 | 12,287 | 20,117 | 16,354 | |||||||||||||||||||||||||
| Merger-related expenses | — | — | — | 10,486 | 7,270 | |||||||||||||||||||||||||
| Other | 8,975 | 10,636 | 8,307 | 12,606 | 10,260 | |||||||||||||||||||||||||
| Total non-interest expense | 150,316 | 150,886 | 165,741 | 222,352 | 165,417 | |||||||||||||||||||||||||
| Income/(loss) before income taxes | 94,849 | 83,010 | 72,176 | (41,922) | (21,318) | |||||||||||||||||||||||||
| Income tax expense/(benefit) | 22,911 | 22,834 | 15,060 | (7,606) | (4,631) | |||||||||||||||||||||||||
| Net income/(loss) | 71,938 | 60,176 | 57,116 | (34,316) | (16,687) | |||||||||||||||||||||||||
| Preferred stock dividends | 3,779 | 2,437 | 2,438 | 2,437 | 2,438 | |||||||||||||||||||||||||
| Net income/(loss) available to common shareholders | $ | 68,159 | $ | 57,739 | $ | 54,678 | $ | (36,753) | $ | (19,125) | ||||||||||||||||||||
| TEXAS CAPITAL BANCSHARES, INC. | ||||||||||||||||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| QUARTERLY FINANCIAL SUMMARY - UNAUDITED | ||||||||||||||||||||||||||||||
| Consolidated Daily Average Balances, Average Yields and Rates | ||||||||||||||||||||||||||||||
| (dollars in thousands) | ||||||||||||||||||||||||||||||
| 1st Quarter 2021 | 4th Quarter 2020 | 3rd Quarter 2020 | 2nd Quarter 2020 | 1st Quarter 2020 | ||||||||||||||||||||||||||
| Average<br>Balance | Revenue/<br>Expense | Yield/<br>Rate | Average<br>Balance | Revenue/<br>Expense | Yield/<br>Rate | Average<br>Balance | Revenue/<br>Expense | Yield/<br>Rate | Average<br>Balance | Revenue/<br>Expense | Yield/<br>Rate | Average<br>Balance | Revenue/<br>Expense | Yield/<br>Rate | ||||||||||||||||
| Assets | ||||||||||||||||||||||||||||||
| Investment securities - Taxable | $ | 3,225,786 | $ | 8,112 | 1.02 | % | $ | 2,137,481 | $ | 7,748 | 1.44 | % | $ | 525,149 | $ | 1,905 | 1.44 | % | $ | 38,829 | $ | 185 | 1.92 | % | $ | 42,799 | $ | 274 | 2.57 | % |
| Investment securities - Non-taxable(2) | 196,785 | 2,247 | 4.63 | % | 200,781 | 2,337 | 4.63 | % | 190,797 | 2,239 | 4.67 | % | 195,806 | 2,327 | 4.78 | % | 195,578 | 2,417 | 4.97 | % | ||||||||||
| Federal funds sold and securities purchased under resale agreements | 4,605 | 1 | 0.07 | % | 1,709 | 1 | 0.13 | % | 12,051 | 1 | 0.04 | % | 245,434 | 77 | 0.13 | % | 199,727 | 614 | 1.24 | % | ||||||||||
| Interest-bearing deposits in other banks | 11,840,942 | 2,932 | 0.10 | % | 10,808,548 | 2,792 | 0.10 | % | 11,028,962 | 2,877 | 0.10 | % | 10,521,240 | 2,314 | 0.09 | % | 6,225,948 | 19,586 | 1.27 | % | ||||||||||
| LHS, at fair value | 243,326 | 1,595 | 2.66 | % | 410,637 | 2,475 | 2.40 | % | 543,606 | 3,867 | 2.83 | % | 380,624 | 2,547 | 2.69 | % | 3,136,381 | 27,480 | 3.52 | % | ||||||||||
| LHI, mortgage finance loans | 8,177,759 | 64,942 | 3.22 | % | 9,550,119 | 78,906 | 3.29 | % | 9,061,984 | 76,464 | 3.36 | % | 8,676,521 | 74,518 | 3.45 | % | 7,054,682 | 55,324 | 3.15 | % | ||||||||||
| LHI(1)(2) | 15,457,888 | 149,196 | 3.91 | % | 15,620,410 | 161,750 | 4.12 | % | 16,286,036 | 157,230 | 3.84 | % | 17,015,041 | 170,970 | 4.04 | % | 16,598,775 | 201,781 | 4.89 | % | ||||||||||
| Less allowance for credit<br><br>losses on loans | 254,697 | — | — | 290,189 | — | — | 264,769 | — | — | 236,823 | — | — | 201,837 | — | — | |||||||||||||||
| LHI, net of allowance | 23,380,950 | 214,138 | 3.71 | % | 24,880,340 | 240,656 | 3.85 | % | 25,083,251 | 233,694 | 3.71 | % | 25,454,739 | 245,488 | 3.88 | % | 23,451,620 | 257,105 | 4.41 | % | ||||||||||
| Total earning assets | 38,892,394 | 229,025 | 2.39 | % | 38,439,496 | 256,009 | 2.65 | % | 37,383,816 | 244,583 | 2.60 | % | 36,836,672 | 252,938 | 2.76 | % | 33,252,053 | 307,476 | 3.72 | % | ||||||||||
| Cash and other assets | 1,064,679 | 1,031,195 | 1,037,760 | 1,075,864 | 976,520 | |||||||||||||||||||||||||
| Total assets | $ | 39,957,073 | $ | 39,470,691 | $ | 38,421,576 | $ | 37,912,536 | $ | 34,228,573 | ||||||||||||||||||||
| Liabilities and Stockholders’ Equity | ||||||||||||||||||||||||||||||
| Transaction deposits | $ | 3,991,966 | $ | 5,861 | 0.60 | % | $ | 4,384,493 | $ | 6,604 | 0.60 | % | $ | 4,275,574 | $ | 6,652 | 0.62 | % | $ | 3,923,966 | $ | 5,998 | 0.61 | % | $ | 3,773,067 | $ | 13,582 | 1.45 | % |
| Savings deposits | 12,889,974 | 10,788 | 0.34 | % | 12,982,189 | 12,671 | 0.39 | % | 12,786,719 | 12,808 | 0.40 | % | 12,537,467 | 13,510 | 0.43 | % | 11,069,429 | 35,961 | 1.31 | % | ||||||||||
| Time deposits | 2,204,242 | 3,355 | 0.62 | % | 2,355,199 | 4,544 | 0.77 | % | 2,844,083 | 8,370 | 1.17 | % | 3,434,388 | 12,786 | 1.50 | % | 2,842,535 | 12,631 | 1.79 | % | ||||||||||
| Total interest bearing deposits | 19,086,182 | 20,004 | 0.43 | % | 19,721,881 | 23,819 | 0.48 | % | 19,906,376 | 27,830 | 0.56 | % | 19,895,821 | 32,294 | 0.65 | % | 17,685,031 | 62,174 | 1.41 | % | ||||||||||
| Other borrowings | 2,686,398 | 2,592 | 0.39 | % | 3,022,077 | 3,517 | 0.46 | % | 2,811,435 | 3,493 | 0.49 | % | 3,612,263 | 4,745 | 0.53 | % | 3,020,255 | 10,251 | 1.37 | % | ||||||||||
| Long-term debt | 464,731 | 5,743 | 5.01 | % | 395,841 | 4,817 | 4.84 | % | 395,749 | 4,839 | 4.87 | % | 395,658 | 5,043 | 5.13 | % | 395,571 | 5,264 | 5.35 | % | ||||||||||
| Total interest bearing liabilities | 22,237,311 | 28,339 | 0.52 | % | 23,139,799 | 32,153 | 0.55 | % | 23,113,560 | 36,162 | 0.62 | % | 23,903,742 | 42,082 | 0.71 | % | 21,100,857 | 77,689 | 1.48 | % | ||||||||||
| Demand deposits | 14,421,505 | 13,174,114 | 12,202,065 | 10,865,896 | 10,003,495 | |||||||||||||||||||||||||
| Other liabilities | 309,644 | 303,480 | 314,500 | 293,698 | 270,868 | |||||||||||||||||||||||||
| Stockholders’ equity | 2,988,613 | 2,853,298 | 2,791,451 | 2,849,200 | 2,853,353 | |||||||||||||||||||||||||
| Total liabilities and stockholders’ equity | $ | 39,957,073 | $ | 39,470,691 | $ | 38,421,576 | $ | 37,912,536 | $ | 34,228,573 | ||||||||||||||||||||
| Net interest income(2) | $ | 200,686 | $ | 223,856 | $ | 208,421 | $ | 210,856 | $ | 229,787 | ||||||||||||||||||||
| Net interest margin | 2.09 | % | 2.32 | % | 2.22 | % | 2.30 | % | 2.78 | % |
(1) The loan averages include loans on which the accrual of interest has been discontinued and are stated net of unearned income.
(2) Taxable equivalent rates used where applicable.
earnings1q2021-final
Q1-2021 Earnings April 21, 2021
2 Forward Looking Statements This communication contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 regarding our financial condition, results of operations, business plans and future performance. These statements are not historical in nature and can generally be identified by such words as “believe,” “expect,” “estimate,” “anticipate,” “plan,” “may,” “will,” “forecast,” “could,” “should”, “projects,” “targeted,” “continue,” “intend” and similar expressions. Because forward-looking statements relate to future results and occurrences, they are subject to inherent uncertainties, risks, and changes in circumstances that are difficult to predict. A number of factors, many of which are beyond our control, could cause actual results to differ materially from future results expressed or implied by such forward-looking statements. These factors include, but are not limited to, (1) the credit quality of our loan portfolio, (2) general economic conditions in the United States, globally and in our markets and the impact they may have on us and our customers, including the continued impact on our customers from volatility in oil and gas prices, (3) the material risks and uncertainties for the U.S. and world economies, and for our business, resulting from the COVID-19 pandemic and any other pandemic, epidemic or health related crisis, (4) expectations regarding rates of default and credit losses, (5) volatility in the mortgage industry, (6) our business strategies, (7) our expectations about future financial performance, future growth and earnings, (8) the appropriateness of our allowance for credit losses and provision for credit losses, (9) our ability to identify, employ and retain qualified employees, (10) the impact of changing regulatory requirements and legislative changes on our business, (11) increased competition, (12) interest rate risk, (13)greater than expected costs or difficulties related to the integration and development of new lines of business, new products or service offerings and new technologies, (14) technological changes, (15) the cost and effects of cyber incidents or other failures, interruptions or security breaches of our systems or those of third party providers and (16) our success at managing the risk and uncertainties involved in the foregoing factors. In addition, statements about the effects of the COVID-19 pandemic on the firm’s business, results, financial position and liquidity are subject to the risk that the actual impact may differ, possibly materially, from what is currently expected. These and other factors that could cause results to differ materially from those described in the forward-looking statements, as well as a discussion of the risks and uncertainties that may affect our business, can be found in our Annual Report on Form 10-K, our Quarterly Reports on Form 10-Q and in other filings we make with the Securities and Exchange Commission. The information contained in this communication speaks only as of its date. Except to the extent required by applicable law or regulation, we disclaim any obligation to update such factors or to publicly announce the results of any revisions to any of the forward-looking statements included herein to reflect future events or developments.
3 Improved Profitability Actions Supporting Commitments Positioning for Balance Sheet Strength The Bank executed the largest capital raise in its history ($300.0 million of preferred), bolstering Tier 1 Capital (~50bps) and readying the balance sheet for future growth as the recovery takes hold The warehouse lending credit risk transfer (“CRT”) more closely aligns the warehouse portfolio’s regulatory treatment with its true risk profile, freeing capital to better support core mortgage finance clients and allow for growth elsewhere Investing for Growth and Sustainably Higher Core Earnings Targeted leadership hires solidify a forward-looking Executive Management Team, which is now mostly in place and focusing on operational excellence and building the capabilities needed to capitalize on market opportunities The Correspondent Lending wind-down will stabilize the Bank’s earnings profile and allow for meaningful reinvestment elsewhere (+$70 million per year 3). Savings will be reallocated to banker hires and enhancing existing platforms Net Interest Income Financial Highlights ($M) Non-Interest Income Total Revenue Non-Interest Expense PPNR 1 Provision for Credit Losses Income Tax Expense PPNR 1 / Avg. Assets Efficiency Ratio 2 EPS ROA Key Performance Metrics $228.3 Q1 2020 Q4 2020 Q1 2021 11.8 240.1 165.4 74.7 (4.6) $223.0 42.9 265.9 115.0 32.0 22.8 $200.1 39.1 239.2 88.8 (6.0) 22.9 0.88% 68.9% $(0.38) (2.85)% 1.16% 56.7% $1.14 8.50% 0.90% 62.9% $1.33 10.08%ROCE 96.0 150.9 150.3 (0.20)% 0.61% 0.73% Net Income / (Loss) $(16.7) $60.2 $71.9 1 Net interest income and non-interest income, less non-interest expense 2 Non-interest expense divided by the sum of net interest income and non-interest income 3 Annualized Correspondent Lending Q1-2021 non-interest expense Net income to common of $68.2 million, or $1.33 per diluted share, as an improving credit outlook offset seasonal mortgage finance declines. Core earnings generation (PPNR 1 / Avg Assets) in line with Q1-2020 levels Total revenue flat Y-o-Y, despite a 125bp decline in the federal funds target rate. Loan fees were down Q-o-Q in a return to more normalized levels Non-interest expense was down Q-o-Q and lower Y-o-Y, with anticipated decreases in servicing-related expense and legal and professional expense offsetting higher salaries and benefits expense Thoughtful resolution of high-risk credits in 2020 and forward-looking ACL build leave significant reserves relative to current risk. NPA coverage increased to 2.5x After encouraging improvements in case numbers and vaccination metrics (over 45% of Texans with at least one shot), the Bank has been executing against its plan to bring employees back in a safe manner. We are monitoring progress and proceeding at a prudent pace to ensure ongoing employee safety
4 Established an Operating Committee immediately and began a disciplined review of each business. A new Business Management Framework will facilitate enhanced operating routines to cascade decisions, improve transparency, and foster a culture of accountability Quarterly Business Reviews are an important tool for aligning capital, expenses, and management focus against opportunities to drive thru-cycle returns. We just completed the second round and are driving important decisions We will be defined by our clients. A newly formed Balance Sheet Committee will ensure available capital is being used to build lasting relationships with top-tier clients led by best-in-class management teams Centralizing the Support Groups and breaking down silos is creating scale and already generating capacity for resource reallocation and new investment All in-flight investments are being re-underwritten to reaffirm value propositions and strategic alignment Instilling a “product ownership” mindset will focus new investments on business value and on-time, on-budget delivery As demonstrated, we believe a strong balance sheet supported by robust risk management is a strategic advantage. This will remain a top priority, allowing the Bank to grow during favorable cycles and to capitalize on opportunities in more challenging environments Competition in our markets is at an all-time high; but, with a brand that continues to resonate, the Bank is having tremendous success in attracting top leaders and talented, seasoned bankers An improving platform augmented with new capabilities will shorten the time needed for each new banking team to gain momentum and generate value Being a commercially-oriented bank headquartered in one of the best markets in the country presents a tremendous opportunity for growth, and Texas Capital is committed to building an industry-leading team to support its clients First-quarter hiring efforts resulted in an exceptional quarter for front-line hires as well. Successful efforts building a robust pipeline of front-line talent will translate to important adds in 2021 Leadership in each market is actively engaging local top talent in support of an ambitious 2021 hiring agenda that calls for hiring more bankers than any year in the Bank’s history Strategic Priorities Talent Management Refreshing framework to attract, retain, and develop top talent Business Reviews & Operational Excellence Bias towards predictable thru-cycle returns
5 $1.7M $1.6M $5.1M $3.4M 0.99% 1.00% 1.00% 1.00% Q2 2020 Q3 2020 Q4 2020 Q1 2021 Noteworthy Items | Loan Fees and PPP PPP Loans Commentary Loan fees (excluding PPP fees), which were slightly down Q-o-Q, continue to provide a meaningful contribution to tradition LHI yields and NIM. Contribution to net interest income increased modestly Y-o-Y Ending PPP ($M) $717.5 $715.0 $617.5 $728.1 Forgiven PPP ($M) $1.3 $90.2 $88.2 Commentary The new round of PPP funding gave way to a net increase of $110.6 million in loans in Q1-2021. Participation is continuing, but at a slower pace Contribution from loan fees continues to sufficiently offset origination expense ($12.7 million in fees remaining to be earned), though outsized benefits from forgiven loans declined from prior quarter PPP vendor fees ($1.4 million in Q1-2021) expected to decline with slowing participation PPP Fees Yield on PPP Loans (excl. Fees) Loan Fees (excl. PPP) LHI Yield Contribution NIM Contribution Loan Fee Dollars Q1 2020 0.30% 0.15% Q2 2020 0.29% 0.13% Q3 2020 0.25% 0.11% Q4 2020 0.46% 0.19% Q1 2021 0.34% 0.13% $12.8M $18.0M $10.5M $12.2M $12.2M
6 $70.6M $75.5M $95.3M $105.4M $121.1M Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 MSR (Period-end) Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 LHS (Avg) LHS (Period-end) Noteworthy Items | Correspondent Lending Historical Contribution Commentary Offering an opportunity for horizontal expansion into a business with high fee income and attractive risk-adjusted yields, Correspondent Lending achieved net profitability soon after launch. The MSR portfolio will be sold at a modest premium, and an employee retention agreement will provide a “soft landing” to many of the valued professionals that made this business such a success In line with our strategic focus on stable thru-cycle returns, the Bank will begin to reposition a considerable portion of its expense base (~12% 1) towards front-line hires and new products and services (in $ millions) Q1-2020 Q2-2020 Q3-2020 Q4-2020 Q1-2021 FY 2020 Net Interest Income 24.5 1.5 2.8 1.4 0.9 30.2 Non-interest Income Service Chgs on Dep Accts - - - - - - Brokered Loan Fees 2.6 2.8 5.8 3.9 2.2 15.1 Servicing Fee Income 4.6 5.9 7.1 8.6 8.8 26.2 Gain/(Loss) on Sale of LHS (13.0) 39.0 25.2 6.8 5.6 58.0 Other Income - - - - - - Non-Interest Expense Salaries & Benefits 3.6 3.5 4.5 3.4 3.0 15.0 Marketing 0.0 0.0 0.0 0.0 0.0 0.1 Legal & Professional 0.8 0.6 0.8 0.9 1.0 3.2 Communications & Tech 0.7 1.4 1.0 1.0 0.4 4.0 Servicing Related Expenses 16.4 20.1 12.3 15.9 13.0 64.6 Other Expense 0.5 0.5 0.4 0.7 0.7 2.2 1 Based on Q1-2021 results. Correspondent Lending non-interest expense as a % of TCBI’s total Risk Weighted ~50% Risk Weighted 250%
7 46% 44% 39% 37% 15% 13% 17% 41% 48% Q1 2020 Q4 2020 Q1 2021 Commercial Energy Real Estate +24% -22% -2% +7% -2% -5% 1.43% 1.1x 0.63% 1.66% 2.1x 0.33% 1.57% 2.5x 0.25% ACL on Loans / Loans HFI excl MFLs ACL on Loans / NPAs NPAs / Earning Assets Commentary Credit Risk Management Highlights Credit Quality Q1 2020 Q4 2020 Q1 2021 Criticized Composition | Y-o-Y & Q-o-Q $945M$676MQuarter-end Balances Positive mix shift of criticized assets Y-o-Y Composition continues to materially shift from higher risk (enterprise value / commodity risk) categories to assets with more tangible secondary repayment valuation at improved LTVs De-risking strategies for the highest risk categories have proven effective The risk of loss in the criticized assets portfolio has accordingly improved The velocity of negative migration from “watch” to “special mention” is slowing Non-accrual loans decreased for the fourth consecutive quarter Credit Trends Net charge-offs improved materially Q-o-Q (down $58.9 million) Strong risk management, prior de-risking efforts and an improved outlook resulted in stabilized performance in the majority of segments COVID-19 Update Higher exposed segments of the CRE portfolio, Hotel/Lodging and Senior Living, had continued migration during the quarter Core C&I, including Energy, continued to stabilize Economic View for CECL: Quarterly forecasts and outlook are improving due to additional fiscal stimulus and an accelerating vaccination rollout $918M
8 Business Assets 28% Energy 3% Total Mortgage Finance 37% Comml R/E Mkt. Risk 12% Residential R/E Mkt. Risk 6% Owner Occupied R/E 5% Other 9% $16.9B $15.4B $1.1B $1.2B $0.1B $0.7B 3/31/2020 Targeted Reductions Line Utilization Other PPP 3/31/2021 $16.6B $17.0B $16.3B $15.6B $15.5B $10.2B $9.1B $9.6B $10.0B $8.4B 3.35% 3.43% 3.33% 3.52% 3.45% Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 LHI (excl. MFLs) Total MFLs Total Loan Spread 1 Total MFLs include LHI, mortgage finance, and Correspondent Lending LHS 2 Includes total LHI and LHS 3 Total Loan Spread = Yield on total loans (HFI & HFS) – Total cost of deposits and other borrowings Loan Portfolio Growth Outlook Period-End Loan Composition 2 Average Loans & Total Loan Spread $24.6B in balances Ending LHI (excluding MFLs) modestly increased $48 million from Q4-2020, but significantly down $1.5 billion (9%) Y-o-Y PPP helped drive linked-quarter growth, but activity slowing Thoughtful resolution of problem credits and focused de- risking efforts position the Bank for growth going forward All markets expected to benefit from recent leadership and banker hires Normalizing commercial loan fees and reduced PPP contribution decreased yields Q-o-Q, but total loan spread has shown more resiliency and was higher Y-o-Y amidst a declining rate environment Total MFLs 1 decreased $1.6 billion as expected in the seasonally low first quarter. Actions are underway to bolster warehouse volumes (e.g., bringing participated balances back on-balance sheet) 3 Total Loan Yield 3.69% 3.82% 3.70%4.30% 3.86% 1 Y-o-Y Changes in Ending LHI (excluding MFLs) Beginning Balance 03/31/2020 Ending Balance 03/31/2021
9 $15.0B $17.0B $17.3B $16.7B $16.9B $2.7B $2.3B $2.3B $1.6B $1.4B $9.4B $10.8B $12.3B $12.7B $15.2B Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Interest-bearing core Interest-bearing brokered DDAs $27.1B $30.2B $32.0B $31.0B $33.4B $0.3B $0.2B $0.2B $0.1B 1.04% 1.30% 0.22% 0.25% Q1 2021 Q2 2021 Q3 2021 Q4 2021 Amount Maturing Rate 0.90% 0.42% 0.34% 0.29% 0.24% 0.92% 0.45% 0.38% 0.33% 0.29% Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Avg Cost of Deposits Total Funding Costs Brokered CDs Deposits and Fundings Highlights DDA balances increased materially in the quarter (up $2.5 billion), while interest-bearing portfolios remained relatively stable Continuing to see elevated client cash, and some increases coinciding with PPP deployment Brokered deposit balances have continued their downward trajectory. Continuing to evaluate future maturities in conjunction with strategic balance sheet positioning Total funding costs and the average cost of deposits declined similarly Q-o-Q, and opportunities for further reduction are being actioned Higher-cost, indexed portfolios are now being more aggressively managed to reduce both costs and volumes Future quarters will enjoy full benefit from term FHLB balances maturing late in Q1-2021 Funding Costs Period-End Deposits Balances Q1-2021 and Upcoming Maturities Term FHLB 1 1 Term FHLB matured in 1Q 2021. Short-term FHLB balances expected to continue, but at more favorable current-market rates $3.0B $0.0B 0.46% Q1 2021 Q2 2021 Amount Matured
10 $675.9M $918.4M $945.1M 2.77% 3.76% 3.87% Q1 2020 Q4 2020 Q1 2021 Criticized Loans % Total LHI $96.0M $32.0M -$6.0M Q1 2020 Q4 2020 Q1 2021 $228.3M $223.0M $200.1M 2.78% 2.32% 2.09% Q1 2020 Q4 2020 Q1 2021 Expected seasonal declines in mortgage finance combined with normalizing loan fees and fewer days drove Q-o-Q reduction in net interest income Targeted actions to reduce deposit costs benefitted net interest income and helped offset the impact of growing liquidity assets on NIM Maturing high-cost term FHLB was replaced by lower-cost FHLB funding, offsetting the cost of newly issued credit-linked notes Commentary Q1-2021 Earnings Overview Net Interest Income & Margin Commentary Provision for Credit Losses Net Interest Margin Detail (bps) Criticized Loans N et In te re st In co m e C re di t E xp en se Q 4 20 20 Q 1 20 21 Lo an s (n et P P P ) Li qu id A ss et B al an ce s Li qu id A ss et Y ie ld s P P P L oa ns Y ie ld s O th er Fu nd in g C os ts Declining net charge-offs (down to $6.4 million in Q1-2021) and an improved economic outlook drove negative provision expense NPAs declined $24.3 million Q-o-Q and $121.4 million Y-o-Y. Despite its linked-quarter reduction, the ACL balance remains at 2.5x the NPA balance Criticized loans increased modestly Q-o-Q as a result of continued downgrades to borrowers impacted by COVID-19
11 $11.8M $42.9M $39.1M Q1 2020 Q4 2020 Q1 2021 $165.4M $150.9M $150.3M Q1 2020 Q4 2020 Q1 2021 $3.3M $3.0M $4.7M $2.5M $2.7M $2.9M $2.8M $0.5M $0.5M Q1 2020 Q4 2020 Q1 2021 Swap Fees Wealth Management Deposit Service Charges $8.5M $6.2M $8.1M $77.2M $78.4M $87.5M Q1 2020 Q4 2020 Q1 2021 Commentary Q1-2021 Earnings Overview Non-interest Income Commentary Non-interest Expense Fee Income Details Salary and Employee Benefits N on -in te re st in co m e N on -in te re st e xp en se Seasonally softer mortgage finance volumes drove Q-o-Q declines in brokered loan fees and GOS of LHS, but levels remain strong compared to year-ago levels A focus on optimizing treasury relationships benefitted non-interest income, as deposit service charges increased Q-o-Q Swap fees and wealth management fees were stable Q-o-Q Salaries and employee benefits increased meaningfully Q-o-Q, partially due to a lower-than-expected Q4-2020, but also due to annual reset of benefits-related costs and accruals Marketing expense and legal and professional expense continue favorable downward trends; improving $5.6 million Q-o-Q A move higher in longer rates (e.g., the 10YR UST) led to a reversal of past MSR impairment and a reduction in MSR amortization expense
12 Summary & Outlook Diverse, well-established lines of business balanced between differentiated national businesses and core market offerings reflective of the relationship banking approach synonymous with Texas Capital since inception Organic growth model developed by hand selecting top talent fosters unique cultural alignment, innovation mindset, and client-centric focus. Bias towards action enables rapid transformation consistent with dynamic market Branch-lite since formation, a limited physical footprint enables capital allocation for core treasury focus and digital offerings - compatible with accelerating customer preferences Best-in-class Mortgage Finance business provides balance sheet optionality, strong risk-adjusted returns, and natural hedge to asset-sensitive commercially-oriented model Franchise Highlights 2021 Areas of Focus Building on Q1-2021 actions taken to position the balance sheet for future growth, the Bank will focus on businesses providing stable, thru-cycle earnings and attractive risk-adjusted returns Quarterly Business Reviews will drive continued in-depth reviews to ensure optimal capital and resource alignment to strategic priorities After a brief pause, the Bank will more actively manage its liquidity position, focusing on aggressive reduction of higher cost deposits and investing a portion of the remaining in higher yielding securities Overall strategy assessment to formulate new strategic objectives and long-term financial targets. External communication of strategy to begin Q3-2021