8-K
TEXAS CAPITAL BANCSHARES INC/TX (TCBI)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 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 |
| 5.75% Non-Cumulative Perpetual Preferred Stock Series B, par value $0.01 per share | TCBIO | Nasdaq Stock Market |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02. Results of Operations and Financial Condition.
(a)On October 20, 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 September 30, 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 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.
As previously announced, the Company will host a conference call and live webcast today at 4:30 p.m. EDT to review the Company’s financial results for the period ended September 30, 2021.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits
99.1 Press Release, datedOctober20, 2021 announcing Texas Capital Bancshares, Inc.'s operating and financial results for its fiscal quarter endedSeptember30, 2021a10212021exhibit991.htm
99.2 Presentation datedOctober20, 2021 discussing Texas Capital Bancshares, Inc.’s operating and financial results for its fiscal quarter endedSeptember30, 2021a3q21earningspresentatio.htm
104 Cover Page Interactive Data File (embedded within the Inline XBRL document)
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Date: | October 20, 2021 | TEXAS CAPITAL BANCSHARES, INC. | |
|---|---|---|---|
| By: | /s/ Julie L. 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 Q3 2021
DALLAS - October 20, 2021 - Texas Capital Bancshares, Inc. (NASDAQ: TCBI), the parent company of Texas Capital Bank, announced operating results for the third quarter of 2021.
“I am very pleased by the important actions taken this quarter,” said Rob C. Holmes, President and CEO. “We have communicated a transformative vision for the future of our company which we believe will lead to higher quality, more sustainable earnings for our shareholders. I am encouraged by the support we have received thus far, and with a vastly improved balance sheet, a strengthening loan portfolio, and a highly motivated management team and employee base, we are focused on what needs to be done to become the flagship financial services firm headquartered in Texas.”
•Net income of $43.4 million ($0.76 per diluted share) reported for the third quarter of 2021, a decrease of $30.1 million on a linked quarter basis and a decrease of $13.7 million from the third quarter of 2020.
•Provision for credit losses of $5.0 million for the third quarter of 2021, compared to a negative provision of $19.0 million for the second quarter of 2021 and a provision of $30.0 million for the third quarter of 2020.
•During the third quarter of 2021, we recorded a $12.0 million write-off of certain software assets to reposition our capitalized technology investment to align with the long-term strategy as announced by management in the third quarter of 2021.
•Loans held for investment (“LHI”), excluding mortgage finance loans, increased $52.8 million (less than 1%) on a linked quarter basis and decreased $568.6 million (4)% from the third quarter of 2020.
•LHI, mortgage finance loans decreased 3% on a linked quarter basis and decreased 9% from the third quarter of 2020.
•Demand deposits increased 5% and total deposits increased 3% on a linked quarter basis, and increased 21% and decreased 7%, respectively, from the third quarter of 2020.
FINANCIAL SUMMARY
| (dollars and shares in thousands) | Q3 2021 | Q3 2020 | % Change | |||||
|---|---|---|---|---|---|---|---|---|
| QUARTERLY OPERATING RESULTS | ||||||||
| Net income | $ | 43,390 | $ | 57,116 | (24) | % | ||
| Net income available to common stockholders | $ | 39,078 | $ | 54,678 | (29) | % | ||
| Diluted earnings per common share | $ | 0.76 | $ | 1.08 | (30) | % | ||
| Diluted common shares | 51,140 | 50,573 | 1 | % | ||||
| Return on average assets | 0.47 | % | 0.59 | % | ||||
| Return on average common equity | 5.41 | % | 8.24 | % | ||||
| BALANCE SHEET | ||||||||
| Loans held for sale (“LHS”) | $ | 9,660 | $ | 648,009 | (99) | % | ||
| LHI, mortgage finance | 8,528,313 | 9,378,104 | (9) | % | ||||
| LHI | 15,221,404 | 15,789,958 | (4) | % | ||||
| Total LHI | 23,749,717 | 25,168,062 | (6) | % | ||||
| Total assets | 36,404,320 | 38,432,872 | (5) | % | ||||
| Demand deposits | 14,970,462 | 12,339,212 | 21 | % | ||||
| Total deposits | 29,813,668 | 31,959,487 | (7) | % | ||||
| Stockholders’ equity | 3,147,752 | 2,800,404 | 12 | % |
DETAILED FINANCIALS
For the third quarter of 2021, net income was $43.4 million, compared to $73.5 million for the second quarter of 2021 and $57.1 million for the third quarter of 2020. On a fully diluted basis, earnings per common share were $0.76 for the quarter ended September 30, 2021, compared to $1.31 for the quarter ended June 30, 2021 and $1.08 for the quarter ended September 30, 2020.
We recorded a $5.0 million provision for credit losses for the third quarter of 2021, compared to a $19.0 million negative provision for credit losses for the second quarter of 2021 and a $30.0 million provision for credit losses for the third quarter of 2020. The $5.0 million provision for credit losses recorded in the third quarter of 2021 resulted from our view of the economic outlook remaining consistent as compared to the prior quarter and an increase in LHI, excluding mortgage finance. We recorded $3.1 million in net charge-offs during the third quarter of 2021, compared to $2.4 million during the second quarter of 2021 and $1.6 million during the third quarter of 2020. Criticized loans totaled $728.9 million at September 30, 2021, compared to $891.6 million at June 30, 2021 and $1.1 billion at September 30, 2020.
Non-performing assets (“NPAs”) totaled $87.5 million at September 30, 2021, compared to $86.6 million at June 30, 2021 and $161.9 million at September 30, 2020. The ratio of total LHI NPAs to total LHI plus other real estate owned for the third quarter of 2021 was 0.37%, compared to 0.36% for the second quarter of 2021 and 0.64% for the third quarter of 2020.
Net interest income was $194.1 million for the third quarter of 2021, compared to $197.0 million for the second quarter of 2021 and $207.6 million for the third quarter of 2020. The linked-quarter decrease in net interest income was primarily driven by a decline in loan fees, partially offset by a decrease in average interest-bearing deposits. The year-over-year decrease was primarily due to declines in total average loans and earning asset yields, partially offset by increases in average investment securities and loan fees, as well as declining cost of funds. Net interest margin for the third quarter of 2021 was 2.15%, an increase of 5 basis points from the second quarter of 2021 and a decrease of 7 basis points from the third quarter of 2020. LHI yields, excluding mortgage finance loans, decreased 18 basis points from the second quarter of 2021, and decreased 1 basis point compared to the third quarter of 2020. LHI, mortgage finance yields for the third quarter of 2021 decreased 16 basis points compared to the second quarter of 2021, and decreased 43 basis points compared to the third quarter of 2020. Additionally, total cost of deposits for the third quarter of 2021 decreased 1 basis point to 0.19% compared to 0.20% for the second quarter of 2021, and decreased 15 basis points from 0.34% for the third quarter of 2020.
Non-interest income for the third quarter of 2021 decreased $8.9 million, or 30%, compared to the second quarter of 2021, and decreased $39.1 million, or 65%, compared to the third quarter of 2020. The linked quarter decrease was primarily related to decreases in servicing income, due to the second quarter sale of our mortgage servicing rights (“MSR”) portfolio, and other non-interest income. The year-over-year decrease was primarily related to decreases in net gain/(loss) on sale of LHS, brokered loan fees and servicing income, all resulting from the second quarter 2021 sale of our MSR portfolio and transition of the mortgage correspondent aggregation MCA program to a third-party.
Non-interest expense for the third quarter of 2021 increased $3.9 million, or 3 percent, compared to the second quarter of 2021, and decreased $12.8 million, or 8%, compared to the third quarter of 2020. The linked quarter increase was primarily due to an increase in communications and technology expense, partially offset by a decrease in servicing-related expenses due to the second quarter sale of our MSR portfolio. The year-over-year decrease was primarily due to decreases in communications and technology expense and servicing-related expenses, partially offset by an increase in salaries and employee benefits. Included in communication and technology expense for the third quarter of 2021 was a $12.0 million write-off of certain software assets as discussed above, compared to none in the second quarter and $15.4 million in the third quarter of 2020.
All regulatory ratios continue to be in excess of “well-capitalized” requirements as of September 30, 2021. Our CET 1, tier 1 capital, total capital and leverage ratios were 10.7%, 12.2%, 14.9% and 9.0%, respectively, at September 30, 2021, compared to 10.5%, 12.1%, 14.8% and 8.4%, respectively, at June 30, 2021. At September 30, 2021, our ratio of tangible common equity to total tangible assets was 7.8% compared to 7.9% at June 30, 2021.
About Texas Capital Bancshares, Inc.
Texas Capital Bancshares, Inc. (NASDAQ: TCBI), a member of the Russell 2000 Index and the S&P MidCap 400, is the parent company of Texas Capital Bank (the “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 and pursuant to the Private Securities Litigation Reform Act of 1995 regarding, among other things, our financial condition, results of operations, business plans and future performance. These statements are not historical in nature and may often be identified by the use of words such as “expect,” “estimate,” “anticipate,” “plan,” “may,” “will,” “forecast,” “could,” “should,” “projects,” “targeted,” “continue,” “become,” “intend” and similar expressions.
Because forward-looking statements relate to future results and occurrences, they are subject to inherent and various uncertainties, risks, and changes in circumstances that are difficult to predict, may change over time, are based on management’s expectations and assumptions at the time the statements are made and are not guarantees of future results. A number of factors, many of which are beyond our control, could cause actual results to differ materially from future results expressed or implied by such forward-looking statements. These factors include, but are not limited to, (1) the credit quality of our loan portfolio, (2) general economic conditions and related material risks and uncertainties 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 as well as the continued impact of the COVID-19 pandemic (and any other pandemic, epidemic or health-related crisis), (3) technological changes, including the increased focus on information technology and cybersecurity and our ability to manage such information systems and the effects of cyber-incidents (including failures, disruptions or security breaches) or those of third-party providers, (4) changes in interest rates and changes in the value of commercial and residential real estate securing our loans, (5) adverse economic or market conditions that could affect the credit quality of our loan portfolio or our operating performance, (6) expectations regarding rates of default and credit losses and the appropriateness of our allowance for credit losses and provision for credit losses, (7) unexpected market conditions, regulatory changes or changes in our credit ratings that could, among other things, cause access to capital market transactions and other sources of funding to become more difficult, (8) the inadequacy of our available funds to meet our obligations, (9) the failure to effectively balance our funding sources with cash demands by depositors and borrowers, (10) material failures of our accounting estimates and risk management processes based on management judgment, (11) failure of our risk management strategies and procedures, including failure or circumvention of our controls, (12) the failure to effectively manage risk, (13) uncertainty regarding alternatives to the London Interbank Offered Rate and our ability to successfully implement any new interest rate benchmarks, (14) the impact of changing regulatory requirements and legislative changes on our business, (15) the failure to successfully execute our business strategy, including completing planned merger, acquisition or sale transactions, (16) the failure to identify, attract and retain key personnel or the loss of such personnel, (17) increased or more effective competition from banks or other financial service providers in our markets, (18) structural changes in the markets for origination, sale and servicing of residential mortgages, (19) certainty in the pricing of mortgage loans that we purchase, and later sell or securitize, (20) volatility in the market price of our common stock, (21) credit risk resulting from our exposure to counterparties, (22) an increase in the incidence or severity of fraud, illegal payments, security breaches and other illegal acts impacting us, (23) the failure to maintain adequate regulatory capital to support our business, (24) environmental liability or other environmental, social or governance factors that may materially negatively impact the company, (25) severe weather, natural disasters, acts of war or terrorism and other external events and (26) our success at managing the risk and uncertainties involved in the foregoing factors.
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) | |||||||||||||||
| 3rd Quarter | 2nd Quarter | 1st Quarter | 4th Quarter | 3rd Quarter | |||||||||||
| 2021 | 2021 | 2021 | 2020 | 2020 | |||||||||||
| CONSOLIDATED STATEMENTS OF INCOME | |||||||||||||||
| Interest income | $ | 220,148 | $ | 224,490 | $ | 228,412 | $ | 255,163 | $ | 243,731 | |||||
| Interest expense | 26,053 | 27,496 | 28,339 | 32,153 | 36,162 | ||||||||||
| Net interest income | 194,095 | 196,994 | 200,073 | 223,010 | 207,569 | ||||||||||
| Provision for credit losses | 5,000 | (19,000) | (6,000) | 32,000 | 30,000 | ||||||||||
| Net interest income after provision for credit losses | 189,095 | 215,994 | 206,073 | 191,010 | 177,569 | ||||||||||
| Non-interest income | 21,220 | 30,102 | 39,092 | 42,863 | 60,348 | ||||||||||
| Non-interest expense | 152,987 | 149,060 | 150,316 | 150,863 | 165,741 | ||||||||||
| Income before income taxes | 57,328 | 97,036 | 94,849 | 83,010 | 72,176 | ||||||||||
| Income tax expense | 13,938 | 23,555 | 22,911 | 22,834 | 15,060 | ||||||||||
| Net income | 43,390 | 73,481 | 71,938 | 60,176 | 57,116 | ||||||||||
| Preferred stock dividends | 4,312 | 6,317 | 3,779 | 2,437 | 2,438 | ||||||||||
| Net income available to common stockholders | $ | 39,078 | $ | 67,164 | $ | 68,159 | $ | 57,739 | $ | 54,678 | |||||
| Diluted earnings per common share | $ | 0.76 | $ | 1.31 | $ | 1.33 | $ | 1.14 | $ | 1.08 | |||||
| Diluted common shares | 51,139,555 | 51,093,660 | 51,069,511 | 50,794,421 | 50,573,073 | ||||||||||
| CONSOLIDATED BALANCE SHEET DATA | |||||||||||||||
| Total assets | $ | 36,404,320 | $ | 35,228,542 | $ | 40,054,433 | $ | 37,726,096 | $ | 38,432,872 | |||||
| LHI | 15,221,404 | 15,168,565 | 15,399,174 | 15,351,451 | 15,789,958 | ||||||||||
| LHI, mortgage finance | 8,528,313 | 8,772,799 | 9,009,081 | 9,079,409 | 9,378,104 | ||||||||||
| LHS | 9,660 | 63,747 | 176,286 | 283,165 | 648,009 | ||||||||||
| Liquidity assets(1) | 8,317,926 | 6,768,650 | 11,212,276 | 9,032,807 | 10,461,544 | ||||||||||
| Investment securities | 3,663,874 | 3,798,275 | 3,443,058 | 3,196,970 | 1,367,313 | ||||||||||
| Demand deposits | 14,970,462 | 14,228,038 | 15,174,642 | 12,740,947 | 12,339,212 | ||||||||||
| Total deposits | 29,813,668 | 28,839,563 | 33,391,970 | 30,996,589 | 31,959,487 | ||||||||||
| Other borrowings | 2,203,470 | 2,014,481 | 2,515,587 | 3,111,751 | 2,908,183 | ||||||||||
| Long-term debt | 928,062 | 927,386 | 664,968 | 395,896 | 395,806 | ||||||||||
| Stockholders’ equity | 3,147,752 | 3,114,957 | 3,159,482 | 2,871,224 | 2,800,404 | ||||||||||
| End of period shares outstanding | 50,605,626 | 50,592,201 | 50,557,767 | 50,470,450 | 50,455,552 | ||||||||||
| Book value | $ | 56.27 | $ | 55.64 | $ | 53.59 | $ | 53.92 | $ | 52.53 | |||||
| Tangible book value(2) | $ | 55.93 | $ | 55.29 | $ | 53.24 | $ | 53.57 | $ | 52.18 | |||||
| SELECTED FINANCIAL RATIOS | |||||||||||||||
| Net interest margin | 2.15 | % | 2.10 | % | 2.09 | % | 2.32 | % | 2.22 | % | |||||
| Return on average assets | 0.47 | % | 0.76 | % | 0.73 | % | 0.61 | % | 0.59 | % | |||||
| Return on average common equity | 5.41 | % | 9.74 | % | 10.08 | % | 8.50 | % | 8.24 | % | |||||
| Non-interest income to average earning assets | 0.23 | % | 0.32 | % | 0.41 | % | 0.44 | % | 0.64 | % | |||||
| Efficiency ratio(3) | 71.1 | % | 65.6 | % | 62.9 | % | 56.7 | % | 61.9 | % | |||||
| Non-interest expense to average earning assets | 1.69 | % | 1.59 | % | 1.57 | % | 1.56 | % | 1.76 | % | |||||
| Tangible common equity to total tangible assets(4) | 7.8 | % | 7.9 | % | 6.7 | % | 7.2 | % | 6.9 | % | |||||
| Common Equity Tier 1 | 10.7 | % | 10.5 | % | 10.2 | % | 9.4 | % | 9.1 | % | |||||
| Tier 1 capital | 12.2 | % | 12.1 | % | 12.2 | % | 10.3 | % | 9.9 | % | |||||
| Total capital | 14.9 | % | 14.8 | % | 14.0 | % | 12.1 | % | 11.8 | % | |||||
| Leverage | 9.0 | % | 8.4 | % | 8.3 | % | 7.5 | % | 7.6 | % |
(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) | |||||
| September 30, 2020 | %<br>Change | ||||
| Assets | |||||
| Cash and due from banks | 217,125 | $ | 185,242 | 17 | % |
| Interest-bearing deposits | 10,461,544 | (20) | % | ||
| Securities, available-for-sale | 1,367,313 | N/M | |||
| LHS (8.4 million and 639.0 million at September 30, 2021 and 2020, respectively, at fair value) | 648,009 | (99) | % | ||
| LHI, mortgage finance | 9,378,104 | (9) | % | ||
| LHI (net of unearned income) | 15,789,958 | (4) | % | ||
| Less: Allowance for credit losses on loans | 290,165 | (24) | % | ||
| LHI, net | 24,877,897 | (5) | % | ||
| Mortgage servicing rights, net | 95,323 | (99) | % | ||
| Premises and equipment, net | 26,653 | (21) | % | ||
| Accrued interest receivable and other assets | 753,123 | (17) | % | ||
| Goodwill and intangibles, net | 17,768 | (2) | % | ||
| Total assets | 36,404,320 | $ | 38,432,872 | (5) | % |
| Liabilities and Stockholders’ Equity | |||||
| Liabilities: | |||||
| Deposits: | |||||
| Non-interest bearing | 14,970,462 | $ | 12,339,212 | 21 | % |
| Interest bearing | 19,620,275 | (24) | % | ||
| Total deposits | 31,959,487 | (7) | % | ||
| Accrued interest payable | 14,674 | (39) | % | ||
| Other liabilities | 354,318 | (15) | % | ||
| Federal funds purchased and repurchase agreements | 208,183 | (98) | % | ||
| Other borrowings | 2,700,000 | (19) | % | ||
| Long-term debt | 395,806 | 134 | % | ||
| Total liabilities | 35,632,468 | (7) | % | ||
| Stockholders’ equity: | |||||
| Preferred stock, .01 par value, 1,000 liquidation value: | |||||
| Authorized shares - 10,000,000 | |||||
| Issued shares - 300,000 and 6,000,000 shares issued at September 30, 2021 and 2020, respectively | 150,000 | 100 | % | ||
| Common stock, .01 par value: | |||||
| Authorized shares - 100,000,000 | |||||
| Issued shares - 50,606,043 and 50,455,969 at September 30, 2021 and 2020, respectively | 504 | — | % | ||
| Additional paid-in capital | 987,754 | 1 | % | ||
| Retained earnings | 1,655,317 | 14 | % | ||
| Treasury stock (shares at cost: 417 at September 30, 2021 and 2020) | (8) | — | % | ||
| Accumulated other comprehensive income/(loss), net of taxes | 6,837 | N/M | |||
| Total stockholders’ equity | 2,800,404 | 12 | % | ||
| Total liabilities and stockholders’ equity | 36,404,320 | $ | 38,432,872 | (5) | % |
All values are in US Dollars.
| TEXAS CAPITAL BANCSHARES, INC. | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) | |||||||||||||||
| (dollars in thousands except per share data) | |||||||||||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||
| Interest income | |||||||||||||||
| Interest and fees on loans | $ | 206,307 | $ | 237,179 | $ | 632,510 | $ | 768,399 | |||||||
| Investment securities | 10,235 | 3,674 | 31,040 | 7,881 | |||||||||||
| Federal funds sold and securities purchased under resale agreements | — | 1 | 1 | 692 | |||||||||||
| Interest-bearing deposits in other banks | 3,606 | 2,877 | 9,499 | 24,777 | |||||||||||
| Total interest income | 220,148 | 243,731 | 673,050 | 801,749 | |||||||||||
| Interest expense | |||||||||||||||
| Deposits | 14,719 | 27,830 | 50,994 | 122,298 | |||||||||||
| Federal funds purchased | 5 | 128 | 131 | 973 | |||||||||||
| Other borrowings | 743 | 3,365 | 3,711 | 17,516 | |||||||||||
| Long-term debt | 10,586 | 4,839 | 27,052 | 15,146 | |||||||||||
| Total interest expense | 26,053 | 36,162 | 81,888 | 155,933 | |||||||||||
| Net interest income | 194,095 | 207,569 | 591,162 | 645,816 | |||||||||||
| Provision for credit losses | 5,000 | 30,000 | (20,000) | 226,000 | |||||||||||
| Net interest income after provision for credit losses | 189,095 | 177,569 | 611,162 | 419,816 | |||||||||||
| Non-interest income | |||||||||||||||
| Service charges on deposit accounts | 4,622 | 2,864 | 13,972 | 8,616 | |||||||||||
| Wealth management and trust fee income | 3,382 | 2,502 | 9,380 | 7,317 | |||||||||||
| Brokered loan fees | 6,032 | 15,034 | 22,276 | 33,813 | |||||||||||
| Servicing income | 292 | 7,329 | 15,236 | 18,195 | |||||||||||
| Swap fees | 568 | 484 | 1,628 | 4,709 | |||||||||||
| Net gain/(loss) on sale of LHS | (1,185) | 25,242 | 1,317 | 51,265 | |||||||||||
| Other | 7,509 | 6,893 | 26,605 | 18,698 | |||||||||||
| Total non-interest income | 21,220 | 60,348 | 90,414 | 142,613 | |||||||||||
| Non-interest expense | |||||||||||||||
| Salaries and employee benefits | 87,503 | 84,096 | 261,855 | 262,080 | |||||||||||
| Net occupancy expense | 8,324 | 8,736 | 24,463 | 26,582 | |||||||||||
| Marketing | 2,123 | 3,636 | 5,720 | 20,146 | |||||||||||
| Legal and professional | 11,055 | 11,207 | 28,479 | 40,003 | |||||||||||
| Communications and technology | 28,374 | 31,098 | 58,695 | 87,649 | |||||||||||
| FDIC insurance assessment | 4,500 | 6,374 | 16,339 | 19,363 | |||||||||||
| Servicing-related expenses | 2,396 | 12,287 | 27,740 | 48,741 | |||||||||||
| Merger-related expenses | — | — | — | 17,756 | |||||||||||
| Other | 8,712 | 8,307 | 29,072 | 31,173 | |||||||||||
| Total non-interest expense | 152,987 | 165,741 | 452,363 | 553,493 | |||||||||||
| Income before income taxes | 57,328 | 72,176 | 249,213 | 8,936 | |||||||||||
| Income tax expense | 13,938 | 15,060 | 60,404 | 2,823 | |||||||||||
| Net income | 43,390 | 57,116 | 188,809 | 6,113 | |||||||||||
| Preferred stock dividends | 4,312 | 2,438 | 14,408 | 7,313 | |||||||||||
| Net income/(loss) available to common stockholders | $ | 39,078 | $ | 54,678 | $ | 174,401 | $ | (1,200) | |||||||
| Basic earnings/(loss) per common share | $ | 0.77 | $ | 1.08 | $ | 3.45 | $ | (0.02) | |||||||
| Diluted earnings/(loss) per common share | $ | 0.76 | $ | 1.08 | $ | 3.41 | $ | (0.02) | |||||||
| TEXAS CAPITAL BANCSHARES, INC. | |||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| SUMMARY OF CREDIT LOSS EXPERIENCE | |||||||||||||||
| (dollars in thousands) | |||||||||||||||
| 3rd Quarter | 2nd Quarter | 1st Quarter | 4th Quarter | 3rd Quarter | |||||||||||
| 2021 | 2021 | 2021 | 2020 | 2020 | |||||||||||
| Allowance for credit losses on loans: | |||||||||||||||
| Beginning balance | $ | 221,511 | $ | 242,484 | $ | 254,615 | $ | 290,165 | $ | 264,722 | |||||
| Loans charged-off: | |||||||||||||||
| Commercial | 4,348 | 1,412 | 2,451 | 37,984 | 2,436 | ||||||||||
| Energy | — | 686 | 5,732 | 33,283 | 141 | ||||||||||
| Real estate | — | 1,192 | — | 180 | — | ||||||||||
| Total charge-offs | 4,348 | 3,290 | 8,183 | 71,447 | 2,577 | ||||||||||
| Recoveries: | |||||||||||||||
| Commercial | 1,104 | 308 | 1,050 | 394 | 113 | ||||||||||
| Energy | 42 | 609 | 715 | 5,696 | 880 | ||||||||||
| Real estate | 112 | — | — | — | — | ||||||||||
| Total recoveries | 1,258 | 917 | 1,765 | 6,090 | 993 | ||||||||||
| Net charge-offs | 3,090 | 2,373 | 6,418 | 65,357 | 1,584 | ||||||||||
| Provision for credit losses on loans | 3,536 | (18,600) | (5,713) | 29,807 | 27,027 | ||||||||||
| Ending balance | $ | 221,957 | $ | 221,511 | $ | 242,484 | $ | 254,615 | $ | 290,165 | |||||
| Allowance for off-balance sheet credit losses: | |||||||||||||||
| Beginning balance | $ | 16,747 | $ | 17,147 | $ | 17,434 | $ | 15,241 | $ | 12,268 | |||||
| Provision for off-balance sheet credit losses | 1,464 | (400) | (287) | 2,193 | 2,973 | ||||||||||
| Ending balance | $ | 18,211 | $ | 16,747 | $ | 17,147 | $ | 17,434 | $ | 15,241 | |||||
| Total allowance for credit losses | $ | 240,168 | $ | 238,258 | $ | 259,631 | $ | 272,049 | $ | 305,406 | |||||
| Total provision for credit losses | $ | 5,000 | $ | (19,000) | $ | (6,000) | $ | 32,000 | $ | 30,000 | |||||
| Allowance for credit losses on loans to LHI | 0.93 | % | 0.93 | % | 0.99 | % | 1.04 | % | 1.15 | % | |||||
| Allowance for credit losses on loans to average LHI | 0.95 | % | 0.98 | % | 1.03 | % | 1.01 | % | 1.14 | % | |||||
| Net charge-offs to average LHI(1) | 0.05 | % | 0.04 | % | 0.11 | % | 1.03 | % | 0.02 | % | |||||
| Net charge-offs to average LHI for last twelve months(1) | 0.33 | % | 0.31 | % | 0.59 | % | 0.80 | % | 0.59 | % | |||||
| Total provision for credit losses to average LHI(1) | 0.09 | % | (0.34) | % | (0.10) | % | 0.51 | % | 0.47 | % | |||||
| Total allowance for credit losses to LHI | 1.01 | % | 1.00 | % | 1.06 | % | 1.11 | % | 1.21 | % |
(1)Interim period ratios are annualized.
| TEXAS CAPITAL BANCSHARES, INC. | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| SUMMARY OF NON-PERFORMING ASSETS AND PAST DUE LOANS | |||||||||||||||
| (dollars in thousands) | |||||||||||||||
| 3rd Quarter | 2nd Quarter | 1st Quarter | 4th Quarter | 3rd Quarter | |||||||||||
| 2021 | 2021 | 2021 | 2020 | 2020 | |||||||||||
| Non-performing assets (NPAs): | |||||||||||||||
| Non-accrual loans | $ | 87,532 | $ | 86,636 | $ | 97,730 | $ | 121,989 | $ | 161,946 | |||||
| Other real estate owned (OREO) | — | — | — | — | — | ||||||||||
| Total LHI NPAs | $ | 87,532 | $ | 86,636 | $ | 97,730 | $ | 121,989 | $ | 161,946 | |||||
| Non-accrual loans to LHI | 0.37 | % | 0.36 | % | 0.40 | % | 0.50 | % | 0.64 | % | |||||
| Total LHI NPAs to LHI plus OREO | 0.37 | % | 0.36 | % | 0.40 | % | 0.50 | % | 0.64 | % | |||||
| Total LHI NPAs to earning assets | 0.25 | % | 0.25 | % | 0.25 | % | 0.33 | % | 0.43 | % | |||||
| Allowance for credit losses on loans to non-accrual loans | 2.5x | 2.6x | 2.5x | 2.1x | 1.8x | ||||||||||
| LHI past due 90 days and still accruing(1) | $ | 3,405 | $ | 7,671 | $ | 6,187 | $ | 12,541 | $ | 15,896 | |||||
| LHI past due 90 days to LHI | 0.01 | % | 0.03 | % | 0.03 | % | 0.05 | % | 0.06 | % | |||||
| LHS non-accrual(2) | $ | — | $ | — | $ | — | $ | 6,966 | $ | — | |||||
| LHS past due 90 days and still accruing(3) | $ | 3,808 | $ | 2,695 | $ | 16,359 | $ | 16,667 | $ | 15,631 |
(1)At September 30, 2021, loans past due 90 days and still accruing included premium finance loans of $2.3 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. The first quarter of 2021 and fourth and third quarters of 2020 also include 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) | ||||||||||||||||||||||||||||||
| 3rd Quarter | 2nd Quarter | 1st Quarter | 4th Quarter | 3rd Quarter | ||||||||||||||||||||||||||
| 2021 | 2021 | 2021 | 2020 | 2020 | ||||||||||||||||||||||||||
| Interest income | ||||||||||||||||||||||||||||||
| Interest and fees on loans | $ | 206,307 | $ | 210,611 | $ | 215,592 | $ | 242,776 | $ | 237,179 | ||||||||||||||||||||
| Investment securities | 10,235 | 10,918 | 9,887 | 9,594 | 3,674 | |||||||||||||||||||||||||
| Federal funds sold and securities purchased under resale agreements | — | — | 1 | 1 | 1 | |||||||||||||||||||||||||
| Interest-bearing deposits in other banks | 3,606 | 2,961 | 2,932 | 2,792 | 2,877 | |||||||||||||||||||||||||
| Total interest income | 220,148 | 224,490 | 228,412 | 255,163 | 243,731 | |||||||||||||||||||||||||
| Interest expense | ||||||||||||||||||||||||||||||
| Deposits | 14,719 | 16,271 | 20,004 | 23,819 | 27,830 | |||||||||||||||||||||||||
| Federal funds purchased | 5 | 51 | 75 | 110 | 128 | |||||||||||||||||||||||||
| Other borrowings | 743 | 451 | 2,517 | 3,407 | 3,365 | |||||||||||||||||||||||||
| Long-term debt | 10,586 | 10,723 | 5,743 | 4,817 | 4,839 | |||||||||||||||||||||||||
| Total interest expense | 26,053 | 27,496 | 28,339 | 32,153 | 36,162 | |||||||||||||||||||||||||
| Net interest income | 194,095 | 196,994 | 200,073 | 223,010 | 207,569 | |||||||||||||||||||||||||
| Provision for credit losses | 5,000 | (19,000) | (6,000) | 32,000 | 30,000 | |||||||||||||||||||||||||
| Net interest income after provision for credit losses | 189,095 | 215,994 | 206,073 | 191,010 | 177,569 | |||||||||||||||||||||||||
| Non-interest income | ||||||||||||||||||||||||||||||
| Service charges on deposit accounts | 4,622 | 4,634 | 4,716 | 3,004 | 2,864 | |||||||||||||||||||||||||
| Wealth management and trust fee income | 3,382 | 3,143 | 2,855 | 2,681 | 2,502 | |||||||||||||||||||||||||
| Brokered loan fees | 6,032 | 6,933 | 9,311 | 12,610 | 15,034 | |||||||||||||||||||||||||
| Servicing income | 292 | 5,935 | 9,009 | 8,834 | 7,329 | |||||||||||||||||||||||||
| Swap fees | 568 | 534 | 526 | 473 | 484 | |||||||||||||||||||||||||
| Net gain/(loss) on sale of LHS | (1,185) | (3,070) | 5,572 | 6,761 | 25,242 | |||||||||||||||||||||||||
| Other | 7,509 | 11,993 | 7,103 | 8,500 | 6,893 | |||||||||||||||||||||||||
| Total non-interest income | 21,220 | 30,102 | 39,092 | 42,863 | 60,348 | |||||||||||||||||||||||||
| Non-interest expense | ||||||||||||||||||||||||||||||
| Salaries and employee benefits | 87,503 | 86,830 | 87,522 | 78,449 | 84,096 | |||||||||||||||||||||||||
| Net occupancy expense | 8,324 | 7,865 | 8,274 | 8,373 | 8,736 | |||||||||||||||||||||||||
| Marketing | 2,123 | 1,900 | 1,697 | 3,435 | 3,636 | |||||||||||||||||||||||||
| Legal and professional | 11,055 | 9,147 | 8,277 | 12,129 | 11,207 | |||||||||||||||||||||||||
| Communications and technology | 28,374 | 14,352 | 15,969 | 15,405 | 31,098 | |||||||||||||||||||||||||
| FDIC insurance assessment | 4,500 | 5,226 | 6,613 | 6,592 | 6,374 | |||||||||||||||||||||||||
| Servicing-related expenses | 2,396 | 12,355 | 12,989 | 15,844 | 12,287 | |||||||||||||||||||||||||
| Other | 8,712 | 11,385 | 8,975 | 10,636 | 8,307 | |||||||||||||||||||||||||
| Total non-interest expense | 152,987 | 149,060 | 150,316 | 150,863 | 165,741 | |||||||||||||||||||||||||
| Income before income taxes | 57,328 | 97,036 | 94,849 | 83,010 | 72,176 | |||||||||||||||||||||||||
| Income tax expense | 13,938 | 23,555 | 22,911 | 22,834 | 15,060 | |||||||||||||||||||||||||
| Net income | 43,390 | 73,481 | 71,938 | 60,176 | 57,116 | |||||||||||||||||||||||||
| Preferred stock dividends | 4,312 | 6,317 | 3,779 | 2,437 | 2,438 | |||||||||||||||||||||||||
| Net income available to common shareholders | $ | 39,078 | $ | 67,164 | $ | 68,159 | $ | 57,739 | $ | 54,678 | ||||||||||||||||||||
| TEXAS CAPITAL BANCSHARES, INC. | ||||||||||||||||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| QUARTERLY FINANCIAL SUMMARY - UNAUDITED | ||||||||||||||||||||||||||||||
| Consolidated Daily Average Balances, Average Yields and Rates | ||||||||||||||||||||||||||||||
| (dollars in thousands) | ||||||||||||||||||||||||||||||
| 3rd Quarter 2021 | 2nd Quarter 2021 | 1st Quarter 2021 | 4th Quarter 2020 | 3rd 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 | $ | 3,590,591 | $ | 8,546 | 0.94 | % | $ | 3,361,696 | $ | 9,222 | 1.10 | % | $ | 3,225,786 | $ | 8,112 | 1.02 | % | $ | 2,137,481 | $ | 7,748 | 1.44 | % | $ | 525,149 | $ | 1,905 | 1.44 | % |
| Investment securities - non-taxable(2) | 185,221 | 2,138 | 4.58 | % | 181,574 | 2,147 | 4.74 | % | 196,785 | 2,247 | 4.63 | % | 200,781 | 2,337 | 4.63 | % | 190,797 | 2,239 | 4.67 | % | ||||||||||
| Federal funds sold and securities purchased under resale agreements | 653 | — | 0.12 | % | 713 | — | 0.18 | % | 4,605 | 1 | 0.07 | % | 1,709 | 1 | 0.13 | % | 12,051 | 1 | 0.04 | % | ||||||||||
| Interest-bearing deposits in other banks | 9,045,442 | 3,606 | 0.16 | % | 11,583,046 | 2,961 | 0.10 | % | 11,840,942 | 2,932 | 0.10 | % | 10,808,548 | 2,792 | 0.10 | % | 11,028,962 | 2,877 | 0.10 | % | ||||||||||
| LHS, at fair value | 18,791 | 54 | 1.14 | % | 93,164 | 781 | 3.36 | % | 243,326 | 1,595 | 2.66 | % | 410,637 | 2,475 | 2.40 | % | 543,606 | 3,867 | 2.83 | % | ||||||||||
| LHI, mortgage finance loans | 7,987,521 | 58,913 | 2.93 | % | 7,462,223 | 57,401 | 3.09 | % | 8,177,759 | 64,942 | 3.22 | % | 9,550,119 | 78,906 | 3.29 | % | 9,061,984 | 76,464 | 3.36 | % | ||||||||||
| LHI(1)(2) | 15,266,167 | 147,423 | 3.83 | % | 15,242,975 | 152,515 | 4.01 | % | 15,457,888 | 149,196 | 3.91 | % | 15,620,410 | 161,750 | 4.12 | % | 16,286,036 | 157,230 | 3.84 | % | ||||||||||
| Less allowance for credit<br><br>losses on loans | 220,984 | — | — | 241,676 | — | — | 254,697 | — | — | 290,189 | — | — | 264,769 | — | — | |||||||||||||||
| LHI, net of allowance | 23,032,704 | 206,336 | 3.55 | % | 22,463,522 | 209,916 | 3.75 | % | 23,380,950 | 214,138 | 3.71 | % | 24,880,340 | 240,656 | 3.85 | % | 25,083,251 | 233,694 | 3.71 | % | ||||||||||
| Total earning assets | 35,873,402 | 220,680 | 2.44 | % | 37,683,715 | 225,027 | 2.40 | % | 38,892,394 | 229,025 | 2.39 | % | 38,439,496 | 256,009 | 2.65 | % | 37,383,816 | 244,583 | 2.60 | % | ||||||||||
| Cash and other assets | 855,555 | 996,946 | 1,064,679 | 1,031,195 | 1,037,760 | |||||||||||||||||||||||||
| Total assets | $ | 36,728,957 | $ | 38,680,661 | $ | 39,957,073 | $ | 39,470,691 | $ | 38,421,576 | ||||||||||||||||||||
| Liabilities and Stockholders’ Equity | ||||||||||||||||||||||||||||||
| Transaction deposits | $ | 3,012,547 | $ | 4,737 | 0.62 | % | $ | 3,795,152 | $ | 5,395 | 0.57 | % | $ | 3,991,966 | $ | 5,861 | 0.60 | % | $ | 4,384,493 | $ | 6,604 | 0.60 | % | $ | 4,275,574 | $ | 6,652 | 0.62 | % |
| Savings deposits | 10,044,995 | 8,262 | 0.33 | % | 11,296,382 | 8,990 | 0.32 | % | 12,889,974 | 10,788 | 0.34 | % | 12,982,189 | 12,671 | 0.39 | % | 12,786,719 | 12,808 | 0.40 | % | ||||||||||
| Time deposits | 1,640,562 | 1,720 | 0.42 | % | 1,755,993 | 1,886 | 0.43 | % | 2,204,242 | 3,355 | 0.62 | % | 2,355,199 | 4,544 | 0.77 | % | 2,844,083 | 8,370 | 1.17 | % | ||||||||||
| Total interest bearing deposits | 14,698,104 | 14,719 | 0.40 | % | 16,847,527 | 16,271 | 0.39 | % | 19,086,182 | 20,004 | 0.43 | % | 19,721,881 | 23,819 | 0.48 | % | 19,906,376 | 27,830 | 0.56 | % | ||||||||||
| Other borrowings | 2,299,692 | 748 | 0.13 | % | 2,349,718 | 502 | 0.09 | % | 2,686,398 | 2,592 | 0.39 | % | 3,022,077 | 3,517 | 0.46 | % | 2,811,435 | 3,493 | 0.49 | % | ||||||||||
| Long-term debt | 927,626 | 10,586 | 4.53 | % | 881,309 | 10,723 | 4.88 | % | 464,731 | 5,743 | 5.01 | % | 395,841 | 4,817 | 4.84 | % | 395,749 | 4,839 | 4.87 | % | ||||||||||
| Total interest bearing liabilities | 17,925,422 | 26,053 | 0.58 | % | 20,078,554 | 27,496 | 0.55 | % | 22,237,311 | 28,339 | 0.52 | % | 23,139,799 | 32,153 | 0.55 | % | 23,113,560 | 36,162 | 0.62 | % | ||||||||||
| Demand deposits | 15,363,568 | 15,139,546 | 14,421,505 | 13,174,114 | 12,202,065 | |||||||||||||||||||||||||
| Other liabilities | 275,317 | 274,401 | 309,644 | 303,480 | 314,500 | |||||||||||||||||||||||||
| Stockholders’ equity | 3,164,650 | 3,188,160 | 2,988,613 | 2,853,298 | 2,791,451 | |||||||||||||||||||||||||
| Total liabilities and stockholders’ equity | $ | 36,728,957 | $ | 38,680,661 | $ | 39,957,073 | $ | 39,470,691 | $ | 38,421,576 | ||||||||||||||||||||
| Net interest income(2) | $ | 194,627 | $ | 197,531 | $ | 200,686 | $ | 223,856 | $ | 208,421 | ||||||||||||||||||||
| Net interest margin | 2.15 | % | 2.10 | % | 2.09 | % | 2.32 | % | 2.22 | % |
(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.
a3q21earningspresentatio
© 2021 Texas Capital Bank Member FDIC October 20, 2021 Q3-2021 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, our financial condition, results of operations, business plans and future performance. These statements are not historical in nature and may often be identified by the use of words such as “expect,” “estimate,” “anticipate,” “plan,” “may,” “will,” “forecast,” “could,” “should,” “projects,” “targeted,” “continue,” “become,” “intend” and similar expressions. Because forward-looking statements relate to future results and occurrences, they are subject to inherent and various uncertainties, risks, and changes in circumstances that are difficult to predict, may change over time, are based on management’s expectations and assumptions at the time the statements are made and are not guarantees of future results. A number of factors, many of which are beyond our control, could cause actual results to differ materially from future results expressed or implied by such forward-looking statements. These factors include, but are not limited to, (1) the credit quality of our loan portfolio, (2) general economic conditions and related material risks and uncertainties 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 as well as the continued impact of the COVID-19 pandemic (and any other pandemic, epidemic or health-related crisis), (3) technological changes, including the increased focus on information technology and cybersecurity and our ability to manage such information systems and the effects of cyber-incidents (including failures, disruptions or security breaches) or those of third-party providers, (4) changes in interest rates and changes in the value of commercial and residential real estate securing our loans, (5) adverse economic or market conditions that could affect the credit quality of our loan portfolio or our operating performance, (6) expectations regarding rates of default and credit losses and the appropriateness of our allowance for credit losses and provision for credit losses, (7) unexpected market conditions, regulatory changes or changes in our credit ratings that could, among other things, cause access to capital market transactions and other sources of funding to become more difficult, (8) the inadequacy of our available funds to meet our obligations, (9) the failure to effectively balance our funding sources with cash demands by depositors and borrowers, (10) material failures of our accounting estimates and risk management processes based on management judgment, (11) failure of our risk management strategies and procedures, including failure or circumvention of our controls, (12) the failure to effectively manage risk, (13) uncertainty regarding alternatives to the London Interbank Offered Rate and our ability to successfully implement any new interest rate benchmarks, (14) the impact of changing regulatory requirements and legislative changes on our business, (15) the failure to successfully execute our business strategy, including completing planned merger, acquisition or sale transactions, (16) the failure to identify, attract and retain key personnel or the loss of such personnel, (17) increased or more effective competition from banks or other financial service providers in our markets, (18) structural changes in the markets for origination, sale and servicing of residential mortgages, (19) certainty in the pricing of mortgage loans that we purchase, and later sell or securitize, (20) volatility in the market price of our common stock, (21) credit risk resulting from our exposure to counterparties, (22) an increase in the incidence or severity of fraud, illegal payments, security breaches and other illegal acts impacting us, (23) the failure to maintain adequate regulatory capital to support our business, (24) environmental liability or other environmental, social or governance factors that may materially negatively impact the company, (25) severe weather, natural disasters, acts of war or terrorism and other external events and (26) our success at managing the risk and uncertainties involved in the foregoing factors. 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 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 Financial Performance Net Interest Income Non-Interest Income Total Revenue Non-Interest Expense PPNR 1 Provision for Credit Losses Income Tax Expense Net Income PPNR 1 / Avg. Assets Efficiency Ratio 2 EPS ROA ROCE $207.6 60.3 267.9 165.7 102.2 15.1 1.06% 61.9% $1.08 8.24% 30.0 0.59% $57.1 $197.0 30.1 227.1 78.0 (19.0) 23.6 0.81% 65.6% $1.31 9.74% 149.1 0.76% $73.5 $194.1 21.2 215.3 62.3 5.0 13.9 0.67% 71.1% $0.76 5.41% 153.0 0.47% $43.4 Financial Highlights ($M) Q3 2020 Q2 2021 Q3 2021 Key Performance Metrics 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 ◼ Net income to common of $43.4 million, or $0.76 per diluted share. An important shift to align technology to the lines of business and re- underwriting the expense base resulted in a $12.0 million write-off of capitalized technology assets ◼ Internal view of economic outlook remaining consistent with Q2-2021, coupled with current-quarter net loan growth, drove a modest provision expense of $5 million ◼ Banker and client activity continues to improve, contributing to growth in non- real estate LHI portfolios, but overall net interest income declined after strong Q2-2021 loan fees ◼ Utilizing the levers previously discussed to drive warehouse activity, revenue contribution increased Q-o-Q despite a 0.16% decline in warehouse yields ◼ Strategic non-interest income categories, treasury and wealth management income (stable Q-o-Q and $2.6 million higher Y-o-Y), continue to gain traction and reinforce importance of additional investment ◼ Continue to reposition the expense base in support of our strategic priorities and value creation ◼ Success in onboarding client-facing professionals and important support resources resulted in a slight Q-o-Q increase in salaries & benefits expense ◼ Reflecting stable credit quality, the ACL balance remained in line with Q2- 2021, at 1.46% of LHI (excl Mortgage Finance), and with NPA coverage of 2.5x
5 LHI Yield Contribution NIM Contribution Loan Fee Dollars ($M) Q3 2020 0.25% 0.11% Q4 2020 0.46% 0.19% Q1 2021 0.34% 0.13% Q2 2021 0.41% 0.17% Q3 2021 0.32% 0.13% $5.1M $3.4M $5.1M $3.4M 0.99% 1.00% 0.98% 0.97% Q4 2020 Q1 2021 Q2 2021 Q3 2021 Commentary ◼ Q3-2021 loan fees (excluding PPP fees) declined from strong Q2-2021 levels, which is consistent with past results as performance can vary quarter to quarter based on normal client activity Noteworthy Items // Loan Fees and PPP Loan Fees (excl. PPP) PPP Loans Period-end PPP ($M) $617.5 $728.1 $364.4 $207.3 Forgiven PPP ($M) $90.2 $88.2 $367.1 $157.1 Originations & Partial Paydowns, net ($M) ($7.3) $198.8 $3.4 $- PPP Fees Yield on PPP Loans (excl. Fees) Commentary ◼ There were no new originations or partial payments in PPP loans this quarter, so quarterly forgiveness drove the entire net portfolio decline of $157.1 million ◼ Cumulative PPP fees earned since inception total $20.3 million and $11.8 million YTD thru Q3-2021. There is $4.8 million in PPP fees remaining to be earned, but pace will remain uncertain ◼ PPP notwithstanding, ending LHI (excl. Mortgage Finance) grew for the second quarter in a row: $210.0 million in Q3-2021 and $133.1 million in Q2-2021 $10.5M $18.0M $12.8M $15.7M $12.2M
6 $70.6M $75.5M $95.3M $105.4M $121.1M $1.3M $1.2M Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 MSR (Period-end) Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 LHS (Average) LHS (Period-end) Noteworthy Items // Correspondent Lending Risk Weighted ~50% Risk Weighted 250% 1 Based on Correspondent Lending’s results during final full-quarter operations (Q1-2021) Historical Contribution (in $ millions) Q1 2020 Q2 2020 Q3 2020 Q4 2020 FY 2020 Q1 2021 Q2 2021 Q3 2021 YTD 2021 Net Interest Income 24.5 1.5 2.8 1.4 30.2 0.9 0.3 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 2.9 Servicing Fee Income 4.6 5.9 7.1 8.6 26.2 8.8 5.7 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) 1.3 Non-Interest Expense Salaries & Benefits 3.6 3.5 4.5 3.4 15.0 3.0 3.1 0.4 6.5 Marketing 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 2.1 Communications & Tech 0.7 1.4 1.0 1.0 4.1 0.4 0.3 1.3 2.0 Servicing Related Expenses 16.4 20.1 12.3 15.9 64.7 13.0 12.4 2.4 27.8 Other Expense 0.5 0.5 0.4 0.7 2.1 0.7 0.6 0.6 1.9 Commentary ◼ Transition activities substantially completed in Q3-2021 and contributions to Q3-2021 results declined materially, as expected. Repositioning the expense base (~$70 million1) to more profitable, strategically-aligned areas is well underway and will continue at a prudent pace ◼ A modest loss on sale of LHS weighed slightly on non-interest income ($1.2 million). Salaries & benefits expense was largely extinguished this quarter, while servicing-related expense continued to add $2.4 million to total non-interest expense ◼ With only minor LHS remaining, coupled with the Q4-2021 sale of remaining MSRs, Correspondent Lending’s net expense in Q4-2021 is expected to be negligible
7 Q3 2021 EOP $0.2B $0.7B $2.3B $3.4B $3.5B $3.8B $3.7B $10.8B $11.0B $10.8B $11.8B $11.6B $9.0B $8.3B Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 10.19% 10.53% 10.70% 2.06% 1.52% 1.52% 1.79% 2.72% 2.73% % of Total Deposits 36% 37% 40% 46% 48% 43% 40% IB Deposit Costs 0.65% 0.56% 0.48% 0.43% 0.39% 0.40% 0.38% Yield on Liquidity Assets3 0.09% 0.10% 0.10% 0.10% 0.10% 0.16% 0.15% Investment Portfolio (Average) Liquidity Assets2 (Average) Noteworthy Items // Capital Actions and Liquidity Q1 2021 Q2 2021 Preferred Stock Long-term Debt 14.04% Q3 2021 CET1 Tier 1 Capital Tier 2 Capital 14.95%14.77% Q3 2021 (Actual) $10.6M $4.3M Risk-based Capital Ratios // Consolidated Excess Liquidity 1 Based on contractual rates and no change to outstanding balances; 2 Liquidity assets include Federal funds sold and interest- bearing deposits in other banks; 3 Interest on excess reserves increased to 15bps effective June 17, 2021 Q4 2021 (Projected)1 $10.5M Interest and Dividend Expense $4.3M Q2 2021 (Actual) $10.7M $6.3M Commentary ◼ One-off impacts to financial performance from the H1-2021 capital actions were complete in Q2-2021, leaving Q3-2021 results representative of go-forward levels (both capital ratios and associated interest and dividend expense) ◼ The full-quarter benefit of Q2-2021 liquidity management actions and the resumption of the investment portfolio build were realized in Q3-2021. Further liquidity management opportunities are unlikely in the short term
8 37% 37% 37% 26% 11% 11% 37% 52% 52% Q3 2020 Q2 2021 Q3 2021 Commercial Energy Real Estate $1,076M $892M $729M 1.84% 1.8x 0.43% 1.46% 2.6x 0.25% 1.46% 2.5x 0.25% ACL on Loans / Loans HFI excl MFLs ACL on Loans / NPAs NPAs / Earning Assets Credit Risk Management ◼ Credit Trends ◼ Credit performance was stable reflecting economic improvements, client selection, underwriting and prior de-risking strategies ◼ Positive economic activity resulted in improved credit quality particularly in the CRE and Energy sectors ◼ Net charge-offs of $3.1 million in Q3-2021, in line with prior two quarters ◼ COVID-19 Update ◼ All sectors showed overall stable to improving performance ◼ The longer-term impact of COVID-19, the delta variant, and macroeconomic pressures on client performance are watch items ◼ Economic View for CECL: Quarterly forecasts and outlook are consistent with the Q2-2021 view in light of macroeconomic uncertainties Q3 2020 Q2 2021 Q3 2021 Criticized Composition1 | Y-o-Y & Q-o-Q Highlights Credit Quality Commentary ◼ The quarter reflects further improvement in the criticized portfolio, particularly in CRE. Balances are more than 30% lower than year-ago levels ◼ Criticized assets declined largely due to payoffs at par and upgrades to pass of CRE loans in the Hotel and Senior Housing segments ◼ The mix of criticized assets continues to be comprised of loans with tangible secondary repayment valuations with a lower risk of loss ◼ Non-accrual loans are stable ◼ Enhanced risk management practices, analytics, and adherences continue to strengthen risk assessment accuracy ◼ Client selection and underwriting standards are key success factors aligned with the bank’s financial priorities, strategy and goals 1 Period-end balances
9 3.35% 3.43% 3.33% 3.52% 3.45% 3.55% 3.36% 4.30% 3.86% 3.69% 3.82% 3.70% 3.75% 3.55% Q1 2020 Q3 2020 Q1 2021 Q3 2021 Total Loans Spread Total Loan Yield Q3 2021 EOP $16.6B $16.4B $15.6B $14.9B $14.8B $14.7B $15.0B $15.0B $0.6B $0.7B $0.7B $0.6B $0.6B $0.3B $0.2B $10.2B $9.1B $9.6B $10.0B $8.4B $7.6B $8.0B $8.5B Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 LHI (excl. MFLs and PPP Loans) PPP Loans Total MFLs Loan Portfolio 1 Period-End Loan Composition (excl MFLs1) Quarterly Trend in Yields and Spreads2 1 Total MFLs include mortgage warehouse loans and Correspondent Lending LHS; 2 Total Loan Spread = Yield on total loans (HFI & HFS) – Total cost of deposits and other borrowings Average Loans Commentary ◼ Average total MFLs 1 increased from Q2- 2021 ($0.4 billion) in line with historical seasonal changes. Previously discussed levers to bolster warehouse activity are successfully supporting revenue contribution ahead of the seasonally lower fourth and first quarters ◼ Average LHI (excluding MFLs1) grew modestly Q-o-Q as broad-based growth in core LHI offset declining PPP loan balances ◼ PPP loans ended Q3-2021 at $207.3 million, a $157.2 million decline from Q2-2021 ◼ Payoffs in real estate loans, reflective of both current market conditions and payoffs in the criticized portfolio, were more than offset by growth in other loan categories. Ending LHI (excluding MFLs1 and PPP) increased for a second consecutive quarter ($210.0 million in Q3-2021 and $133.1 million in Q2-2021) ◼ Loan yields declined Q-o-Q with pressure on warehouse yields and lower loan fees following strong Q2-2021 levels. Total loan spread2, which also declined Q-o-Q, remains stable Y-o-Y 48% 48% 48% $9.0B $9.3B $9.9B $6.1B $5.6B $5.2B Q3 2020 Q2 2021 Q3 2021 C&I LHI (excl. PPP Loans) Real Estate LHI Utilization Rate Q3 2020 Q2 2021 Q3 2021 (~5% below long-term avg) Q3 2020 Q2 2021 Q3 2021 1 2
10 47% 50% 65% 70% 71% Interest-bearing Deposit Beta Federal Funds Target (Max) Q3 2021 EOP $15.4B $17.0B $17.5B $17.9B $17.5B $15.7B $13.6B $13.9B $2.3B $2.9B $2.4B $1.8B $1.6B $1.2B $1.1B $1.0B $10.0B $10.9B $12.2B $13.2B $14.4B $15.1B $15.4B $15.0B Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 Interest-bearing (excluding Brokered CDs) Brokered CDs DDAs Deposits and Fundings Funding Costs Deposit Mix (Average) Average Deposits Balances Commentary ◼ Average Interest-bearing deposits continue to decline meaningfully as a result of targeted actions to reduce higher-cost indexed deposits. Average interest-bearing balances (excluding brokered CDs) are $3.9 billion lower than Q1-2021 levels ◼ Brokered CD balances continue to mature without replacement (Y-o-Y reduction of $1.3 billion) ◼ Average DDA balances increased Q-o-Q ($0.3 billion) and Y-o-Y ($3.2 billion). Ending balance is below the quarterly average due to normal quarter-end activity ◼ Y-o-Y improvements in both average deposit costs and total funding costs reflect efforts to improve deposit composition ahead of next tightening cycle ◼ Higher-cost indexed portfolios will continue to be aggressively managed towards long-term target (<15%) ◼ Though interest-bearing deposit rates have absorbed more than 70%1 of Fed rate reductions during this loosening cycle, a strategic focus on treasury and operating accounts will result in lower sensitivity as rates rise 64% 72% 77% 36% 28% 23% Non-Indexed Indexed 1 Includes interest-bearing deposits only and compares the change in monthly interest-bearing deposit rates to the change in the Fed Funds Target range’s maximum. Percentages (betas) for each period are estimated based on total change since June 2019 % of Fed Rate Reductions Reflected in Deposit Costs1 0.34% 0.29% 0.24% 0.20% 0.19% 0.38% 0.33% 0.29% 0.29% 0.28% Avg Cost of Deposits Total Funding Costs 1
11 8.6% 7.6% 8.5% 6.5% 3.3% 5.9% 3Q20 2Q21 3Q21 $0.7B $3.5B $3.8B 2.30% 1.29% 1.12% Q3 2020 Q2 2021 Q3 2021 Avg. Investment Portfolio Yield on investment $207.6M $197.0M $194.1M 2.22% 2.10% 2.15% Q3 2020 Q2 2021 Q3 2021 Q3-2021 Earnings Overview N e t In te re s t In c o m e B a la n c e S h e e t M a n a g e m e n t Avg. Investment Portfolio & Yield NII Shock Sensitivity | 12-month Net Interest Income & Margin Net Interest Margin Detail (bps) Q 2 2 0 2 1 Q 3 2 0 2 1 L o a n s (n e t P P P ) L iq u id A s s e t B a la n c e s L iq u id A s s e t Y ie ld s P P P L o a n s Y ie ld s O th e r F u n d in g C o s ts 15.2% Loans at Floor1 37% 49% 50% Floor Yield 4.05% 3.82% 3.55% +100bps Shock +200bps Shock 1 Floors stated as a percentage of floating rate loans, excluding leases and Mortgage Finance loans 10.9% 14.4% Commentary ◼ Building on favorable trends ending Q2-2021, we continue to use previously discussed levers to capture warehouse market share and maintain volumes—warehouse interest income was higher Q-o-Q despite a decline in yields ◼ While loan fees (ex. PPP) and warehouse yields declined Q-o-Q, the full-quarter benefits of exiting costly excess liquidity and a growing investment portfolio improved NIM ◼ Traditional LHI growth may continue in the fourth quarter, but excess liquidity from seasonal warehouse loan declines could weigh on NIM and net interest income near-term Commentary ◼ Average investment portfolio balances increased $0.2 billion Q-o-Q, as expected, benefitting both revenue and NIM. Early-quarter rate volatility impacted amortization costs and yields late- quarter, but recent curve steepening is currently expected to benefit Q4-2021 results ◼ Focused on maintaining portfolio balances at current levels near-term ◼ Net interest income and NIM continued to benefit from loan floors. Asset sensitivity remains lower than historical levels, but the estimated benefit from the second 100bp shock shows inherent profile remains well-positioned for rising rates
12 $60.3M $30.1M $21.2M Q3 2020 Q2 2021 Q3 2021 $165.7M $149.1M $153.0M Q3 2020 Q2 2021 Q3 2021 $84.1M $86.8M $87.5M Q3 2020 Q2 2021 Q3 2021 $2.9M $4.6M $4.6M $2.5M $3.1M $3.4M $0.5M $0.5M $0.6M Q3 2020 Q2 2021 Q3 2021 Deposit Service Charges Wealth Management Swap Fees $5.9M $8.3M $8.6M Q3-2021 Earnings Overview N o n -i n te re s t in c o m e N o n -i n te re s t e x p e n s e Non-interest Expense Salary & Employee Benefits Non-interest Income Fee Income Details $12.0M Write-off Expense % of Revenue 23% 13% 10% % of NIE 51% 58% 57% $141.0M $15.4M $150.3M Commentary ◼ Appropriately aligning technology to the lines of business and re-underwriting our capitalized technology investment to align with our long-term strategy led to a write-off of $12.0 million ◼ Salaries and employee benefits increased modestly Q-o-Q. Correspondent Lending transition reductions, which are now largely complete, have started (and will continue) supporting new-hire costs and other investments over the near-term ◼ Correspondent Lending expense declined by $12.1 million Q-o-Q Commentary ◼ Mortgage Finance fee income, including brokered loan fees and Correspondent Lending-related items, declined $4.7 million Q-o-Q. Seasonal Warehouse loan declines may weigh on Q4-2021 and Q1-2022 results as well ◼ Contributions from treasury-related fees and swap fees remained stable this quarter, while wealth management fees provided a fifth consecutive quarter of steady Q-o-Q growth ◼ While quarterly results may vary, strategic investments in products and services will drive sustainable long-term improvements in non- interest income’s contribution to total revenue
13 Focused on the Future Current Financial Priorities Building Tangible Book Value // Reinvesting organically generated capital to improve client relevance and create a more valuable franchise Investment // Re-aligning the expense base to directly support the business and investing aggressively to take advantage of market opportunities that we are uniquely positioned to serve Revenue Growth // Growing top- line revenue as a result of expanded banking capabilities for best-in-class clients in our Texas and national markets Flagship Results Proactive, disciplined engagement with the best clients in our markets to provide the talent, products, and offerings they need through their entire life-cycles Structurally higher, more sustainable earnings driving greater performance and lower annual variability Consistent communication, enhanced accountability, and a bias for action ensure execution and delivery Commitment to financial resilience allowing us to serve clients, access markets, and support communities through all cycles