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 2021   Q2 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 shares 51,094      50,416          %
Return on average assets 0.76  %   (0.36 ) %    
Return on average common equity 9.74  %   (5.48 ) %    
BALANCE SHEET          
LHS $ 63,747      $ 454,581        (86 ) %
LHI, mortgage finance 8,772,799      8,972,626        (2 ) %
LHI 15,168,565      16,552,203        (8 ) %
Total LHI 23,941,364      25,524,829        (6 ) %
Total assets 35,228,542      36,613,127        (4 ) %
Demand deposits 14,228,038      10,835,911        31    %
Total deposits 28,839,563      30,187,695        (4 ) %
Stockholders’ equity 3,114,957      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 “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.

TEXAS CAPITAL BANCSHARES, INC.
SELECTED FINANCIAL HIGHLIGHTS (UNAUDITED)
(dollars in thousands except per share data)
  2nd Quarter 1st Quarter 4th Quarter 3rd Quarter 2nd Quarter
  2021 2021 2020 2020 2020
CONSOLIDATED STATEMENTS OF INCOME          
Interest income $ 224,490      $ 228,412      $ 255,163    $ 243,731    $ 252,010     
Interest expense 27,496      28,339      32,153    36,162    42,082     
Net interest income 196,994      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 losses 215,994      206,073      191,010    177,569    109,928     
Non-interest income 30,102      39,092      42,863    60,348    70,485     
Non-interest expense 149,060      150,316      150,863    165,741    222,335     
Income/(loss) before income taxes 97,036      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 dividends 6,317      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 shares 51,093,660      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     
LHI 15,168,565      15,399,174      15,351,451    15,789,958    16,552,203     
LHI, mortgage finance 8,772,799      9,009,081      9,079,409    9,378,104    8,972,626     
LHS 63,747      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 securities 3,798,275      3,443,058      3,196,970    1,367,313    234,969     
Demand deposits 14,228,038      15,174,642      12,740,947    12,339,212    10,835,911     
Total deposits 28,839,563      33,391,970      30,996,589    31,959,487    30,187,695     
Other borrowings 2,014,481      2,515,587      3,111,751    2,908,183    2,895,790     
Long-term debt 927,386      664,968      395,896    395,806    395,715     
Stockholders’ equity 3,114,957      3,159,482      2,871,224    2,800,404    2,734,755     
           
End of period shares outstanding 50,592,201      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 margin 2.10    % 2.09    % 2.32  % 2.22  % 2.30    %
Return on average assets 0.76    % 0.73    % 0.61  % 0.59  % (0.36 ) %
Return on average common equity 9.74    % 10.08    % 8.50  % 8.24  % (5.48 ) %
Non-interest income to average earning assets 0.32    % 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 assets 1.59    % 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 1 10.5    % 10.2    % 9.4  % 9.1  % 8.8    %
Tier 1 capital 12.1    % 12.2    % 10.3  % 9.9  % 9.7    %
Total capital 14.8    % 14.0    % 12.1  % 11.8  % 11.6    %
Leverage 8.4    % 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.

TEXAS CAPITAL BANCSHARES, INC.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(dollars in thousands)
  June 30, 2021 June 30, 2020 %Change
Assets      
Cash and due from banks $ 202,549      $ 176,540      15    %
Interest-bearing deposits 6,768,650      9,490,044      (29 ) %
Federal funds sold and securities purchased under resale agreements —      50,000      (100 ) %
Securities, available-for-sale 3,798,275      234,969      N/M    
LHS, at fair value 63,747      454,581      (86 ) %
LHI, mortgage finance 8,772,799      8,972,626      (2 ) %
LHI (net of unearned income) 15,168,565      16,552,203      (8 ) %
Less: Allowance for credit losses on loans 221,511      264,722      (16 ) %
LHI, net 23,719,853      25,260,107      (6 ) %
Mortgage servicing rights, net 1,316      75,451      (98 ) %
Premises and equipment, net 21,969      28,603      (23 ) %
Accrued interest receivable and other assets 634,719      824,963      (23 ) %
Goodwill and intangibles, net 17,464      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 bearing 14,611,525      19,351,784      (24 ) %
Total deposits 28,839,563      30,187,695      (4 ) %
       
Accrued interest payable 8,116      20,314      (60 ) %
Other liabilities 324,039      378,858      (14 ) %
Federal funds purchased and repurchase agreements 14,481      195,790      (93 ) %
Other borrowings 2,000,000      2,700,000      (26 ) %
Long-term debt 927,386      395,715      134    %
Total liabilities 32,113,585      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, respectively 300,000      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, respectively 506      504      —    %
Additional paid-in capital 992,469      983,144        %
Retained earnings 1,848,379      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’ equity 3,114,957      2,734,755      14    %
Total liabilities and stockholders’ equity $ 35,228,542      $ 36,613,127      (4 ) %
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,
  2021 2020 2021 2020
Interest income        
Interest and fees on loans $ 210,611      $ 247,595      $ 426,203      $ 531,220     
Investment securities 10,918      2,024      20,805      4,207     
Federal funds sold and securities purchased under resale agreements —      77          691     
Interest-bearing deposits in other banks 2,961      2,314      5,893      21,900     
Total interest income 224,490      252,010      452,902      558,018     
Interest expense        
Deposits 16,271      32,294      36,275      94,468     
Federal funds purchased 51      176      126      845     
Other borrowings 451      4,569      2,968      14,151     
Long-term debt 10,723      5,043      16,466      10,307     
Total interest expense 27,496      42,082      55,835      119,771     
Net interest income 196,994      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 losses 215,994      109,928      422,067      242,247     
Non-interest income        
Service charges on deposit accounts 4,634      2,459      9,350      5,752     
Wealth management and trust fee income 3,143      2,348      5,998      4,815     
Brokered loan fees 6,933      10,764      16,244      18,779     
Servicing income 5,935      6,120      14,944      10,866     
Swap fees 534      1,468      1,060      4,225     
Net gain/(loss) on sale of LHS (3,070 )   39,023      2,502      26,023     
Other 11,993      8,303      19,096      11,805     
Total non-interest income 30,102      70,485      69,194      82,265     
Non-interest expense        
Salaries and employee benefits 86,830      100,791      174,352      177,984     
Net occupancy expense 7,865      9,134      16,139      17,846     
Marketing 1,900      7,988      3,597      16,510     
Legal and professional 9,147      11,330      17,424      28,796     
Communications and technology 14,352      42,760      30,321      56,551     
FDIC insurance assessment 5,226      7,140      11,839      12,989     
Servicing-related expenses 12,355      20,100      25,344      36,454     
Merger-related expenses —      10,486      —      17,756     
Other 11,385      12,606      20,360      22,866     
Total non-interest expense 149,060      222,335      299,376      387,752     
Income/(loss) before income taxes 97,036      (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 dividends 6,317      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 )  
TEXAS CAPITAL BANCSHARES, INC.
SUMMARY OF CREDIT LOSS EXPERIENCE
(dollars in thousands)
  2nd Quarter 1st Quarter 4th Quarter 3rd Quarter 2nd Quarter
  2021 2021 2020 2020 2020
Allowance for credit losses on loans:          
Beginning balance $ 242,484      $ 254,615      $ 290,165    $ 264,722    $ 240,958   
Loans charged-off:          
Commercial 1,412      2,451      37,984    2,436    12,287   
Energy 686      5,732      33,283    141    62,368   
Real estate 1,192      —      180    —    —   
Total charge-offs 3,290      8,183      71,447    2,577    74,655   
Recoveries:          
Commercial 308      1,050      394    113    513   
Energy 609      715      5,696    880    —   
Total recoveries 917      1,765      6,090    993    513   
Net charge-offs 2,373      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 LHI 0.93    % 0.99    % 1.04  % 1.15  % 1.04  %
Allowance for credit losses on loans to average LHI 0.98    % 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.

TEXAS CAPITAL BANCSHARES, INC.          
SUMMARY OF NON-PERFORMING ASSETS AND PAST DUE LOANS      
(dollars in thousands)          
  2nd Quarter 1st Quarter 4th Quarter 3rd Quarter 2nd Quarter
  2021 2021 2020 2020 2020
           
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 LHI 0.36  % 0.40  % 0.50  % 0.64  % 0.68  %
Total LHI NPAs to LHI plus OREO 0.36  % 0.40  % 0.50  % 0.64  % 0.68  %
Total LHI NPAs to earning assets 0.25  % 0.25  % 0.33  % 0.43  % 0.49  %
Allowance for credit losses on loans to non-accrual loans   2.6x      2.5x      2.1x      1.8x      1.5x   
           
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 LHI 0.03  % 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.

TEXAS CAPITAL BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(dollars in thousands)
           
  2nd Quarter 1st Quarter 4th Quarter 3rd Quarter 2nd Quarter
  2021 2021 2020 2020 2020
Interest income          
Interest and fees on loans $ 210,611      $ 215,592      $ 242,776    $ 237,179    $ 247,595     
Investment securities 10,918      9,887      9,594    3,674    2,024     
Federal funds sold and securities purchased under resale agreements —              77     
Interest-bearing deposits in other banks 2,961      2,932      2,792    2,877    2,314     
Total interest income 224,490      228,412      255,163    243,731    252,010     
Interest expense          
Deposits 16,271      20,004      23,819    27,830    32,294     
Federal funds purchased 51      75      110    128    176     
Other borrowings 451      2,517      3,407    3,365    4,569     
Long-term debt 10,723      5,743      4,817    4,839    5,043     
Total interest expense 27,496      28,339      32,153    36,162    42,082     
Net interest income 196,994      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 losses 215,994      206,073      191,010    177,569    109,928     
Non-interest income          
Service charges on deposit accounts 4,634      4,716      3,004    2,864    2,459     
Wealth management and trust fee income 3,143      2,855      2,681    2,502    2,348     
Brokered loan fees 6,933      9,311      12,610    15,034    10,764     
Servicing income 5,935      9,009      8,834    7,329    6,120     
Swap fees 534      526      473    484    1,468     
Net gain/(loss) on sale of LHS (3,070 )   5,572      6,761    25,242    39,023     
Other 11,993      7,103      8,500    6,893    8,303     
Total non-interest income 30,102      39,092      42,863    60,348    70,485     
Non-interest expense          
Salaries and employee benefits 86,830      87,522      78,449    84,096    100,791     
Net occupancy expense 7,865      8,274      8,373    8,736    9,134     
Marketing 1,900      1,697      3,435    3,636    7,988     
Legal and professional 9,147      8,277      12,129    11,207    11,330     
Communications and technology 14,352      15,969      15,405    31,098    42,760     
FDIC insurance assessment 5,226      6,613      6,592    6,374    7,140     
Servicing-related expenses 12,355      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 expense 149,060      150,316      150,863    165,741    222,335     
Income/(loss) before income taxes 97,036      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 dividends 6,317      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 )  
TEXAS CAPITAL BANCSHARES, INC.
QUARTERLY FINANCIAL SUMMARY - UNAUDITED
Consolidated Daily Average Balances, Average Yields and Rates
(dollars in thousands)
  2nd Quarter 2021   1st Quarter 2021   4th Quarter 2020   3rd Quarter 2020   2nd Quarter 2020
  AverageBalance Revenue/Expense Yield/Rate   AverageBalance Revenue/Expense Yield/Rate   AverageBalance Revenue/Expense Yield/Rate   AverageBalance Revenue/Expense Yield/Rate   AverageBalance 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 agreements 713    —    0.18  %   4,605      0.07  %   1,709      0.13  %   12,051      0.04  %   245,434    77    0.13  %
Interest-bearing deposits in other banks 11,583,046    2,961    0.10  %   11,840,942    2,932    0.10  %   10,808,548    2,792    0.10  %   11,028,962    2,877    0.10  %   10,521,240    2,314    0.09  %
LHS, at fair value 93,164    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 loans 7,462,223    57,401    3.09  %   8,177,759    64,942    3.22  %   9,550,119    78,906    3.29  %   9,061,984    76,464    3.36  %   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 allowance 22,463,522    209,916    3.75  %   23,380,950    214,138    3.71  %   24,880,340    240,656    3.85  %   25,083,251    233,694    3.71  %   25,454,739    245,488    3.88  %
Total earning assets 37,683,715    225,027    2.40  %   38,892,394    229,025    2.39  %   38,439,496    256,009    2.65  %   37,383,816    244,583    2.60  %   36,836,672    252,938    2.76  %
Cash and other assets 996,946          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 deposits 11,296,382    8,990    0.32  %   12,889,974    10,788    0.34  %   12,982,189    12,671    0.39  %   12,786,719    12,808    0.40  %   12,537,467    13,510    0.43  %
Time deposits 1,755,993    1,886    0.43  %   2,204,242    3,355    0.62  %   2,355,199    4,544    0.77  %   2,844,083    8,370    1.17  %   3,434,388    12,786    1.50  %
Total interest bearing deposits 16,847,527    16,271    0.39  %   19,086,182    20,004    0.43  %   19,721,881    23,819    0.48  %   19,906,376    27,830    0.56  %   19,895,821    32,294    0.65  %
Other borrowings 2,349,718    502    0.09  %   2,686,398    2,592    0.39  %   3,022,077    3,517    0.46  %   2,811,435    3,493    0.49  %   3,612,263    4,745    0.53  %
Long-term debt 881,309    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 liabilities 20,078,554    27,496    0.55  %   22,237,311    28,339    0.52  %   23,139,799    32,153    0.55  %   23,113,560    36,162    0.62  %   23,903,742    42,082    0.71  %
Demand deposits 15,139,546          14,421,505          13,174,114          12,202,065          10,865,896       
Other liabilities 274,401          309,644          303,480          314,500          293,698       
Stockholders’ equity 3,188,160          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 margin     2.10  %       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.

INVESTOR CONTACT
Jamie Britton, 214.932.6721
jamie.britton@texascapitalbank.com

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