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

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EX-99.2 - EX-99.2 - TEXAS CAPITAL BANCSHARES INC/TXa2q21earningspresentatio.htm
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Exhibit 99.1
tcbilogoforearningsreleasea.jpg
INVESTOR CONTACTMEDIA CONTACT
Jamie Britton, 214.932.6721Shannon Wherry, 469.399.8527
jamie.britton@texascapitalbank.comshannon.wherry@texascapitalbank.com
TEXAS CAPITAL BANCSHARES, INC. ANNOUNCES OPERATING RESULTS FOR Q2 2021
DALLAS - July 21, 2021 - Texas Capital Bancshares, Inc. (NASDAQ: TCBI), the parent company of Texas Capital Bank, announced operating results for the second quarter of 2021.
“I continue to be pleased with the progress we're making in these first six months of 2021,” said Rob C. Holmes, President and CEO. “Building on an incredibly productive first quarter, second quarter successes included executing our largest capital markets transaction to-date with a $375.0 million subordinated note issuance, making the strategic decision to sell our portfolio of mortgage servicing rights to better align resources for the future and continuing to add new talent in key strategic areas at a record-setting pace. All of these actions, combined with the necessary and much appreciated hard work being done by our team internally every day, are laying a lasting foundation to support our long-term strategy, which we are looking forward to sharing with you during the third quarter.”
•Net income of $73.5 million ($1.31 per diluted share) reported for the second quarter of 2021, an increase of $1.5 million on a linked quarter basis and an increase of $107.8 million from the second quarter of 2020.
•Loans held for investment (“LHI”), excluding mortgage finance loans, decreased 1% on a linked quarter basis and decreased 8% from the second quarter of 2020. PPP loans continue to pay off, as expected, and contributed $363.7 million to the linked quarter decrease in LHI, excluding mortgage finance loans.
•Total mortgage finance loans, including mortgage correspondent aggregation (“MCA”) loans held for sale (“LHS”), decreased 4% on a linked quarter basis and decreased 6% from the second quarter of 2020. The decrease in MCA LHS is consistent with the previously announced transition of the MCA program.
•Demand deposits decreased 6% and total deposits decreased 14% on a linked quarter basis, and increased 31% and decreased 4%, respectively, from the second quarter of 2020. The linked-quarter declines were the result of targeted actions to reduce high-cost indexed deposits.
•Issuance of $375.0 million in 4.00% fixed rate subordinated notes, completed in the second quarter of 2021, providing additional capital to be used for general corporate purposes. A portion of the proceeds were used for the redemption of our existing 6.50% fixed rate subordinated notes.

FINANCIAL SUMMARY
(dollars and shares in thousands)Q2 2021Q2 2020% Change
QUARTERLY OPERATING RESULTS
Net income$73,481 $(34,316)314 %
Net income available to common stockholders$67,164 $(36,753)283 %
Diluted earnings per common share$1.31 $(0.73)279 %
Diluted common shares51,094 50,416 1 %
Return on average assets0.76 %(0.36)%
Return on average common equity9.74 %(5.48)%
BALANCE SHEET
LHS$63,747 $454,581 (86)%
LHI, mortgage finance8,772,799 8,972,626 (2)%
LHI15,168,565 16,552,203 (8)%
Total LHI23,941,364 25,524,829 (6)%
Total assets35,228,542 36,613,127 (4)%
Demand deposits14,228,038 10,835,911 31 %
Total deposits28,839,563 30,187,695 (4)%
Stockholders’ equity3,114,957 2,734,755 14 %



DETAILED FINANCIALS

For the second quarter of 2021, net income was $73.5 million, compared to net income of $71.9 million for the first quarter of 2021, and net loss of $34.3 million for the second quarter of 2020. On a fully diluted basis, earnings per common share were $1.31 for the quarter ended June 30, 2021, compared to earnings per common share of $1.33 for the quarter ended March 31, 2021 and loss per common share of $0.73 for the quarter ended June 30, 2020.

We recorded a $19.0 million negative provision for credit losses for the second quarter of 2021, compared to a $6.0 million negative provision for credit losses for the first quarter of 2021 and a $100.0 million provision for credit losses for the second quarter of 2020. The linked quarter decrease in provision for credit losses resulted primarily from decreases in charge-offs and criticized loans, as well as an improvement in the economic outlook as the economy continues to recover from the impacts of the COVID-19 pandemic. We recorded $2.4 million in net charge-offs during the second quarter of 2021, compared to $6.4 million during the first quarter of 2021 and $74.1 million during the second quarter of 2020. Criticized loans totaled $891.6 million at June 30, 2021, compared to $945.1 million at March 31, 2021 and $1.0 billion at June 30, 2020.

Non-performing assets (“NPAs”) totaled $86.6 million at June 30, 2021, a decrease of $11.1 million compared to the first quarter of 2021 and a decrease of $87.4 million compared to the second quarter of 2020. The ratio of total LHI NPAs to total LHI plus other real estate owned for the second quarter of 2021 was 0.36%, compared to 0.40% for the first quarter of 2021 and 0.68% for the second quarter of 2020.

Net interest income was $197.0 million for the second quarter of 2021, compared to $200.1 million for the first quarter of 2021 and $209.9 million for the second quarter of 2020. The linked-quarter and year-over-year decreases in net interest income were primarily driven by a decrease in total average loans, partially offset by increases in loan fees. Net interest margin for the second quarter of 2021 was 2.10%, an increase of 1 basis point from the first quarter of 2021 and a decrease of 20 basis points from the second quarter of 2020. LHI yields, excluding mortgage finance loans, increased 10 basis points from the first quarter of 2021, and decreased 3 basis points compared to the second quarter of 2020. LHI, mortgage finance yields for the second quarter of 2021 decreased 13 basis points compared to the first quarter of 2021, and decreased 36 basis points compared to the second quarter of 2020. Additionally, total cost of deposits for the second quarter of 2021 decreased 4 basis points to 0.20% compared to 0.24% for the first quarter of 2021, and decreased 22 basis points from 0.42% for the second quarter of 2020.

Non-interest income for the second quarter of 2021 decreased $9.0 million, or 23%, compared to the first quarter of 2021, and decreased $40.4 million, or 57%, compared to the second quarter of 2020. The linked quarter decrease was primarily related to decreases in brokered loans fees, servicing income and net gain/(loss) on sale of LHS, partially offset by an increase in other non-interest income. The year-over-year decrease was primarily related to decreases in net gain/(loss) on sale of LHS and brokered loan fees, offset by increases in service charges on deposit accounts and other non-interest income. The linked quarter and year-over-year decreases in brokered loan fees and net gain/(loss) on sale of LHS, as well as the linked quarter decline in servicing income, were primarily due to the second quarter 2021 sale of our portfolio of MSRs and transition of the MCA program to a third-party.

Non-interest expense for the second quarter of 2021 decreased $1.3 million, or 1 percent, compared to the first quarter of 2021, and decreased $73.3 million, or 33%, compared to the second quarter of 2020. The year-over-year decrease was primarily due to decreases in marketing expense, communications and technology expense, servicing-related expenses and merger-related expenses.

All regulatory ratios continue to be in excess of “well-capitalized” requirements as of June 30, 2021. Our CET 1, tier 1 capital, total capital and leverage ratios were 10.5%, 12.1%, 14.8% and 8.4%, respectively, at June 30, 2021, compared to 10.2%, 12.2%, 14.0% and 8.3%, respectively, at March 31, 2021. At June 30, 2021, our ratio of tangible common equity to total tangible assets was 7.9% compared to 6.7% at March 31, 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
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“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 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 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.


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TEXAS CAPITAL BANCSHARES, INC.
SELECTED FINANCIAL HIGHLIGHTS (UNAUDITED)
(dollars in thousands except per share data)
2nd Quarter1st Quarter4th Quarter3rd Quarter2nd Quarter
20212021202020202020
CONSOLIDATED STATEMENTS OF INCOME
Interest income$224,490 $228,412 $255,163 $243,731 $252,010 
Interest expense27,496 28,339 32,153 36,162 42,082 
Net interest income196,994 200,073 223,010 207,569 209,928 
Provision for credit losses(19,000)(6,000)32,000 30,000 100,000 
Net interest income after provision for credit losses215,994 206,073 191,010 177,569 109,928 
Non-interest income30,102 39,092 42,863 60,348 70,485 
Non-interest expense149,060 150,316 150,863 165,741 222,335 
Income/(loss) before income taxes97,036 94,849 83,010 72,176 (41,922)
Income tax expense/(benefit)23,555 22,911 22,834 15,060 (7,606)
Net income/(loss)73,481 71,938 60,176 57,116 (34,316)
Preferred stock dividends6,317 3,779 2,437 2,438 2,437 
Net income/(loss) available to common stockholders$67,164 $68,159 $57,739 $54,678 $(36,753)
Diluted earnings/(loss) per common share$1.31 $1.33 $1.14 $1.08 $(0.73)
Diluted common shares51,093,660 51,069,511 50,794,421 50,573,073 50,416,331 
CONSOLIDATED BALANCE SHEET DATA
Total assets$35,228,542 $40,054,433 $37,726,096 $38,432,872 $36,613,127 
LHI15,168,565 15,399,174 15,351,451 15,789,958 16,552,203 
LHI, mortgage finance8,772,799 9,009,081 9,079,409 9,378,104 8,972,626 
LHS63,747 176,286 283,165 648,009 454,581 
Liquidity assets(1)
6,768,650 11,212,276 9,032,807 10,461,544 9,540,044 
Investment securities3,798,275 3,443,058 3,196,970 1,367,313 234,969 
Demand deposits14,228,038 15,174,642 12,740,947 12,339,212 10,835,911 
Total deposits28,839,563 33,391,970 30,996,589 31,959,487 30,187,695 
Other borrowings2,014,481 2,515,587 3,111,751 2,908,183 2,895,790 
Long-term debt927,386 664,968 395,896 395,806 395,715 
Stockholders’ equity3,114,957 3,159,482 2,871,224 2,800,404 2,734,755 
End of period shares outstanding50,592,201 50,557,767 50,470,450 50,455,552 50,435,672 
Book value$55.64 $53.59 $53.92 $52.53 $51.25 
Tangible book value(2)
$55.29 $53.24 $53.57 $52.18 $50.89 
SELECTED FINANCIAL RATIOS
Net interest margin2.10 %2.09 %2.32 %2.22 %2.30 %
Return on average assets0.76 %0.73 %0.61 %0.59 %(0.36)%
Return on average common equity9.74 %10.08 %8.50 %8.24 %(5.48)%
Non-interest income to average earning assets0.32 %0.41 %0.44 %0.64 %0.77 %
Efficiency ratio(3)
65.6 %62.9 %56.7 %61.9 %79.3 %
Non-interest expense to average earning assets1.59 %1.57 %1.56 %1.76 %2.43 %
Tangible common equity to total tangible assets(4)
7.9 %6.7 %7.2 %6.9 %7.0 %
Common Equity Tier 110.5 %10.2 %9.4 %9.1 %8.8 %
Tier 1 capital12.1 %12.2 %10.3 %9.9 %9.7 %
Total capital14.8 %14.0 %12.1 %11.8 %11.6 %
Leverage8.4 %8.3 %7.5 %7.6 %7.5 %
(1)    Liquidity assets include Federal funds sold and interest-bearing deposits in other banks.
(2)    Stockholders’ equity excluding preferred stock, less goodwill and intangibles, divided by shares outstanding at period end.
(3)    Non-interest expense divided by the sum of net interest income and non-interest income.
(4)    Stockholders’ equity excluding preferred stock, less goodwill and intangibles, divided by total assets, less goodwill and intangibles.
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TEXAS CAPITAL BANCSHARES, INC.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(dollars in thousands)
June 30, 2021June 30, 2020%
Change
Assets
Cash and due from banks$202,549 $176,540 15 %
Interest-bearing deposits6,768,650 9,490,044 (29)%
Federal funds sold and securities purchased under resale agreements— 50,000 (100)%
Securities, available-for-sale3,798,275 234,969 N/M
LHS, at fair value63,747 454,581 (86)%
LHI, mortgage finance8,772,799 8,972,626 (2)%
LHI (net of unearned income)15,168,565 16,552,203 (8)%
Less: Allowance for credit losses on loans221,511 264,722 (16)%
LHI, net23,719,853 25,260,107 (6)%
Mortgage servicing rights, net1,316 75,451 (98)%
Premises and equipment, net21,969 28,603 (23)%
Accrued interest receivable and other assets634,719 824,963 (23)%
Goodwill and intangibles, net17,464 17,869 (2)%
Total assets$35,228,542 $36,613,127 (4)%
Liabilities and Stockholders’ Equity
Liabilities:
Deposits:
Non-interest bearing$14,228,038 $10,835,911 31 %
Interest bearing14,611,525 19,351,784 (24)%
Total deposits28,839,563 30,187,695 (4)%
Accrued interest payable8,116 20,314 (60)%
Other liabilities324,039 378,858 (14)%
Federal funds purchased and repurchase agreements14,481 195,790 (93)%
Other borrowings2,000,000 2,700,000 (26)%
Long-term debt927,386 395,715 134 %
Total liabilities32,113,585 33,878,372 (5)%
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 June 30, 2021 and 2020, respectively300,000 150,000 100 %
Common stock, $.01 par value:
Authorized shares - 100,000,000
Issued shares - 50,592,618 and 50,436,089 at June 30, 2021 and 2020, respectively506 504 — %
Additional paid-in capital992,469 983,144 1 %
Retained earnings1,848,379 1,600,639 15 %
Treasury stock (shares at cost: 417 at June 30, 2021 and 2020)(8)(8)— %
Accumulated other comprehensive income/(loss), net of taxes(26,389)476 N/M
Total stockholders’ equity3,114,957 2,734,755 14 %
Total liabilities and stockholders’ equity$35,228,542 $36,613,127 (4)%
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TEXAS CAPITAL BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(dollars in thousands except per share data)
Three Months Ended June 30,Six Months Ended June 30,
2021202020212020
Interest income
Interest and fees on loans$210,611 $247,595 $426,203 $531,220 
Investment securities10,918 2,024 20,805 4,207 
Federal funds sold and securities purchased under resale agreements— 77 1 691 
Interest-bearing deposits in other banks2,961 2,314 5,893 21,900 
Total interest income224,490 252,010 452,902 558,018 
Interest expense
Deposits16,271 32,294 36,275 94,468 
Federal funds purchased51 176 126 845 
Other borrowings451 4,569 2,968 14,151 
Long-term debt10,723 5,043 16,466 10,307 
Total interest expense27,496 42,082 55,835 119,771 
Net interest income196,994 209,928 397,067 438,247 
Provision for credit losses(19,000)100,000 (25,000)196,000 
Net interest income after provision for credit losses215,994 109,928 422,067 242,247 
Non-interest income
Service charges on deposit accounts4,634 2,459 9,350 5,752 
Wealth management and trust fee income3,143 2,348 5,998 4,815 
Brokered loan fees6,933 10,764 16,244 18,779 
Servicing income5,935 6,120 14,944 10,866 
Swap fees534 1,468 1,060 4,225 
Net gain/(loss) on sale of LHS(3,070)39,023 2,502 26,023 
Other11,993 8,303 19,096 11,805 
Total non-interest income30,102 70,485 69,194 82,265 
Non-interest expense
Salaries and employee benefits86,830 100,791 174,352 177,984 
Net occupancy expense7,865 9,134 16,139 17,846 
Marketing1,900 7,988 3,597 16,510 
Legal and professional9,147 11,330 17,424 28,796 
Communications and technology14,352 42,760 30,321 56,551 
FDIC insurance assessment5,226 7,140 11,839 12,989 
Servicing-related expenses12,355 20,100 25,344 36,454 
Merger-related expenses— 10,486 — 17,756 
Other11,385 12,606 20,360 22,866 
Total non-interest expense149,060 222,335 299,376 387,752 
Income/(loss) before income taxes97,036 (41,922)191,885 (63,240)
Income tax expense/(benefit)23,555 (7,606)46,466 (12,237)
Net income/(loss)73,481 (34,316)145,419 (51,003)
Preferred stock dividends6,317 2,437 10,096 4,875 
Net income/(loss) available to common stockholders$67,164 $(36,753)$135,323 $(55,878)
Basic earnings/(loss) per common share$1.33 $(0.73)$2.68 $(1.11)
Diluted earnings/(loss) per common share$1.31 $(0.73)$2.65 $(1.11)

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TEXAS CAPITAL BANCSHARES, INC.
SUMMARY OF CREDIT LOSS EXPERIENCE
(dollars in thousands)
2nd Quarter1st Quarter4th Quarter3rd Quarter2nd Quarter
20212021202020202020
Allowance for credit losses on loans:
Beginning balance$242,484 $254,615 $290,165 $264,722 $240,958 
Loans charged-off:
Commercial1,412 2,451 37,984 2,436 12,287 
Energy686 5,732 33,283 141 62,368 
Real estate1,192 — 180 — — 
Total charge-offs3,290 8,183 71,447 2,577 74,655 
Recoveries:
Commercial308 1,050 394 113 513 
Energy609 715 5,696 880 — 
Total recoveries917 1,765 6,090 993 513 
Net charge-offs2,373 6,418 65,357 1,584 74,142 
Provision for credit losses on loans(18,600)(5,713)29,807 27,027 97,906 
Ending balance$221,511 $242,484 $254,615 $290,165 $264,722 
Allowance for off-balance sheet credit losses:
Beginning balance$17,147 $17,434 $15,241 $12,268 $10,174 
Provision for off-balance sheet credit losses(400)(287)2,193 2,973 2,094 
Ending balance$16,747 $17,147 $17,434 $15,241 $12,268 
Total allowance for credit losses$238,258 $259,631 $272,049 $305,406 $276,990 
Total provision for credit losses$(19,000)$(6,000)$32,000 $30,000 $100,000 
Allowance for credit losses on loans to LHI0.93 %0.99 %1.04 %1.15 %1.04 %
Allowance for credit losses on loans to average LHI0.98 %1.03 %1.01 %1.14 %1.03 %
Net charge-offs to average LHI(1)
0.04 %0.11 %1.03 %0.02 %1.16 %
Net charge-offs to average LHI for last twelve months(1)
0.31 %0.59 %0.80 %0.59 %0.73 %
Total provision for credit losses to average LHI(1)
(0.34)%(0.10)%0.51 %0.47 %1.57 %
Total allowance for credit losses to LHI
1.00 %1.06 %1.11 %1.21 %1.09 %
(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)
2nd Quarter1st Quarter4th Quarter3rd Quarter2nd Quarter
20212021202020202020
Non-performing assets (NPAs):
Non-accrual loans$86,636 $97,730 $121,989 $161,946 $174,031 
Other real estate owned (OREO)— — — — — 
Total LHI NPAs$86,636 $97,730 $121,989 $161,946 $174,031 
Non-accrual loans to LHI0.36 %0.40 %0.50 %0.64 %0.68 %
Total LHI NPAs to LHI plus OREO0.36 %0.40 %0.50 %0.64 %0.68 %
Total LHI NPAs to earning assets0.25 %0.25 %0.33 %0.43 %0.49 %
Allowance for credit losses on loans to non-accrual loans2.6x2.5x2.1x1.8x1.5x
LHI past due 90 days and still accruing(1)
$7,671 $6,187 $12,541 $15,896 $21,079 
LHI past due 90 days to LHI0.03 %0.03 %0.05 %0.06 %0.08 %
LHS non-accrual(2)
$— $— $6,966 $— $— 
LHS past due 90 days and still accruing(3)
$2,695 $16,359 $16,667 $15,631 $10,152 
(1)At June 30, 2021, loans past due 90 days and still accruing includes premium finance loans of $3.0 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.
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TEXAS CAPITAL BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(dollars in thousands)
2nd Quarter1st Quarter4th Quarter3rd Quarter2nd Quarter
20212021202020202020
Interest income
Interest and fees on loans$210,611 $215,592 $242,776 $237,179 $247,595 
Investment securities10,918 9,887 9,594 3,674 2,024 
Federal funds sold and securities purchased under resale agreements— 1 1 1 77 
Interest-bearing deposits in other banks2,961 2,932 2,792 2,877 2,314 
Total interest income224,490 228,412 255,163 243,731 252,010 
Interest expense
Deposits16,271 20,004 23,819 27,830 32,294 
Federal funds purchased51 75 110 128 176 
Other borrowings451 2,517 3,407 3,365 4,569 
Long-term debt10,723 5,743 4,817 4,839 5,043 
Total interest expense27,496 28,339 32,153 36,162 42,082 
Net interest income196,994 200,073 223,010 207,569 209,928 
Provision for credit losses(19,000)(6,000)32,000 30,000 100,000 
Net interest income after provision for credit losses215,994 206,073 191,010 177,569 109,928 
Non-interest income
Service charges on deposit accounts4,634 4,716 3,004 2,864 2,459 
Wealth management and trust fee income3,143 2,855 2,681 2,502 2,348 
Brokered loan fees6,933 9,311 12,610 15,034 10,764 
Servicing income5,935 9,009 8,834 7,329 6,120 
Swap fees534 526 473 484 1,468 
Net gain/(loss) on sale of LHS(3,070)5,572 6,761 25,242 39,023 
Other11,993 7,103 8,500 6,893 8,303 
Total non-interest income30,102 39,092 42,863 60,348 70,485 
Non-interest expense
Salaries and employee benefits86,830 87,522 78,449 84,096 100,791 
Net occupancy expense7,865 8,274 8,373 8,736 9,134 
Marketing1,900 1,697 3,435 3,636 7,988 
Legal and professional9,147 8,277 12,129 11,207 11,330 
Communications and technology14,352 15,969 15,405 31,098 42,760 
FDIC insurance assessment5,226 6,613 6,592 6,374 7,140 
Servicing-related expenses12,355 12,989 15,844 12,287 20,100 
Merger-related expenses— — — — 10,486 
Other 11,385 8,975 10,636 8,307 12,606 
Total non-interest expense149,060 150,316 150,863 165,741 222,335 
Income/(loss) before income taxes97,036 94,849 83,010 72,176 (41,922)
Income tax expense/(benefit)23,555 22,911 22,834 15,060 (7,606)
Net income/(loss)73,481 71,938 60,176 57,116 (34,316)
Preferred stock dividends6,317 3,779 2,437 2,438 2,437 
Net income/(loss) available to common shareholders$67,164 $68,159 $57,739 $54,678 $(36,753)

9

TEXAS CAPITAL BANCSHARES, INC.
QUARTERLY FINANCIAL SUMMARY - UNAUDITED
Consolidated Daily Average Balances, Average Yields and Rates
(dollars in thousands)
2nd Quarter 20211st Quarter 20214th Quarter 20203rd Quarter 20202nd Quarter 2020
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$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 %$38,829 $185 1.92 %
Investment securities - non-taxable(2)
181,574 2,147 4.74 %196,785 2,247 4.63 %200,781 2,337 4.63 %190,797 2,239 4.67 %195,806 2,327 4.78 %
Federal funds sold and securities purchased under resale agreements713 — 0.18 %4,605 1 0.07 %1,709 1 0.13 %12,051 1 0.04 %245,434 77 0.13 %
Interest-bearing deposits in other banks11,583,046 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 %10,521,240 2,314 0.09 %
LHS, at fair value93,164 781 3.36 %243,326 1,595 2.66 %410,637 2,475 2.40 %543,606 3,867 2.83 %380,624 2,547 2.69 %
LHI, mortgage finance loans7,462,223 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 %8,676,521 74,518 3.45 %
LHI(1)(2)
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 %17,015,041 170,970 4.04 %
Less allowance for credit
       losses on loans
241,676 — — 254,697 — — 290,189 — — 264,769 — — 236,823 — — 
LHI, net of allowance22,463,522 209,916 3.75 %23,380,950 214,138 3.71 %24,880,340 240,656 3.85 %25,083,251 233,694 3.71 %25,454,739 245,488 3.88 %
Total earning assets37,683,715 225,027 2.40 %38,892,394 229,025 2.39 %38,439,496 256,009 2.65 %37,383,816 244,583 2.60 %36,836,672 252,938 2.76 %
Cash and other assets996,946 1,064,679 1,031,195 1,037,760 1,075,864 
Total assets$38,680,661 $39,957,073 $39,470,691 $38,421,576 $37,912,536 
Liabilities and Stockholders’ Equity
Transaction deposits$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 %$3,923,966 $5,998 0.61 %
Savings deposits11,296,382 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 %12,537,467 13,510 0.43 %
Time deposits1,755,993 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 %3,434,388 12,786 1.50 %
Total interest bearing deposits16,847,527 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 %19,895,821 32,294 0.65 %
Other borrowings2,349,718 502 0.09 %2,686,398 2,592 0.39 %3,022,077 3,517 0.46 %2,811,435 3,493 0.49 %3,612,263 4,745 0.53 %
Long-term debt881,309 10,723 4.88 %464,731 5,743 5.01 %395,841 4,817 4.84 %395,749 4,839 4.87 %395,658 5,043 5.13 %
Total interest bearing liabilities20,078,554 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 %23,903,742 42,082 0.71 %
Demand deposits15,139,546 14,421,505 13,174,114 12,202,065 10,865,896 
Other liabilities274,401 309,644 303,480 314,500 293,698 
Stockholders’ equity3,188,160 2,988,613 2,853,298 2,791,451 2,849,200 
Total liabilities and stockholders’ equity$38,680,661 $39,957,073 $39,470,691 $38,421,576 $37,912,536 
Net interest income(2)
$197,531 $200,686 $223,856 $208,421 $210,856 
Net interest margin2.10 %2.09 %2.32 %2.22 %2.30 %
(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