Texas Capital Bancshares, Inc. Announces Operating Results for Q4 and Full Year 2020

Source: Nasdaq GlobeNewswire / 21 Jan 2021 15:03:01 America/Chicago

DALLAS, Jan. 21, 2021 (GLOBE NEWSWIRE) -- 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)	2020			2019			% 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 shares	50,583			50,419			—	%
ROA	0.18		%	1.01		%
ROE	2.10		%	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 shares	50,794			50,462			1	%
ROA	0.61		%	0.74		%
ROE	8.50		%	9.26		%
BALANCE SHEET
Loans held for sale ("LHS")	$	283,165		$	2,577,134		(89	)%
LHI, mortgage finance	9,079,409			8,169,849			11	%
LHI	15,351,451			16,476,413			(7	)%
Total LHI	24,430,860			24,646,262			(1	)%
Total assets	37,726,096			32,548,069			16	%
Demand deposits	12,740,947			9,438,459			35	%
Total deposits	30,996,589			26,478,593			17	%
Stockholders’ equity	2,871,224			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 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.


TEXAS CAPITAL BANCSHARES, INC.
SELECTED FINANCIAL HIGHLIGHTS (UNAUDITED)
(dollars in thousands except per share data)
		4th Quarter			3rd Quarter			2nd Quarter			1st Quarter			4th Quarter
		2020			2020			2020			2020			2019
CONSOLIDATED STATEMENTS OF INCOME
Interest income		$	255,163		$	243,731		$	252,010		$	306,008		$	337,757
Interest expense		32,153			36,162			42,082			77,689			89,372
Net interest income		223,010			207,569			209,928			228,319			248,385
Provision for credit losses		32,000			30,000			100,000			96,000			17,000
Net interest income after provision for credit losses		191,010			177,569			109,928			132,319			231,385
Non-interest income		42,886			60,348			70,502			11,780			17,761
Non-interest expense		150,886			165,741			222,352			165,417			168,187
Income/(loss) before income taxes		83,010			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 dividends		2,437			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 shares		50,794,421			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
LHI		15,351,451			15,789,958			16,552,203			16,857,579			16,476,413
LHI, mortgage finance		9,079,409			9,378,104			8,972,626			7,588,803			8,169,849
LHS		283,165			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 securities		3,196,970			1,367,313			234,969			228,784			239,871
Demand deposits		12,740,947			12,339,212			10,835,911			9,420,303			9,438,459
Total deposits		30,996,589			31,959,487			30,187,695			27,134,263			26,478,593
Other borrowings		3,111,751			2,908,183			2,895,790			5,195,267			2,541,766
Subordinated notes		282,490			282,400			282,309			282,219			282,129
Long-term debt		113,406			113,406			113,406			113,406			113,406
Stockholders’ equity		2,871,224			2,800,404			2,734,755			2,772,596			2,801,321

End of period shares outstanding		50,470,450			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 margin		2.32		%	2.22		%	2.30		%	2.78		%	2.95		%
Return on average assets		0.61		%	0.59		%	(0.36		)%	(0.20		)%	0.74		%
Return on average common equity		8.50		%	8.24		%	(5.48		)%	(2.85		)%	9.26		%
Non-interest income to average earning assets		0.44		%	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 assets		1.56		%	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 1		9.4		%	9.1		%	8.8		%	9.3		%	8.9		%
Tier 1 capital		10.3		%	9.9		%	9.7		%	10.2		%	9.7		%
Total capital		12.1		%	11.8		%	11.6		%	12.0		%	11.4		%
Leverage		7.5		%	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.


TEXAS CAPITAL BANCSHARES, INC.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(dollars in thousands)
	December 31, 2020			December 31, 2019			% Change
Assets
Cash and due from banks	$	173,573		$	161,817		7	%
Interest-bearing deposits	9,032,807			4,233,766			113	%
Federal funds sold and securities purchased under resale agreements	—			30,000			(100	)%
Securities, available-for-sale	3,196,970			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 finance	9,079,409			8,169,849			11	%
LHI (net of unearned income)	15,351,451			16,476,413			(7	)%
Less: Allowance for credit losses on loans	254,615			195,047			31	%
LHI, net	24,176,245			24,451,215			(1	)%
Mortgage servicing rights, net	105,424			64,904			62	%
Premises and equipment, net	24,546			31,212			(21	)%
Accrued interest receivable and other assets	715,699			740,051			(3	)%
Goodwill and intangibles, net	17,667			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 bearing	18,255,642			17,040,134			7	%
Total deposits	30,996,589			26,478,593			17	%

Accrued interest payable	11,150			12,760			(13	)%
Other liabilities	339,486			318,094			7	%
Federal funds purchased and repurchase agreements	111,751			141,766			(21	)%
Other borrowings	3,000,000			2,400,000			25	%
Subordinated notes, net	282,490			282,129			—	%
Trust preferred subordinated debentures	113,406			113,406			—	%
Total liabilities	34,854,872			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 2019	150,000			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, respectively	504			503			—	%
Additional paid-in capital	991,898			978,205			1	%
Retained earnings	1,713,056			1,663,671			3	%
Treasury stock (shares at cost: 417 at December 31, 2020 and 2019)	(8		)	(8		)	—	%
Accumulated other comprehensive income, net of taxes	15,774			8,950			N/M
Total stockholders’ equity	2,871,224			2,801,321			2	%
Total liabilities and stockholders’ equity	$	37,726,096		$	32,548,069		16	%

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,
	2020		2019			2020		2019
Interest income
Interest and fees on loans	$	242,776	$	312,147		$	1,011,175	$	1,284,036
Investment securities	9,594		2,618			17,475		8,654
Federal funds sold and securities purchased under resale agreements	1		439			693		1,529
Interest-bearing deposits in other banks	2,792		22,553			27,569		71,093
Total interest income	255,163		337,757			1,056,912		1,365,312
Interest expense
Deposits	23,819		70,987			146,117		293,537
Federal funds purchased	110		1,319			1,083		11,872
Other borrowings	3,407		11,712			20,923		58,393
Subordinated notes	4,191		4,191			16,764		16,764
Trust preferred subordinated debentures	626		1,163			3,199		5,026
Total interest expense	32,153		89,372			188,086		385,592
Net interest income	223,010		248,385			868,826		979,720
Provision for credit losses	32,000		17,000			258,000		75,000
Net interest income after provision for credit losses	191,010		231,385			610,826		904,720
Non-interest income
Service charges on deposit accounts	3,004		2,785			11,620		11,320
Wealth management and trust fee income	2,681		2,342			9,998		8,810
Brokered loan fees	12,610		8,645			46,423		29,738
Servicing income	8,834		4,030			27,029		13,439
Swap fees	473		1,559			5,182		4,387
Net gain/(loss) on sale of LHS	6,761		(7,757		)	58,026		(20,259		)
Other	8,523		6,157			27,238		45,005
Total non-interest income	42,886		17,761			185,516		92,440
Non-interest expense
Salaries and employee benefits	78,449		90,248			340,529		328,483
Net occupancy expense	8,373		9,075			34,955		32,989
Marketing	3,435		12,807			23,581		53,355
Legal and professional	12,129		21,032			52,132		52,460
Communications and technology	15,405		13,801			103,054		44,826
FDIC insurance assessment	6,592		5,613			25,955		20,093
Servicing-related expenses	15,867		2,960			64,625		22,573
Merger-related expenses	—		1,370			17,756		1,370
Other	10,636		11,281			41,809		44,701
Total non-interest expense	150,886		168,187			704,396		600,850
Income before income taxes	83,010		80,959			91,946		396,310
Income tax expense	22,834		16,539			25,657		84,295
Net income	60,176		64,420			66,289		312,015
Preferred stock dividends	2,437		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


TEXAS CAPITAL BANCSHARES, INC.
SUMMARY OF CREDIT LOSS EXPERIENCE
(dollars in thousands)
		4th Quarter			3rd Quarter			2nd Quarter			1st Quarter			4th Quarter
		2020			2020			2020			2020			2019
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:
Commercial		37,984			2,436			12,287			20,653			13,968
Energy		33,283			141			62,368			37,730			797
Real estate		180			—			—			—			—
Total charge-offs		71,447			2,577			74,655			58,383			14,765
Recoveries:
Commercial		394			113			513			257			1,754
Energy		5,696			880			—			423			209
Total recoveries		6,090			993			513			680			1,963
Net charge-offs		65,357			1,584			74,142			57,703			12,802
Provision for credit losses on loans		29,807			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 losses		2,193			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 LHI		1.04		%	1.15		%	1.04		%	0.99		%	0.79		%
Allowance for credit losses on loans to average LHI		1.01		%	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.


TEXAS CAPITAL BANCSHARES, INC.
SUMMARY OF NON-PERFORMING ASSETS AND PAST DUE LOANS
(dollars in thousands)
		4th Quarter			3rd Quarter			2nd Quarter			1st Quarter			4th Quarter
		2020			2020			2020			2020			2019

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 LHI		0.50		%	0.64		%	0.68		%	0.90		%	0.91		%
Total LHI NPAs to LHI plus OREO		0.50		%	0.64		%	0.68		%	0.90		%	0.91		%
Total LHI NPAs to earning assets		0.33		%	0.43		%	0.49		%	0.63		%	0.71		%
Allowance for credit losses on loans to non-accrual loans			2.1x			1.8x			1.5x			1.1x			.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 LHI		0.05		%	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.


TEXAS CAPITAL BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(dollars in thousands)

	4th Quarter		3rd Quarter		2nd Quarter			1st Quarter			4th Quarter
	2020		2020		2020			2020			2019
Interest income
Interest and fees on loans	$	242,776	$	237,179	$	247,595		$	283,625		$	312,147
Investment securities	9,594		3,674		2,024			2,183			2,618
Federal funds sold and securities purchased under resale agreements	1		1		77			614			439
Interest-bearing deposits in other banks	2,792		2,877		2,314			19,586			22,553
Total interest income	255,163		243,731		252,010			306,008			337,757
Interest expense
Deposits	23,819		27,830		32,294			62,174			70,987
Federal funds purchased	110		128		176			669			1,319
Other borrowings	3,407		3,365		4,569			9,582			11,712
Subordinated notes	4,191		4,191		4,191			4,191			4,191
Trust preferred subordinated debentures	626		648		852			1,073			1,163
Total interest expense	32,153		36,162		42,082			77,689			89,372
Net interest income	223,010		207,569		209,928			228,319			248,385
Provision for credit losses	32,000		30,000		100,000			96,000			17,000
Net interest income after provision for credit losses	191,010		177,569		109,928			132,319			231,385
Non-interest income
Service charges on deposit accounts	3,004		2,864		2,459			3,293			2,785
Wealth management and trust fee income	2,681		2,502		2,348			2,467			2,342
Brokered loan fees	12,610		15,034		10,764			8,015			8,645
Servicing income	8,834		7,329		6,120			4,746			4,030
Swap fees	473		484		1,468			2,757			1,559
Net gain/(loss) on sale of LHS	6,761		25,242		39,023			(13,000		)	(7,757		)
Other	8,523		6,893		8,320			3,502			6,157
Total non-interest income	42,886		60,348		70,502			11,780			17,761
Non-interest expense
Salaries and employee benefits	78,449		84,096		100,791			77,193			90,248
Net occupancy expense	8,373		8,736		9,134			8,712			9,075
Marketing	3,435		3,636		7,988			8,522			12,807
Legal and professional	12,129		11,207		11,330			17,466			21,032
Communications and technology	15,405		31,098		42,760			13,791			13,801
FDIC insurance assessment	6,592		6,374		7,140			5,849			5,613
Servicing-related expenses	15,867		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 expense	150,886		165,741		222,352			165,417			168,187
Income/(loss) before income taxes	83,010		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 dividends	2,437		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


TEXAS CAPITAL BANCSHARES, INC.
CONSOLIDATED DAILY AVERAGE BALANCES, AVERAGE YIELDS AND RATES - UNAUDITED
(dollars in thousands)

		4th Quarter 2020						3rd Quarter 2020						2nd Quarter 2020						1st Quarter 2020						4th 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 agreements		1,709		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 banks		10,808,548		2,792		0.10	%	11,028,962		2,877		0.10	%	10,521,240		2,314		0.09	%	6,225,948		19,586		1.27	%	5,387,000		22,553		1.66	%
LHS, at fair value		410,637		2,475		2.40	%	543,606		3,867		2.83	%	380,624		2,547		2.69	%	3,136,381		27,480		3.52	%	3,567,836		33,411		3.72	%
LHI, mortgage finance loans		9,550,119		78,906		3.29	%	9,061,984		76,464		3.36	%	8,676,521		74,518		3.45	%	7,054,682		55,324		3.15	%	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 allowance		24,880,340		240,656		3.85	%	25,083,251		233,694		3.71	%	25,454,739		245,488		3.88	%	23,451,620		257,105		4.41	%	24,348,794		279,800		4.56	%
Total earning assets		38,439,496		256,009		2.65	%	37,383,816		244,583		2.60	%	36,836,672		252,938		2.76	%	33,252,053		307,476		3.72	%	33,644,445		339,333		4.00	%
Cash and other assets		1,031,195						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 deposits		12,982,189		12,671		0.39	%	12,786,719		12,808		0.40	%	12,537,467		13,510		0.43	%	11,069,429		35,961		1.31	%	11,111,326		40,603		1.45	%
Time deposits		2,355,199		4,544		0.77	%	2,844,083		8,370		1.17	%	3,434,388		12,786		1.50	%	2,842,535		12,631		1.79	%	2,453,655		13,956		2.26	%
Total interest bearing deposits		19,721,881		23,819		0.48	%	19,906,376		27,830		0.56	%	19,895,821		32,294		0.65	%	17,685,031		62,174		1.41	%	17,382,275		70,987		1.62	%
Other borrowings		3,022,077		3,517		0.46	%	2,811,435		3,493		0.49	%	3,612,263		4,745		0.53	%	3,020,255		10,251		1.37	%	2,822,465		13,031		1.83	%
Subordinated notes		282,435		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 debentures		113,406		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 liabilities		23,139,799		32,153		0.55	%	23,113,560		36,162		0.62	%	23,903,742		42,082		0.71	%	21,100,857		77,689		1.48	%	20,600,220		89,372		1.72	%
Demand deposits		13,174,114						12,202,065						10,865,896						10,003,495						10,933,887
Other liabilities		303,480						314,500						293,698						270,868						278,964
Stockholders’ equity		2,853,298						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 margin						2.32	%					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.

INVESTOR CONTACT
Julie Anderson, 214.932.6773
julie.anderson@texascapitalbank.com

MEDIA CONTACT
Shannon Wherry, 469.399.8527
shannon.wherry@texascapitalbank.com

Texas Capital Bancshares, Inc. Announces Operating Results for Q4 and Full Year 2020

Set Language