DALLAS, Oct. 21, 2020 (GLOBE NEWSWIRE) -- Texas Capital Bancshares, Inc. (NASDAQ: TCBI), the parent company of Texas Capital Bank, announced operating results for the third quarter of 2020.

"We are pleased to report significantly improved operating results for the third quarter," said Larry Helm, Executive Chairman and CEO. "As we continue to navigate these unprecedented times I would like to thank our employees for their dedication to serving our clients and communities. We believe the actions we took during the second quarter have resulted in improvements to core operating results that will continue to serve us well as we plan for the future, and we remain committed to managing credit and taking care of our employees and clients, while continuing to recruit and develop top frontline talent and build shareholder value."

• Net income of $57.1 million ($1.08 per share) reported for the third quarter of 2020, an increase of $91.4 million on a linked quarter basis and a decrease of $31.0 million from the third quarter of 2019.
• Total mortgage finance loans, including mortgage correspondent aggregation ("MCA") loans held for sale ("LHS"), increased 6% on a linked quarter basis (increasing 6% on an average basis) and decreased 6% from the third quarter of 2019 (decreasing 10% on an average basis).
• Demand deposits increased 14% and total deposits increased 6% on a linked quarter basis (increasing 12% and 4%, respectively, on an average basis), and increased 20% and 17%, respectively, from the third quarter of 2019 (increasing 22% and 21%, respectively, on an average basis).
• Loans held for investment ("LHI"), excluding mortgage finance loans, decreased 5% on a linked quarter basis (decreasing 4% on an average basis) and decreased 6% from the third quarter of 2019 (decreasing 4% on an average basis).

FINANCIAL SUMMARY

(Dollars and shares in thousands)	Q3 2020				Q3 2019				% Change
QUARTERLY OPERATING RESULTS
Net income	$	57,116			$	88,082			(35	)%
Net income available to common stockholders	$	54,678			$	85,644			(36	)%
Diluted earnings per common share	$	1.08			$	1.70			(36	)%
Diluted common shares	50,573				50,416				—	%
ROA	0.59		%		1.06		%
ROE	8.24		%		13.21		%
BALANCE SHEET
LHS	$	648,009			$	2,674,225			(76	)%
LHI, mortgage finance	9,378,104				7,951,432				18	%
LHI	15,789,958				16,772,824				(6	)%
Total LHI	25,168,062				24,724,256				2	%
Total assets	38,432,872				33,526,437				15	%
Demand deposits	12,339,212				10,289,572				20	%
Total deposits	31,959,487				27,413,303				17	%
Stockholders’ equity	2,800,404				2,735,993				2	%

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DETAILED FINANCIALS

For the third quarter of 2020, net income was $57.1 million, compared to a net loss of $34.3 million for the second quarter of 2020, and net income of $88.1 million for the third quarter of 2019. On a fully diluted basis, earnings per common share were $1.08 for the quarter ended September 30, 2020, compared to a loss per common share of $0.73 for the quarter ended June 30, 2020 and earnings per common share of $1.70 for the quarter ended September 30, 2019. The increase in net income for the third quarter of 2020 as compared to the second quarter of 2020 resulted primarily from a $70.0 million decrease in the provision for credit losses, as well as a $56.6 million decrease in non-interest expense, driven by significant non-recurring expenses incurred in the second quarter of 2020, as described below.

We recorded a $30.0 million provision for credit losses for the third quarter of 2020 utilizing the Current Expected Credit Loss ("CECL") methodology adopted in the first quarter of 2020, compared to $100.0 million for the second quarter of 2020 and $11.0 million for the third quarter of 2019. The linked quarter decrease in provision for credit losses resulted primarily from a decrease in charge-offs. We recorded $1.6 million in net charge-offs during the third quarter of 2020, compared to $74.1 million during the second quarter of 2020 and $36.9 million during the third quarter of 2019. Criticized loans totaled $1.1 billion at September 30, 2020, compared to $1.0 billion at June 30, 2020 and $536.4 million at September 30, 2019. Criticized loan levels remain elevated 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 $161.9 million at September 30, 2020, a decrease of $12.1 million compared to the second quarter of 2020 and an increase of $41.3 million compared to the third quarter of 2019. Non-accrual energy loans totaled $73.8 million (46% of total NPAs) at September 30, 2020, compared to $103.9 million (60% of total NPAs) at June 30, 2020. Non-accrual leveraged lending loans totaled $31.3 million (19% of total NPAs) at September 30, 2020, compared to $39.1 million (22% of total NPAs) at June 30, 2020. The ratio of NPAs to total LHI plus other real estate owned ("OREO") for the third quarter of 2020 was 0.64%, compared to 0.68% for the second quarter of 2020 and 0.49% for the third quarter of 2019.

Net interest income was $207.6 million for the third quarter of 2020, compared to $209.9 million for the second quarter of 2020 and $252.2 million for the third quarter of 2019. Net interest margin for the third quarter of 2020 was 2.22%, a decrease of 8 basis points from the second quarter of 2020 and a decrease of 94 basis points from the third 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, decreased 20 basis points from the second quarter of 2020, and decreased 169 basis points compared to the third quarter of 2019. LHI, mortgage finance yields for the third quarter of 2020 decreased 9 basis points compared to the second quarter of 2020, and were unchanged compared to the third quarter of 2019. Additionally, total cost of deposits for the third quarter of 2020 decreased 8 basis points to 0.34% compared to 0.42% for the second quarter of 2020, and decreased 87 basis points from 1.21% for the third quarter of 2019.

Non-interest income decreased $10.2 million, or 14%, during the third quarter of 2020 compared to the second quarter of 2020, and increased $40.0 million, or 197%, compared to the third quarter of 2019. The linked quarter decrease was primarily related to a decrease in net gain/(loss) on sale of LHS, partially offset by an increase in brokered loans fees. The year-over-year increase was primarily related to an increase in net gain/(loss) on sale of LHS and an increase in brokered loan fees. The linked quarter and year-over-year increases in brokered loan fees were due to an increase in total mortgage finance volumes in the third quarter of 2020. The year-over-year increase in net gain/(loss) on sale of LHS was due to lower hedge costs in the third 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.

Non-interest expense for the third quarter of 2020 decreased $56.6 million, or 25%, compared to the second quarter of 2020, and increased $16.3 million, or 11%, compared to the third quarter of 2019. The linked quarter decrease was primarily related to decreases in salaries and employee benefits, communications and technology expense, servicing-related expenses and merger-related expenses. The year-over-year increase was primarily due to an increase in communications and technology expense, partially offset by a decrease in marketing expense. The linked quarter decrease in salaries and employee benefits and communication and technology expense was primarily due to non-recurring severance accruals and software expenses recorded in the second quarter of 2020. We wrote-off an additional $15.4 million in software assets during the third quarter of 2020, which contributed to the year-over-year increase in communications and technology expense. The full impact on salaries and employee benefits expense from the reduction in workforce and on software amortization expense from the software write-offs in the second and third quarters of 2020 is expected to be realized in non-interest expense in the first half of 2021, with meaningful reductions in run-rate occurring in the fourth quarter of 2020. Further software write-offs are not expected in the fourth quarter of 2020. The linked-quarter decrease in servicing-related expense was primarily due to a decrease in MSR impairment expense reflecting market conditions and our hedging program.

All regulatory ratios continue to be in excess of "well-capitalized" requirements as of September 30, 2020. Our CET 1, tier 1 capital, total capital and leverage ratios were 9.1%, 9.9%, 11.8% and 7.6%, respectively, at September 30, 2020, compared to 8.8%, 9.7%, 11.6% and 7.5%, respectively, at June 30, 2020. At September 30, 2020, our ratio of tangible common equity to total tangible assets was 6.8% compared to 7.0% at June 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 may be deemed to include "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," "projects," "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 risks and uncertainties include, but are not limited to, the credit quality of our loan portfolio, general economic conditions in the United States and in our markets, including the continued impact on our customers from volatility in oil and gas prices, the material risks and uncertainties for the U.S. and world economies, and for our business, resulting from the COVID-19 pandemic, expectations regarding rates of default and credit losses, volatility in the mortgage industry, our business strategies, our expectations about future financial performance, future growth and earnings, the appropriateness of our allowance for credit losses and provision for credit losses, our ability to identify, employ and retain a successor chief executive officer, the impact of changing regulatory requirements and legislative changes on our business, increased competition, interest rate risk, new lines of business, new product or service offerings and new technologies. These and other factors that could cause results to differ materially from those described in the forward-looking statements, as well as a discussion of the risks and uncertainties that may affect our business, can be found in our Annual Report on Form 10-K, our Quarterly Reports on Form 10-Q and in other filings we make with the Securities and Exchange Commission. The information contained in this communication speaks only as of its date. Except to the extent required by applicable law or regulation, we disclaim any obligation to update such factors or to publicly announce the results of any revisions to any of the forward-looking statements included herein to reflect future events or developments.

TEXAS CAPITAL BANCSHARES, INC.
SELECTED FINANCIAL HIGHLIGHTS (UNAUDITED)
(Dollars in thousands except per share data)
	3rd Quarter			2nd Quarter			1st Quarter			4th Quarter			3rd Quarter
	2020			2020			2020			2019			2019
CONSOLIDATED STATEMENTS OF INCOME
Interest income	$	243,731		$	252,010		$	306,008		$	337,757		$	355,101
Interest expense	36,162			42,082			77,689			89,372			102,933
Net interest income	207,569			209,928			228,319			248,385			252,168
Provision for credit losses	30,000			100,000			96,000			17,000			11,000
Net interest income after provision for credit losses	177,569			109,928			132,319			231,385			241,168
Non-interest income	60,348			70,502			11,780			17,761			20,301
Non-interest expense	165,741			222,352			165,417			168,187			149,429
Income/(loss) before income taxes	72,176			(41,922		)	(21,318		)	80,959			112,040
Income tax expense/(benefit)	15,060			(7,606		)	(4,631		)	16,539			23,958
Net income/(loss)	57,116			(34,316		)	(16,687		)	64,420			88,082
Preferred stock dividends	2,438			2,437			2,438			2,437			2,438
Net income/(loss) available to common stockholders	$	54,678		$	(36,753	)	$	(19,125	)	$	61,983		$	85,644
Diluted earnings/(loss) per common share	$	1.08		$	(0.73	)	$	(0.38	)	$	1.23		$	1.70
Diluted common shares	50,573,073			50,416,331			50,474,802			50,461,723			50,416,402
CONSOLIDATED BALANCE SHEET DATA
Total assets	$	38,432,872		$	36,613,127		$	35,879,416		$	32,548,069		$	33,526,437
LHI	15,789,958			16,552,203			16,857,579			16,476,413			16,772,824
LHI, mortgage finance	9,378,104			8,972,626			7,588,803			8,169,849			7,951,432
LHS	648,009			454,581			774,064			2,577,134			2,674,225
Liquidity assets(1)	10,461,544			9,540,044			9,498,189			4,263,766			4,993,185
Investment securities	1,367,313			234,969			228,784			239,871			238,022
Demand deposits	12,339,212			10,835,911			9,420,303			9,438,459			10,289,572
Total deposits	31,959,487			30,187,695			27,134,263			26,478,593			27,413,303
Other borrowings	2,908,183			2,895,790			5,195,267			2,541,766			2,639,967
Subordinated notes	282,400			282,309			282,219			282,129			282,038
Long-term debt	113,406			113,406			113,406			113,406			113,406
Stockholders’ equity	2,800,404			2,734,755			2,772,596			2,801,321			2,735,993
End of period shares outstanding	50,455,552			50,435,672			50,407,778			50,337,741			50,317,654
Book value	$	52.53		$	51.25		$	52.03		$	52.67		$	51.39
Tangible book value(2)	$	52.18		$	50.89		$	51.67		$	52.31		$	51.03
SELECTED FINANCIAL RATIOS
Net interest margin	2.22		%	2.30		%	2.78		%	2.95		%	3.16		%
Return on average assets	0.59		%	(0.36		)%	(0.20		)%	0.74		%	1.06		%
Return on average common equity	8.24		%	(5.48		)%	(2.85		)%	9.26		%	13.21		%
Non-interest income to average earning assets	0.64		%	0.77		%	0.14		%	0.21		%	0.25		%
Efficiency ratio(3)	61.9		%	79.3		%	68.9		%	63.2		%	54.8		%
Efficiency ratio, adjusted(4)	59.8		%	77.5		%	65.8		%	61.4		%	51.3		%
Non-interest expense to average earning assets	1.76		%	2.43		%	2.00		%	1.98		%	1.86		%
Tangible common equity to total tangible assets(5)	6.8		%	7.0		%	7.3		%	8.1		%	7.6		%
Common Equity Tier 1	9.1		%	8.8		%	9.3		%	8.9		%	8.6		%
Tier 1 capital	9.9		%	9.7		%	10.2		%	9.7		%	9.4		%
Total capital	11.8		%	11.6		%	12.0		%	11.4		%	11.0		%
Leverage	7.6		%	7.5		%	8.5		%	8.4		%	8.6		%

(1)     Liquidity assets include Federal funds sold and interest-bearing deposits in other banks.
(2)     Stockholders’ equity excluding preferred stock, less goodwill and intangibles, divided by shares outstanding at period end.
(3)     Non-interest expense divided by the sum of net interest income and non-interest income.
(4)     Non-interest expense, excluding deposit-related marketing fees and servicing related expenses, divided by the sum of net interest income and non-interest income, net of deposit-related marketing fees and servicing related expenses. Deposit-related marketing fees totaled $1.8 million, $1.7 million, $5.2 million, $9.4 million and $11.9 million for the third, second and first quarters of 2020, as well as the fourth and third quarters of 2019, respectively.
(5)     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)
	September 30, 2020			September 30, 2019			% Change
Assets
Cash and due from banks	$	185,242		$	216,085		(14	)%
Interest-bearing deposits	10,461,544			4,968,185			111	%
Federal funds sold and securities purchased under resale agreements	—			25,000			(100	)%
Securities, available-for-sale	1,367,313			238,022			474	%
LHS ($639.0 million and $2,667.2 million at September 30, 2020 and 2019, respectively, at fair value)	648,009			2,674,225			(76	)%
LHI, mortgage finance	9,378,104			7,951,432			18	%
LHI (net of unearned income)	15,789,958			16,772,824			(6	)%
Less: Allowance for credit losses on loans	290,165			190,138			53	%
LHI, net	24,877,897			24,534,118			1	%
Mortgage servicing rights, net	95,323			49,125			94	%
Premises and equipment, net	26,653			32,667			(18	)%
Accrued interest receivable and other assets	753,123			770,793			(2	)%
Goodwill and intangibles, net	17,768			18,217			(2	)%
Total assets	$	38,432,872		$	33,526,437		15	%
Liabilities and Stockholders’ Equity
Liabilities:
Deposits:
Non-interest bearing	$	12,339,212		$	10,289,572		20	%
Interest bearing	19,620,275			17,123,731			15	%
Total deposits	31,959,487			27,413,303			17	%
Accrued interest payable	14,674			34,336			(57	)%
Other liabilities	354,318			307,394			15	%
Federal funds purchased and repurchase agreements	208,183			139,967			49	%
Other borrowings	2,700,000			2,500,000			8	%
Subordinated notes, net	282,400			282,038			—	%
Trust preferred subordinated debentures	113,406			113,406			—	%
Total liabilities	35,632,468			30,790,444			16	%
Stockholders’ equity:
Preferred stock, $.01 par value, $1,000 liquidation value:
Authorized shares - 10,000,000
Issued shares - 6,000,000 shares issued at September 30, 2020 and 2019	150,000			150,000			—	%
Common stock, $.01 par value:
Authorized shares - 100,000,000
Issued shares - 50,455,969 and 50,318,071 at September 30, 2020 and 2019, respectively	504			503			—	%
Additional paid-in capital	987,754			974,799			1	%
Retained earnings	1,655,317			1,601,688			3	%
Treasury stock (shares at cost: 417 at September 30, 2020 and 2019)	(8		)	(8		)	—	%
Accumulated other comprehensive income, net of taxes	6,837			9,011			N/M
Total stockholders’ equity	2,800,404			2,735,993			2	%
Total liabilities and stockholders’ equity	$	38,432,872		$	33,526,437		15	%

TEXAS CAPITAL BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(Dollars in thousands except per share data)
	Three Months Ended September 30,						Nine Months Ended September 30,
	2020			2019			2020			2019
Interest income
Interest and fees on loans	$	237,179		$	329,344		$	768,399		$	971,889
Investment securities	3,674			2,316			7,881			6,036
Federal funds sold and securities purchased under resale agreements	1			554			692			1,090
Interest-bearing deposits in other banks	2,877			22,887			24,777			48,540
Total interest income	243,731			355,101			801,749			1,027,555
Interest expense
Deposits	27,830			80,967			122,298			222,550
Federal funds purchased	128			1,835			973			10,553
Other borrowings	3,365			14,703			17,516			46,681
Subordinated notes	4,191			4,191			12,573			12,573
Trust preferred subordinated debentures	648			1,237			2,573			3,863
Total interest expense	36,162			102,933			155,933			296,220
Net interest income	207,569			252,168			645,816			731,335
Provision for credit losses	30,000			11,000			226,000			58,000
Net interest income after provision for credit losses	177,569			241,168			419,816			673,335
Non-interest income
Service charges on deposit accounts	2,864			2,707			8,616			8,535
Wealth management and trust fee income	2,502			2,330			7,317			6,468
Brokered loan fees	15,034			8,691			33,813			21,093
Servicing income	7,329			3,549			18,195			9,409
Swap fees	484			1,196			4,709			2,828
Net gain/(loss) on sale of LHS	25,242			(6,011		)	51,265			(12,502		)
Other	6,893			7,839			18,715			38,848
Total non-interest income	60,348			20,301			142,630			74,679
Non-interest expense
Salaries and employee benefits	84,096			80,722			262,080			238,235
Net occupancy expense	8,736			8,125			26,582			23,914
Marketing	3,636			14,753			20,146			40,548
Legal and professional	11,207			11,394			40,003			31,428
Communications and technology	31,098			10,805			87,649			31,025
FDIC insurance assessment	6,374			5,220			19,363			14,480
Servicing-related expenses	12,287			8,165			48,758			19,613
Merger-related expenses	—			—			17,756			—
Other	8,307			10,245			31,173			33,420
Total non-interest expense	165,741			149,429			553,510			432,663
Income before income taxes	72,176			112,040			8,936			315,351
Income tax expense	15,060			23,958			2,823			67,756
Net income	57,116			88,082			6,113			247,595
Preferred stock dividends	2,438			2,438			7,313			7,313
Net income/(loss) available to common stockholders	$	54,678		$	85,644		$	(1,200	)	$	240,282
Basic earnings/(loss) per common share	$	1.08		$	1.70		$	(0.02	)	$	4.78
Diluted earnings/(loss) per common share	$	1.08		$	1.70		$	(0.02	)	$	4.77

TEXAS CAPITAL BANCSHARES, INC.
SUMMARY OF CREDIT LOSS EXPERIENCE
(Dollars in thousands)
	3rd Quarter			2nd Quarter			1st Quarter			4th Quarter			3rd Quarter
	2020			2020			2020			2019			2019
Allowance for credit losses on loans:
Beginning balance	$	264,722		$	240,958		$	195,047		$	190,138		$	214,572
Impact of CECL adoption	—			—			8,585			—			—
Loans charged-off:
Commercial	2,436			12,287			20,653			13,968			21,124
Energy	141			62,368			37,730			797			16,655
Total charge-offs	2,577			74,655			58,383			14,765			37,779
Recoveries:
Commercial	113			513			257			1,754			799
Energy	880			—			423			209			107
Total recoveries	993			513			680			1,963			906
Net charge-offs	1,584			74,142			57,703			12,802			36,873
Provision for credit losses on loans	27,027			97,906			95,029			17,711			12,439
Ending balance	$	290,165		$	264,722		$	240,958		$	195,047		$	190,138
Allowance for off-balance sheet credit losses:
Beginning balance	$	12,268		$	10,174		$	8,640		$	9,351		$	10,790
Impact of CECL adoption	—			—			563			—			—
Provision for off-balance sheet credit losses	2,973			2,094			971			(711		)	(1,439		)
Ending balance	$	15,241		$	12,268		$	10,174		$	8,640		$	9,351
Total allowance for credit losses	$	305,406		$	276,990		$	251,132		$	203,687		$	199,489
Total provision for credit losses	$	30,000		$	100,000		$	96,000		$	17,000		$	11,000
Allowance for credit losses on loans to LHI	1.15		%	1.04		%	0.99		%	0.79		%	0.77		%
Allowance for credit losses on loans to average LHI	1.14		%	1.03		%	1.02		%	0.79		%	0.76		%
Net charge-offs to average LHI(1)	0.02		%	1.16		%	0.98		%	0.21		%	0.58		%
Net charge-offs to average LHI for last twelve months(1)	0.59		%	0.73		%	0.53		%	0.31		%	0.41		%
Total provision for credit losses to average LHI(1)	0.47		%	1.57		%	1.63		%	0.27		%	0.17		%
Total allowance for credit losses to LHI	1.21		%	1.09		%	1.03		%	0.83		%	0.81		%

(1)      Interim period ratios are annualized.

TEXAS CAPITAL BANCSHARES, INC.
SUMMARY OF NON-PERFORMING ASSETS AND PAST DUE LOANS
(Dollars in thousands)
	3rd Quarter			2nd Quarter			1st Quarter			4th Quarter			3rd Quarter
	2020			2020			2020			2019			2019
Non-performing assets (NPAs):
Non-accrual loans	$	161,946		$	174,031		$	219,165		$	225,384		$	120,686
Other real estate owned (OREO)	—			—			—			—			—
Total LHI NPAs	$	161,946		$	174,031		$	219,165		$	225,384		$	120,686
Non-accrual loans to LHI	0.64		%	0.68		%	0.90		%	0.91		%	0.49		%
Total LHI NPAs to LHI plus OREO	0.64		%	0.68		%	0.90		%	0.91		%	0.49		%
Total LHI NPAs to earning assets	0.43		%	0.49		%	0.63		%	0.71		%	0.37		%
Allowance for credit losses on loans to non-accrual loans	1.8x			1.5x			1.1x			.9x			1.6x
LHI past due 90 days and still accruing(1)	$	15,896		$	21,079		$	21,274		$	17,584		$	29,648
LHI past due 90 days to LHI	0.06		%	0.08		%	0.09		%	0.07		%	0.12		%
LHS past due 90 days and still accruing(2)	$	15,631		$	10,152		$	9,014		$	8,207		$	9,187

(1)      At September 30, 2020, loans past due 90 days and still accruing includes premium finance loans of $11.9 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 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)
	3rd Quarter			2nd Quarter			1st Quarter			4th Quarter			3rd Quarter
	2020			2020			2019			2019			2019
Interest income
Interest and fees on loans	$	237,179		$	247,595		$	283,625		$	312,147		$	329,344
Investment securities	3,674			2,024			2,183			2,618			2,316
Federal funds sold and securities purchased under resale agreements	1			77			614			439			554
Interest-bearing deposits in other banks	2,877			2,314			19,586			22,553			22,887
Total interest income	243,731			252,010			306,008			337,757			355,101
Interest expense
Deposits	27,830			32,294			62,174			70,987			80,967
Federal funds purchased	128			176			669			1,319			1,835
Other borrowings	3,365			4,569			9,582			11,712			14,703
Subordinated notes	4,191			4,191			4,191			4,191			4,191
Trust preferred subordinated debentures	648			852			1,073			1,163			1,237
Total interest expense	36,162			42,082			77,689			89,372			102,933
Net interest income	207,569			209,928			228,319			248,385			252,168
Provision for credit losses	30,000			100,000			96,000			17,000			11,000
Net interest income after provision for credit losses	177,569			109,928			132,319			231,385			241,168
Non-interest income
Service charges on deposit accounts	2,864			2,459			3,293			2,785			2,707
Wealth management and trust fee income	2,502			2,348			2,467			2,342			2,330
Brokered loan fees	15,034			10,764			8,015			8,645			8,691
Servicing income	7,329			6,120			4,746			4,030			3,549
Swap fees	484			1,468			2,757			1,559			1,196
Net gain/(loss) on sale of LHS	25,242			39,023			(13,000		)	(7,757		)	(6,011		)
Other	6,893			8,320			3,502			6,157			7,839
Total non-interest income	60,348			70,502			11,780			17,761			20,301
Non-interest expense
Salaries and employee benefits	84,096			100,791			77,193			90,248			80,722
Net occupancy expense	8,736			9,134			8,712			9,075			8,125
Marketing	3,636			7,988			8,522			12,807			14,753
Legal and professional	11,207			11,330			17,466			21,032			11,394
Communications and technology	31,098			42,760			13,791			13,801			10,805
FDIC insurance assessment	6,374			7,140			5,849			5,613			5,220
Servicing-related expenses	12,287			20,117			16,354			2,960			8,165
Merger-related expenses	—			10,486			7,270			1,370			—
Other	8,307			12,606			10,260			11,281			10,245
Total non-interest expense	165,741			222,352			165,417			168,187			149,429
Income/(loss) before income taxes	72,176			(41,922		)	(21,318		)	80,959			112,040
Income tax expense/(benefit)	15,060			(7,606		)	(4,631		)	16,539			23,958
Net income/(loss)	57,116			(34,316		)	(16,687		)	64,420			88,082
Preferred stock dividends	2,438			2,437			2,438			2,437			2,438
Net income/(loss) available to common shareholders	$	54,678		$	(36,753	)	$	(19,125	)	$	61,983		$	85,644

TEXAS CAPITAL BANCSHARES, INC.
QUARTERLY FINANCIAL SUMMARY - UNAUDITED
Consolidated Daily Average Balances, Average Yields and Rates
(Dollars in thousands)
	3rd Quarter 2020									2nd Quarter 2020									1st Quarter 2020									4th Quarter 2019									3rd 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	$	525,149		$	1,905		1.44	%		$	38,829		$	185		1.92	%		$	42,799		$	274		2.57	%		$	40,904		$	693		6.72	%		$	39,744		$	357		3.56	%
Investment securities - Non-taxable(2)	190,797			2,239			4.67	%		195,806			2,327			4.78	%		195,578			2,417			4.97	%		197,591			2,437			4.89	%		200,090			2,480			4.92	%
Federal funds sold and securities purchased under resale agreements	12,051			1			0.04	%		245,434			77			0.13	%		199,727			614			1.24	%		102,320			439			1.70	%		100,657			554			2.18	%
Interest-bearing deposits in other banks	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	%		4,184,217			22,887			2.17	%
LHS, at fair value	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	%		2,555,269			26,206			4.07	%
LHI, mortgage finance loans	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	%		8,118,025			68,660			3.36	%
LHI(1)(2)	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	%		16,901,391			235,557			5.53	%
Less allowance for credit losses on loans	264,769			—			—			236,823			—			—			201,837			—			—			189,353			—			—			212,898			—			—
LHI, net of allowance	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	%		24,806,518			304,217			4.87	%
Total earning assets	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	%		31,886,495			356,701			4.44	%
Cash and other assets	1,037,760									1,075,864									976,520									974,866									1,000,117
Total assets	$	38,421,576								$	37,912,536								$	34,228,573								$	34,619,311								$	32,886,612
Liabilities and Stockholders’ Equity
Transaction deposits	$	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	%		$	3,577,905		$	18,442		2.04	%
Savings deposits	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	%		10,331,078			45,586			1.75	%
Time deposits	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	%		2,706,434			16,939			2.48	%
Total interest bearing deposits	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	%		16,615,417			80,967			1.93	%
Other borrowings	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	%		2,896,477			16,538			2.27	%
Subordinated notes	282,343			4,191			5.91	%		282,252			4,191			5.97	%		282,165			4,191			5.97	%		282,074			4,191			5.89	%		281,979			4,191			5.90	%
Trust preferred subordinated debentures	113,406			648			2.28	%		113,406			852			3.02	%		113,406			1,073			3.80	%		113,406			1,163			4.07	%		113,406			1,237			4.33	%
Total interest bearing liabilities	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	%		19,907,279			102,933			2.05	%
Demand deposits	12,202,065									10,865,896									10,003,495									10,933,887									9,992,406
Other liabilities	314,500									293,698									270,868									278,964									264,506
Stockholders’ equity	2,791,451									2,849,200									2,853,353									2,806,240									2,722,421
Total liabilities and stockholders’ equity	$	38,421,576								$	37,912,536								$	34,228,573								$	34,619,311								$	32,886,612
Net interest income(2)				$	208,421								$	210,856								$	229,787								$	249,961								$	253,768
Net interest margin							2.22	%								2.30	%								2.78	%								2.95	%								3.16	%

(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

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