TEXAS CAPITAL BANCSHARES INC/TX - FORM 8-K - EX-99.1 - EX-99.1 EARNINGS RELEASE - January 21, 2021

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EX-99.2 - EX-99.2 EARNINGS PRESENTATION - TEXAS CAPITAL BANCSHARES INC/TXearnings4q2020final.htm
8-K - 8-K - TEXAS CAPITAL BANCSHARES INC/TXtcbi-20210121.htm

Exhibit 99.1
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INVESTOR CONTACTMEDIA CONTACT
Julie Anderson, 214.932.6773Shannon Wherry, 469.399.8527
julie.anderson@texascapitalbank.comshannon.wherry@texascapitalbank.com
TEXAS CAPITAL BANCSHARES, INC. ANNOUNCES OPERATING RESULTS FOR Q4 AND FULL YEAR 2020
DALLAS - January 21, 2021 - Texas Capital Bancshares, Inc. (NASDAQ: TCBI), the parent company of Texas Capital Bank, announced operating results for the fourth quarter and full year of 2020.
"While 2020 was certainly a challenging year, I am pleased with our strong fourth quarter results," said Larry Helm, Executive Chairman and CEO. "I want to thank our employees for their hard work and commitment to serving our clients during this unprecedented time. Though we are still navigating the pandemic, I am confident that Texas Capital Bank is well positioned for the future due to the actions we took in 2020. Looking ahead, Rob Holmes, our new CEO, officially joins us next week. Under his leadership, I have no doubt that Texas Capital Bank will continue to enhance its level of execution and recruit and develop the best talent, enabling us to drive long term shareholder value."
•Net income of $60.2 million ($1.14 per share) reported for the fourth quarter of 2020, an increase of $3.1 million on a linked quarter basis and a decrease of $4.2 million from the fourth quarter of 2019.
•Average mortgage finance loans held for investment ("LHI") increased 5% on a linked quarter basis and 21% from the fourth quarter of 2019.
•Credit quality improved in the fourth quarter of 2020, reflecting declines in non-performing assets and criticized loans of $40.0 million and $157.1 million, respectively, on a linked quarter basis.
•Successfully deployed $1.8 billion of excess liquidity into higher yielding investment securities in the fourth quarter of 2020.

FINANCIAL SUMMARY
(dollars and shares in thousands)20202019% Change
ANNUAL OPERATING RESULTS
Net income$66,289 $312,015 (79)%
Net income available to common stockholders$56,539 $302,265 (81)%
Diluted earnings per common share$1.12 $5.99 (81)%
Diluted shares50,583 50,419 — %
ROA0.18 %1.01 %
ROE2.10 %11.95 %
QUARTERLY OPERATING RESULTS
Net income$60,176 $64,420 (7)%
Net income available to common stockholders$57,739 $61,983 (7)%
Diluted earnings per common share$1.14 $1.23 (7)%
Diluted common shares50,794 50,462 1 %
ROA0.61 %0.74 %
ROE8.50 %9.26 %
BALANCE SHEET
Loans held for sale ("LHS")$283,165 $2,577,134 (89)%
LHI, mortgage finance9,079,409 8,169,849 11 %
LHI15,351,451 16,476,413 (7)%
Total LHI24,430,860 24,646,262 (1)%
Total assets37,726,096 32,548,069 16 %
Demand deposits12,740,947 9,438,459 35 %
Total deposits30,996,589 26,478,593 17 %
Stockholders’ equity2,871,224 2,801,321 2 %



DETAILED FINANCIALS

Texas Capital Bancshares, Inc. reported net income of $66.3 million and net income available to common stockholders of $56.5 million for the year ended December 31, 2020, compared to net income of $312.0 million and net income available to common stockholders of $302.3 million for the year ended December 31, 2019. For the fourth quarter of 2020, net income was $60.2 million, compared to net income of $57.1 million for the third quarter of 2020, and net income of $64.4 million for the fourth quarter of 2019. On a fully diluted basis, earnings per common share were $1.12 for the year ended December 31, 2020 compared to $5.99 for the same period in 2019. Diluted earnings per common share were $1.14 for the quarter ended December 31, 2020, compared to $1.08 for the quarter ended September 30, 2020 and $1.23 for the quarter ended December 31, 2019. The increase in net income for the fourth quarter of 2020 as compared to the third quarter of 2020 resulted primarily from a $15.4 million increase in net interest income and a $14.9 million decrease in non-interest expense, offset by a $17.5 million decrease in non-interest income.

We recorded a $32.0 million provision for credit losses for the fourth quarter of 2020 utilizing the Current Expected Credit Loss ("CECL") methodology adopted in the first quarter of 2020, compared to $30.0 million for the third quarter of 2020 and $17.0 million for the fourth quarter of 2019. We recorded $65.4 million in net charge-offs during the fourth quarter of 2020, including $27.6 million in energy net charge-offs and $34.2 million in leveraged lending net charge-offs, all of which were loans that had been previously identified as problem loans, compared to $1.6 million during the third quarter of 2020 and $12.8 million during the fourth quarter of 2019. Criticized loans totaled $918.4 million at December 31, 2020, compared to $1.1 billion at September 30, 2020 and $584.1 million at December 31, 2019. Criticized loan levels have declined in the fourth quarter of 2020 as compared to the third quarter of 2020, however remain elevated when compared to 2019 due to the downgrade of loans to borrowers that have been impacted by the COVID-19 pandemic or that are in categories that are expected to be more significantly impacted by COVID-19.

Non-performing assets ("NPAs") totaled $122.0 million at December 31, 2020, a decrease of $40.0 million compared to the third quarter of 2020 and a decrease of $103.4 million compared to the fourth quarter of 2019. Non-accrual energy loans totaled $51.7 million (42% of total NPAs) at December 31, 2020, compared to $73.8 million (46% of total NPAs) at September 30, 2020 and $125.0 million (55% of total NPAs) at December 31, 2019. Non-accrual leveraged lending loans totaled $18.9 million (15% of total NPAs) at December 31, 2020, compared to $31.3 million (19% of total NPAs) at September 30, 2020 and $73.2 million (32% of total NPAs) at December 31, 2019. The ratio of total LHI NPAs to total LHI plus other real estate owned ("OREO") for the fourth quarter of 2020 was 0.50%, compared to 0.64% for the third quarter of 2020 and 0.91% for the fourth quarter of 2019.

Net interest income was $223.0 million for the fourth quarter of 2020, compared to $207.6 million for the third quarter of 2020 and $248.4 million for the fourth quarter of 2019. Net interest margin for the fourth quarter of 2020 was 2.32%, an increase of 10 basis points from the third quarter of 2020 and a decrease of 63 basis points from the fourth quarter of 2019. The shift in earning assets, primarily the increases in liquidity assets and investment securities, and decrease in LHI, excluding mortgage finance, contributed to the year-over-year decrease in net interest margin. LHI yields, excluding mortgage finance loans, increased 28 basis points from the third quarter of 2020, and decreased 104 basis points compared to the fourth quarter of 2019. LHI, mortgage finance yields for the fourth quarter of 2020 decreased 7 basis points compared to the third quarter of 2020, and increased 11 basis points compared to the fourth quarter of 2019. Additionally, total cost of deposits for the fourth quarter of 2020 decreased 5 basis points to 0.29% compared to 0.34% for the third quarter of 2020, and decreased 70 basis points from 0.99% for the fourth quarter of 2019.

Non-interest income decreased $17.5 million, or 29%, during the fourth quarter of 2020 compared to the third quarter of 2020, and increased $25.1 million, or 141%, compared to the fourth quarter of 2019. The linked quarter decrease was primarily related to a decrease in net gain/(loss) on sale of LHS, resulting primarily from decreased margins and lower sales volume. The year-over-year increase was primarily related to increases in net gain/(loss) on sale of LHS, servicing fee income and brokered loan fees. The year-over-year increase in net gain/(loss) on sale of LHS was due to lower hedge costs in the fourth quarter of 2020 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. The year-over-year increase in servicing fee income was due to an increase in the outstanding balance of our servicing portfolio. The year-over-year increase in brokered loan fees was due to an increase in total mortgage finance volumes in the fourth quarter of 2020.

Non-interest expense for the fourth quarter of 2020 decreased $14.9 million, or 9%, compared to the third quarter of 2020, and decreased $17.3 million, or 10%, compared to the fourth quarter of 2019. The linked quarter decrease was primarily related to decreases in salaries and employee benefits and communications and technology expense, offset by an increase in servicing-related expense. The year-over-year decrease was primarily due to decreases in salaries and employee benefits, marketing and legal and profession expenses, partially offset by an increase in servicing-related expense. The linked quarter decrease in communication and technology expense was primarily due to non-recurring software expenses recorded in the third quarter of
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2020. The linked-quarter and year-over-year decreases in salaries and employee benefits was the result of cost savings related to our second quarter 2020 workforce reduction. The linked-quarter and year-over-year increases in servicing-related expense was primarily due to an increase in MSR amortization, resulting primarily from an increase in the cost basis of our MSR asset.

All regulatory ratios continue to be in excess of "well-capitalized" requirements as of December 31, 2020. Our CET 1, tier 1 capital, total capital and leverage ratios were 9.4%, 10.3%, 12.1% and 7.5%, respectively, at December 31, 2020, compared to 9.1%, 9.9%, 11.8% and 7.6%, respectively, at September 30, 2020. At December 31, 2020, our ratio of tangible common equity to total tangible assets was 7.1% compared to 6.8% at September 30, 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 ongoing 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, attract and retain qualified employees, (10) the impact of changing regulatory requirements and legislative changes on our business, (11) increased competition from banking organizations and other financial service providers, (12) interest rate risk, (13) greater than expected costs or difficulties related to the integration of new lines of business, products or new service offerings, (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 items.

In addition, statements about the potential effects of the COVID-19 pandemic on our business, financial condition, liquidity and results of operations may constitute forward-looking statements and are subject to the risk that the actual effects may differ, possibly materially, from what is reflected in those forward-looking statements due to factors and future developments that are uncertain, unpredictable and in many cases beyond our control, including the scope, duration and severity of the COVID-19 pandemic, actions taken by governmental authorities and other parties in response to the COVID-19 pandemic, the scale of distribution and public acceptance of any vaccines for COVID-19 and the effectiveness of such vaccines in stemming or stopping the spread of COVID-19, and the direct and indirect impact of the COVID-19 pandemic on our customers, clients, third parties and us.

These and other factors that could cause results to differ materially from those described in the forward-looking statements, as well as a discussion of the risks and uncertainties that may affect our business, can be found in our Annual Report on Form 10-K, our Quarterly Reports on Form 10-Q and in other filings we make with the Securities and Exchange Commission. The information contained in this communication speaks only as of its date. Except to the extent required by applicable law or regulation, we disclaim any obligation to update such factors or to publicly announce the results of any revisions to any of the forward-looking statements included herein to reflect future events or developments.

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TEXAS CAPITAL BANCSHARES, INC.
SELECTED FINANCIAL HIGHLIGHTS (UNAUDITED)
(dollars in thousands except per share data)
4th Quarter3rd Quarter2nd Quarter1st Quarter4th Quarter
20202020202020202019
CONSOLIDATED STATEMENTS OF INCOME
Interest income$255,163 $243,731 $252,010 $306,008 $337,757 
Interest expense32,153 36,162 42,082 77,689 89,372 
Net interest income223,010 207,569 209,928 228,319 248,385 
Provision for credit losses32,000 30,000 100,000 96,000 17,000 
Net interest income after provision for credit losses191,010 177,569 109,928 132,319 231,385 
Non-interest income42,886 60,348 70,502 11,780 17,761 
Non-interest expense150,886 165,741 222,352 165,417 168,187 
Income/(loss) before income taxes83,010 72,176 (41,922)(21,318)80,959 
Income tax expense/(benefit)22,834 15,060 (7,606)(4,631)16,539 
Net income/(loss)60,176 57,116 (34,316)(16,687)64,420 
Preferred stock dividends2,437 2,438 2,437 2,438 2,437 
Net income/(loss) available to common stockholders$57,739 $54,678 $(36,753)$(19,125)$61,983 
Diluted earnings/(loss) per common share$1.14 $1.08 $(0.73)$(0.38)$1.23 
Diluted common shares50,794,421 50,573,073 50,416,331 50,474,802 50,461,723 
CONSOLIDATED BALANCE SHEET DATA
Total assets$37,726,096 $38,432,872 $36,613,127 $35,879,416 $32,548,069 
LHI15,351,451 15,789,958 16,552,203 16,857,579 16,476,413 
LHI, mortgage finance9,079,409 9,378,104 8,972,626 7,588,803 8,169,849 
LHS283,165 648,009 454,581 774,064 2,577,134 
Liquidity assets(1)
9,032,807 10,461,544 9,540,044 9,498,189 4,263,766 
Investment securities3,196,970 1,367,313 234,969 228,784 239,871 
Demand deposits12,740,947 12,339,212 10,835,911 9,420,303 9,438,459 
Total deposits30,996,589 31,959,487 30,187,695 27,134,263 26,478,593 
Other borrowings3,111,751 2,908,183 2,895,790 5,195,267 2,541,766 
Subordinated notes282,490 282,400 282,309 282,219 282,129 
Long-term debt113,406 113,406 113,406 113,406 113,406 
Stockholders’ equity2,871,224 2,800,404 2,734,755 2,772,596 2,801,321 
End of period shares outstanding50,470,450 50,455,552 50,435,672 50,407,778 50,337,741 
Book value$53.92 $52.53 $51.25 $52.03 $52.67 
Tangible book value(2)
$53.57 $52.18 $50.89 $51.67 $52.31 
SELECTED FINANCIAL RATIOS
Net interest margin2.32 %2.22 %2.30 %2.78 %2.95 %
Return on average assets0.61 %0.59 %(0.36)%(0.20)%0.74 %
Return on average common equity8.50 %8.24 %(5.48)%(2.85)%9.26 %
Non-interest income to average earning assets0.44 %0.64 %0.77 %0.14 %0.21 %
Efficiency ratio(3)
56.7 %61.9 %79.3 %68.9 %63.2 %
Non-interest expense to average earning assets1.56 %1.76 %2.43 %2.00 %1.98 %
Tangible common equity to total tangible assets(4)
7.1 %6.8 %7.0 %7.3 %8.1 %
Common Equity Tier 19.4 %9.1 %8.8 %9.3 %8.9 %
Tier 1 capital10.3 %9.9 %9.7 %10.2 %9.7 %
Total capital12.1 %11.8 %11.6 %12.0 %11.4 %
Leverage7.5 %7.6 %7.5 %8.5 %8.4 %
(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 and accumulated other comprehensive income, less goodwill and intangibles, divided by total assets, less accumulated other comprehensive income and goodwill and intangibles.
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TEXAS CAPITAL BANCSHARES, INC.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(dollars in thousands)
December 31, 2020December 31, 2019%
Change
Assets
Cash and due from banks$173,573 $161,817 7 %
Interest-bearing deposits9,032,807 4,233,766 113 %
Federal funds sold and securities purchased under resale agreements— 30,000 (100)%
Securities, available-for-sale3,196,970 239,871 1,233 %
LHS ($239.1 million and $2,571.3 million at December 31, 2020 and 2019, respectively, at fair value)283,165 2,577,134 (89)%
LHI, mortgage finance9,079,409 8,169,849 11 %
LHI (net of unearned income)15,351,451 16,476,413 (7)%
Less: Allowance for credit losses on loans254,615 195,047 31 %
LHI, net24,176,245 24,451,215 (1)%
Mortgage servicing rights, net105,424 64,904 62 %
Premises and equipment, net24,546 31,212 (21)%
Accrued interest receivable and other assets715,699 740,051 (3)%
Goodwill and intangibles, net17,667 18,099 (2)%
Total assets$37,726,096 $32,548,069 16 %
Liabilities and Stockholders’ Equity
Liabilities:
Deposits:
Non-interest bearing$12,740,947 $9,438,459 35 %
Interest bearing18,255,642 17,040,134 7 %
Total deposits30,996,589 26,478,593 17 %
Accrued interest payable11,150 12,760 (13)%
Other liabilities339,486 318,094 7 %
Federal funds purchased and repurchase agreements111,751 141,766 (21)%
Other borrowings3,000,000 2,400,000 25 %
Subordinated notes, net282,490 282,129 — %
Trust preferred subordinated debentures113,406 113,406 — %
Total liabilities34,854,872 29,746,748 17 %
Stockholders’ equity:
Preferred stock, $.01 par value, $1,000 liquidation value:
Authorized shares - 10,000,000
Issued shares - 6,000,000 shares issued at December 31, 2020 and 2019150,000 150,000 — %
Common stock, $.01 par value:
Authorized shares - 100,000,000
Issued shares - 50,470,867 and 50,338,158 at December 31, 2020 and 2019, respectively504 503 — %
Additional paid-in capital991,898 978,205 1 %
Retained earnings1,713,056 1,663,671 3 %
Treasury stock (shares at cost: 417 at December 31, 2020 and 2019)(8)(8)— %
Accumulated other comprehensive income, net of taxes15,774 8,950 N/M
Total stockholders’ equity2,871,224 2,801,321 2 %
Total liabilities and stockholders’ equity$37,726,096 $32,548,069 16 %

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TEXAS CAPITAL BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(dollars in thousands except per share data)
Three Months Ended December 31,Twelve Months Ended December 31,
2020201920202019
Interest income
Interest and fees on loans$242,776 $312,147 $1,011,175 $1,284,036 
Investment securities9,594 2,618 17,475 8,654 
Federal funds sold and securities purchased under resale agreements1 439 693 1,529 
Interest-bearing deposits in other banks2,792 22,553 27,569 71,093 
Total interest income255,163 337,757 1,056,912 1,365,312 
Interest expense
Deposits23,819 70,987 146,117 293,537 
Federal funds purchased110 1,319 1,083 11,872 
Other borrowings3,407 11,712 20,923 58,393 
Subordinated notes4,191 4,191 16,764 16,764 
Trust preferred subordinated debentures626 1,163 3,199 5,026 
Total interest expense32,153 89,372 188,086 385,592 
Net interest income223,010 248,385 868,826 979,720 
Provision for credit losses32,000 17,000 258,000 75,000 
Net interest income after provision for credit losses191,010 231,385 610,826 904,720 
Non-interest income
Service charges on deposit accounts3,004 2,785 11,620 11,320 
Wealth management and trust fee income2,681 2,342 9,998 8,810 
Brokered loan fees12,610 8,645 46,423 29,738 
Servicing income8,834 4,030 27,029 13,439 
Swap fees473 1,559 5,182 4,387 
Net gain/(loss) on sale of LHS6,761 (7,757)58,026 (20,259)
Other8,523 6,157 27,238 45,005 
Total non-interest income42,886 17,761 185,516 92,440 
Non-interest expense
Salaries and employee benefits78,449 90,248 340,529 328,483 
Net occupancy expense8,373 9,075 34,955 32,989 
Marketing3,435 12,807 23,581 53,355 
Legal and professional12,129 21,032 52,132 52,460 
Communications and technology15,405 13,801 103,054 44,826 
FDIC insurance assessment6,592 5,613 25,955 20,093 
Servicing-related expenses15,867 2,960 64,625 22,573 
Merger-related expenses— 1,370 17,756 1,370 
Other10,636 11,281 41,809 44,701 
Total non-interest expense150,886 168,187 704,396 600,850 
Income before income taxes83,010 80,959 91,946 396,310 
Income tax expense22,834 16,539 25,657 84,295 
Net income60,176 64,420 66,289 312,015 
Preferred stock dividends2,437 2,437 9,750 9,750 
Net income available to common stockholders$57,739 $61,983 $56,539 $302,265 
Basic earnings per common share$1.14 $1.23 $1.12 $6.01 
Diluted earnings per common share$1.14 $1.23 $1.12 $5.99 

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TEXAS CAPITAL BANCSHARES, INC.
SUMMARY OF CREDIT LOSS EXPERIENCE
(dollars in thousands)
4th Quarter3rd Quarter2nd Quarter1st Quarter4th Quarter
20202020202020202019
Allowance for credit losses on loans:
Beginning balance$290,165 $264,722 $240,958 $195,047 $190,138 
Impact of CECL adoption— — — 8,585 — 
Loans charged-off:
Commercial37,984 2,436 12,287 20,653 13,968 
Energy33,283 141 62,368 37,730 797 
Real estate180 — — — — 
Total charge-offs71,447 2,577 74,655 58,383 14,765 
Recoveries:
Commercial394 113 513 257 1,754 
Energy5,696 880 — 423 209 
Total recoveries6,090 993 513 680 1,963 
Net charge-offs65,357 1,584 74,142 57,703 12,802 
Provision for credit losses on loans29,807 27,027 97,906 95,029 17,711 
Ending balance$254,615 $290,165 $264,722 $240,958 $195,047 
Allowance for off-balance sheet credit losses:
Beginning balance$15,241 $12,268 $10,174 $8,640 $9,351 
Impact of CECL adoption— — — 563 — 
Provision for off-balance sheet credit losses2,193 2,973 2,094 971 (711)
Ending balance$17,434 $15,241 $12,268 $10,174 $8,640 
Total allowance for credit losses$272,049 $305,406 $276,990 $251,132 $203,687 
Total provision for credit losses$32,000 $30,000 $100,000 $96,000 $17,000 
Allowance for credit losses on loans to LHI1.04 %1.15 %1.04 %0.99 %0.79 %
Allowance for credit losses on loans to average LHI1.01 %1.14 %1.03 %1.02 %0.79 %
Net charge-offs to average LHI(1)
1.03 %0.02 %1.16 %0.98 %0.21 %
Net charge-offs to average LHI for last twelve months(1)
0.80 %0.59 %0.73 %0.53 %0.31 %
Total provision for credit losses to average LHI(1)
0.51 %0.47 %1.57 %1.63 %0.27 %
Total allowance for credit losses to LHI
1.11 %1.21 %1.09 %1.03 %0.83 %
(1)Interim period ratios are annualized.

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TEXAS CAPITAL BANCSHARES, INC.
SUMMARY OF NON-PERFORMING ASSETS AND PAST DUE LOANS
(dollars in thousands)
4th Quarter3rd Quarter2nd Quarter1st Quarter4th Quarter
20202020202020202019
Non-performing assets (NPAs):
Non-accrual loans$121,989 $161,946 $174,031 $219,165 $225,384 
Other real estate owned (OREO)— — — — — 
Total LHI NPAs$121,989 $161,946 $174,031 $219,165 $225,384 
Non-accrual loans to LHI0.50 %0.64 %0.68 %0.90 %0.91 %
Total LHI NPAs to LHI plus OREO0.50 %0.64 %0.68 %0.90 %0.91 %
Total LHI NPAs to earning assets0.33 %0.43 %0.49 %0.63 %0.71 %
Allowance for credit losses on loans to non-accrual loans2.1x1.8x1.5x1.1x.9x
LHI past due 90 days and still accruing(1)
$12,541 $15,896 $21,079 $21,274 $17,584 
LHI past due 90 days to LHI0.05 %0.06 %0.08 %0.09 %0.07 %
LHS non-accrual(2)
$6,966 $— $— $— $— 
LHS past due 90 days and still accruing(3)
$16,667 $15,631 $10,152 $9,014 $8,207 
(1)At December 31, 2020, loans past due 90 days and still accruing includes premium finance loans of $6.4 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.

8


TEXAS CAPITAL BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(dollars in thousands)
4th Quarter3rd Quarter2nd Quarter1st Quarter4th Quarter
20202020202020202019
Interest income
Interest and fees on loans$242,776 $237,179 $247,595 $283,625 $312,147 
Investment securities9,594 3,674 2,024 2,183 2,618 
Federal funds sold and securities purchased under resale agreements1 1 77 614 439 
Interest-bearing deposits in other banks2,792 2,877 2,314 19,586 22,553 
Total interest income255,163 243,731 252,010 306,008 337,757 
Interest expense
Deposits23,819 27,830 32,294 62,174 70,987 
Federal funds purchased110 128 176 669 1,319 
Other borrowings3,407 3,365 4,569 9,582 11,712 
Subordinated notes4,191 4,191 4,191 4,191 4,191 
Trust preferred subordinated debentures626 648 852 1,073 1,163 
Total interest expense32,153 36,162 42,082 77,689 89,372 
Net interest income223,010 207,569 209,928 228,319 248,385 
Provision for credit losses32,000 30,000 100,000 96,000 17,000 
Net interest income after provision for credit losses191,010 177,569 109,928 132,319 231,385 
Non-interest income
Service charges on deposit accounts3,004 2,864 2,459 3,293 2,785 
Wealth management and trust fee income2,681 2,502 2,348 2,467 2,342 
Brokered loan fees12,610 15,034 10,764 8,015 8,645 
Servicing income8,834 7,329 6,120 4,746 4,030 
Swap fees473 484 1,468 2,757 1,559 
Net gain/(loss) on sale of LHS6,761 25,242 39,023 (13,000)(7,757)
Other8,523 6,893 8,320 3,502 6,157 
Total non-interest income42,886 60,348 70,502 11,780 17,761 
Non-interest expense
Salaries and employee benefits78,449 84,096 100,791 77,193 90,248 
Net occupancy expense8,373 8,736 9,134 8,712 9,075 
Marketing3,435 3,636 7,988 8,522 12,807 
Legal and professional12,129 11,207 11,330 17,466 21,032 
Communications and technology15,405 31,098 42,760 13,791 13,801 
FDIC insurance assessment6,592 6,374 7,140 5,849 5,613 
Servicing-related expenses15,867 12,287 20,117 16,354 2,960 
Merger-related expenses— — 10,486 7,270 1,370 
Other 10,636 8,307 12,606 10,260 11,281 
Total non-interest expense150,886 165,741 222,352 165,417 168,187 
Income/(loss) before income taxes83,010 72,176 (41,922)(21,318)80,959 
Income tax expense/(benefit)22,834 15,060 (7,606)(4,631)16,539 
Net income/(loss)60,176 57,116 (34,316)(16,687)64,420 
Preferred stock dividends2,437 2,438 2,437 2,438 2,437 
Net income/(loss) available to common shareholders$57,739 $54,678 $(36,753)$(19,125)$61,983 

9

TEXAS CAPITAL BANCSHARES, INC.
CONSOLIDATED DAILY AVERAGE BALANCES, AVERAGE YIELDS AND RATES - UNAUDITED
(dollars in thousands)
4th Quarter 20203rd Quarter 20202nd Quarter 20201st Quarter 20204th Quarter 2019
Average
Balance		Revenue/
Expense		Yield/
Rate		Average
Balance		Revenue/
Expense		Yield/
Rate		Average
Balance		Revenue/
Expense		Yield/
Rate		Average
Balance		Revenue/
Expense		Yield/
Rate		Average
Balance		Revenue/
Expense		Yield/
Rate
Assets
Investment securities - Taxable$2,137,481 $7,748 1.44 %$525,149 $1,905 1.44 %$38,829 $185 1.92 %$42,799 $274 2.57 %$40,904 $693 6.72 %
Investment securities - Non-taxable(2)
200,781 2,337 4.63 %190,797 2,239 4.67 %195,806 2,327 4.78 %195,578 2,417 4.97 %197,591 2,437 4.89 %
Federal funds sold and securities purchased under resale agreements1,709 1 0.13 %12,051 1 0.04 %245,434 77 0.13 %199,727 614 1.24 %102,320 439 1.70 %
Interest-bearing deposits in other banks10,808,548 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 %5,387,000 22,553 1.66 %
LHS, at fair value410,637 2,475 2.40 %543,606 3,867 2.83 %380,624 2,547 2.69 %3,136,381 27,480 3.52 %3,567,836 33,411 3.72 %
LHI, mortgage finance loans9,550,119 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 %7,870,888 63,114 3.18 %
LHI(1)(2)
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 %16,667,259 216,686 5.16 %
Less allowance for credit
       losses on loans
290,189 — — 264,769 — — 236,823 — — 201,837 — — 189,353 — — 
LHI, net of allowance24,880,340 240,656 3.85 %25,083,251 233,694 3.71 %25,454,739 245,488 3.88 %23,451,620 257,105 4.41 %24,348,794 279,800 4.56 %
Total earning assets38,439,496 256,009 2.65 %37,383,816 244,583 2.60 %36,836,672 252,938 2.76 %33,252,053 307,476 3.72 %33,644,445 339,333 4.00 %
Cash and other assets1,031,195 1,037,760 1,075,864 976,520 974,866 
Total assets$39,470,691 $38,421,576 $37,912,536 $34,228,573 $34,619,311 
Liabilities and Stockholders’ Equity
Transaction deposits$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 %$3,817,294 $16,428 1.71 %
Savings deposits12,982,189 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 %11,111,326 40,603 1.45 %
Time deposits2,355,199 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 %2,453,655 13,956 2.26 %
Total interest bearing deposits19,721,881 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 %17,382,275 70,987 1.62 %
Other borrowings3,022,077 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 %2,822,465 13,031 1.83 %
Subordinated notes282,435 4,191 5.90 %282,343 4,191 5.91 %282,252 4,191 5.97 %282,165 4,191 5.97 %282,074 4,191 5.89 %
Trust preferred subordinated debentures113,406 626 2.20 %113,406 648 2.28 %113,406 852 3.02 %113,406 1,073 3.80 %113,406 1,163 4.07 %
Total interest bearing liabilities23,139,799 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 %20,600,220 89,372 1.72 %
Demand deposits13,174,114 12,202,065 10,865,896 10,003,495 10,933,887 
Other liabilities303,480 314,500 293,698 270,868 278,964 
Stockholders’ equity2,853,298 2,791,451 2,849,200 2,853,353 2,806,240 
Total liabilities and stockholders’ equity$39,470,691 $38,421,576 $37,912,536 $34,228,573 $34,619,311 
Net interest income(2)
$223,856 $208,421 $210,856 $229,787 $249,961 
Net interest margin2.32 %2.22 %2.30 %2.78 %2.95 %
(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.

TEXAS CAPITAL BANCSHARES INC/TX Reports