Texas Capital Bancshares, Inc. Announces Operating Results for Q1 2020

DALLAS, April 22, 2020 (GLOBE NEWSWIRE) -- Texas Capital Bancshares, Inc. (NASDAQ: TCBI), the parent company of Texas Capital Bank, announced operating results for the first quarter of 2020.

"Our focus during this unprecedented time is on keeping our employees safe and continuing to serve our clients and communities," said Keith Cargill, CEO. "We have taken deliberate actions to ensure that our balance sheet remains strong, including increases in liquidity and reserves supported by a strong capital position. We remain committed to a timely closing of our pending merger with Independent Bank Group and believe our combined strength will enable us to better serve our clients and build long-term shareholder value."

• Strong balance sheet positioning in the first quarter of 2020 included deliberate increases in liquidity and funding sources to support current and future client needs.
• Over 90% of employees working virtually since early March with little to no impact on client experience.
• Net loss of $16.7 million ($0.38 per share) reported for the first quarter of 2020 attributable to a $96.0 million ($1.50 per share) provision for credit losses driven by the adoption of CECL on January 1, 2020, coupled with increases in charge-offs and criticized loans and reserve build related to the global COVID-19 pandemic, MSR impairment of $10.0 million ($0.16 per share) and merger-related expenses of $7.3 million ($0.11 per share).

FINANCIAL SUMMARY
(Dollars and shares in thousands)

	Q1 2020				Q1 2019				% Change
QUARTERLY OPERATING RESULTS
Net income/(loss)	$	(16,687	)		$	82,839			(120	)%
Net income/(loss) available to common stockholders	$	(19,125	)		$	80,401			(124	)%
Diluted earnings/(loss) per common share	$	(0.38	)		$	1.60			(124	)%
Diluted common shares	50,475				50,345				—	%
ROA	(0.20		)%		1.26		%
ROE	(2.85		)%		13.58		%
BALANCE SHEET
LHS	$	774,064			$	1,901,637			(59	)%
LHI, mortgage finance	7,588,803				6,299,710				20	%
LHI	16,857,579				17,061,590				(1	)%
Total LHI	24,446,382				23,361,300				5	%
Total loans	25,220,446				25,262,937				—	%
Total assets	35,879,416				28,383,111				26	%
Demand deposits	9,420,303				6,743,607				40	%
Total deposits	27,134,263				20,650,127				31	%
Stockholders’ equity	2,803,533				2,581,942				9	%

DETAILED FINANCIALS

During the first quarter of 2020, all of us have faced an unprecedented time as our country deals with the health challenges of COVID-19. Actions by US federal, state and foreign governments to address the pandemic, including travel bans and school, business and entertainment venue closures, have resulted in economic weakness and market volatility. Significant uncertainties as to future economic conditions exist, and we have acted in a deliberate way to ensure that we have the balance sheet strength to serve our clients. Our actions include record levels of on balance sheet liquidity and increased capital ratio levels. Additionally, the economic pressures, coupled with the implementation of an expected loss methodology as required by CECL have contributed to an increased provision for credit losses for the first quarter of 2020. We are more committed than ever to meeting the demands of our clients. We have responded quickly and nimbly to address changing economic pressures and our infrastructure has been resilient in dealing with the many demands of a dispersed workforce. Just as we were able to make quick and deliberate decisions to address near-term challenges, we will be equally ready when the world returns to more normal times and we will capitalize on the lessons learned from these unprecedented times.

For the first quarter of 2020, we reported a net loss of $16.7 million and net loss available to common stockholders of $19.1 million, compared to net income of $82.8 million and net income available to common stockholders of $80.4 million for the same period in 2019. On a fully diluted basis, earnings/(loss) per common share were $(0.38) for the quarter ended March 31, 2020 compared to $1.60 for the same period of 2019. The decline in net income for the first quarter of 2020 resulted primarily from a $76.0 million increase in the provision for credit losses. The first quarter of 2020 also includes $10.0 million in MSR impairment ($0.16 per share) and $7.3 million ($0.11 per share) in merger-related expenses.

During the first quarter of 2020, we adopted ASU 2016-13 "Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments", which replaces the incurred loss methodology with an expected loss methodology that is referred to as the Current Expected Credit Loss ("CECL") methodology. Upon adoption, the allowance for credit losses was increased by $9.1 million, with no impact to the consolidated statement of income. We recorded a $96.0 million provision for credit losses for the first quarter of 2020 utilizing the newly adopted CECL methodology, a significant increase from prior quarters. The increase resulted primarily from increases in criticized loans and charge-offs, as well as the impact of reserve build related to the COVID-19 pandemic. Of the $96.0 million provision, $55.0 million related to two large energy loans that were previously identified as problem loans that experienced further deterioration during the first quarter of 2020 exacerbated by the sharp decline in commodity prices, and approximately $30.0 million related to COVID-19 reserve build. In total, $1.8 billion of loans in categories that are expected to be more significantly impacted by COVID-19 were proactively downgraded, primarily to lower pass-rated grades. We recorded $57.7 million in net charge-offs during the first quarter of 2020, including $37.3 million in energy charge-offs and $15.6 million in leveraged lending charge-offs, all of which were loans that have been previously identified, compared to $12.8 million during the fourth quarter of 2019 and $4.6 million during the first quarter of 2019. Criticized loans totaled $675.9 million at March 31, 2020, compared to $584.1 million at December 31, 2019 and $602.8 million at March 31, 2019.

Non-performing assets ("NPAs") totaled $219.2 million at March 31, 2020, a decrease of $6.2 million compared to the fourth quarter of 2019 and an increase of $85.5 million compared to the first quarter of 2019. The year-over-year increase is primarily related to our energy and leveraged lending portfolios, with non-accrual energy loans and non-accrual leveraged lending loans totaling $151.9 million (69% of total NPAs) and $50.0 million (23% of total NPAs), respectively, at March 31, 2020. The ratio of NPAs to total LHI plus other real estate owned ("OREO") for the first quarter of 2020 was 0.90 percent, compared to 0.91 percent for the fourth quarter of 2019 and 0.57 percent for the first quarter of 2019.

Net interest income was $228.3 million for the first quarter of 2020, compared to $248.4 million for the fourth quarter of 2019 and $235.6 million for the first quarter of 2019. The linked quarter decrease in net interest income was due primarily to decreases in yields on loans and liquidity assets, as well as a decrease in average total loans, partially offset by a decrease in funding costs. Net interest margin for the first quarter of 2020 was 2.78 percent, a decrease of 17 basis points from the fourth quarter of 2020 and a decrease of 95 basis points from the first quarter of 2019. LHI yields, excluding mortgage finance loans, decreased 27 basis points from the fourth quarter of 2019, and decreased 93 basis points compared to the first quarter of 2019. Mortgage finance LHI yields for the first quarter of 2020 decreased 3 basis points compared to the fourth quarter of 2019 and decreased 66 basis points compared to the first quarter of 2019. The shift in earning assets, primarily the increase in liquidity assets, also contributed to the decrease in net interest margin. Total cost of deposits for the first quarter of 2020 decreased 9 basis points to 0.90 percent compared to 0.99 percent for the fourth quarter of 2019, and decreased 43 basis points from 1.33 percent for the first quarter of 2019.

Non-interest income decreased $6.0 million, or 34 percent, during the first quarter of 2020 compared to the fourth quarter of 2019, and decreased $18.2 million, or 61 percent, compared to the first quarter of 2019. The linked quarter decrease is primarily related to decreases in net gain/(loss) on sale of LHS and other non-interest income, partially offset by an increase in swap fees. The year-over-year decrease is primarily related to decreases in net gain/(loss) on sale of LHS and other non-interest income, partially offset by increases in brokered loan fees, servicing income and swap fees.

Non-interest expense for the first quarter of 2020 increased $6.7 million, or 4 percent, compared to the fourth quarter of 2019, and increased $25.0 million, or 18 percent, compared to the first quarter of 2019. The linked quarter increase in non-interest expense was primarily related to increases in servicing-related expenses and merger-related expenses, partially offset by decreases in salaries and employee benefits, marketing and legal and professional expenses. The year-over-year increase was primarily due to increases in legal and professional and communications and technology expenses, as well as servicing-related expenses and merger-related expenses, partially offset by a decrease in marketing expense.

Texas Capital Bank is well capitalized under regulatory guidelines as of March 31, 2020. Our CET 1, tier 1 capital, total capital and leverage ratios were 9.3%, 10.2%, 12.0% and 8.5%, respectively, at March 31, 2020, compared to 8.9%, 9.8%, 11.4% and 8.4%, respectively, at December 31, 2019. At March 31, 2020, our ratio of tangible common equity to total tangible assets was 7.3% percent compared 8.2% at December 31, 2019.

About Texas Capital Bancshares, Inc.

Texas Capital Bancshares, Inc. (NASDAQ: TCBI), a member of the Russell 1000 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. On December 9, 2019, Texas Capital Bancshares, Inc. (“TCBI”), announced that it had entered into an Agreement and Plan of Merger with Independent Bank Group, Inc. (“IBTX”), which provides that, upon the terms and subject to the conditions set forth therein, TCBI will merge with and into IBTX (the “Merger”), with IBTX as the surviving entity in the Merger. For additional information see the related filings by TCBI with the Securities and Exchange Commission (“SEC”).

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 the financial condition, results of operations, business plans and the future performance of TCBI. 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, and our expectations about future financial performance, future growth and earnings, the appropriateness of our allowance for credit losses and provision for credit losses, 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, the occurrence of any event, change or other circumstances that could give rise to the right of one or both of the parties to terminate the definitive merger agreement between IBTX and TCBI, the outcome of any legal proceedings that may be instituted against IBTX or TCBI, delays in completing the transaction, the failure to obtain necessary regulatory approvals (and the risk that such approvals may result in the imposition of conditions that could adversely affect the combined company or the expected benefits of the transaction) and shareholder approvals or to satisfy any of the other conditions to the transaction on a timely basis or at all, the possibility that the anticipated benefits of the transaction are not realized when expected or at all, including as a result of the impact of, or problems arising from, the integration of the two companies or as a result of the strength of the economy and competitive factors in the areas where IBTX and TCBI do business, the possibility that the transaction may be more expensive to complete than anticipated, including as a result of unexpected factors or events, diversion of management’s attention from ongoing business operations and opportunities, potential adverse reactions or changes to business or employee relationships, including those resulting from the announcement or completion of the transaction, the ability to complete the transaction and integration of IBTX and TCBI successfully. 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, TCBI disclaims 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.

Additional Information About the Merger and Where to Find It

In connection with the proposed merger between IBTX and TCBI, IBTX filed a registration statement on Form S-4 with the SEC to register the shares of IBTX’s capital stock to be issued in connection with the merger. The registration statement includes a joint proxy statement/prospectus. The registration statement has not yet become effective. After the Form S-4 is effective, a definitive joint proxy statement/prospectus will be sent to the shareholders of IBTX and TCBI seeking their approval of the proposed transaction.

INVESTORS AND SECURITY HOLDERS ARE URGED TO READ THE REGISTRATION STATEMENT ON FORM S-4, THE JOINT PROXY STATEMENT/PROSPECTUS INCLUDED WITHIN THE REGISTRATION STATEMENT ON FORM S-4 AND ANY OTHER RELEVANT DOCUMENTS FILED OR TO BE FILED WITH THE SEC IN CONNECTION WITH THE PROPOSED TRANSACTION BECAUSE THESE DOCUMENTS DO AND WILL CONTAIN IMPORTANT INFORMATION ABOUT IBTX, TCBI AND THE PROPOSED TRANSACTION.

Investors and security holders may obtain copies of these documents free of charge through the website maintained by the SEC at www.sec.gov or from IBTX at its website, www.ibtx.com, or from TCBI at its website, www.texascapitalbank.com. Documents filed with the SEC by IBTX will be available free of charge by accessing the Investor Relations page of IBTX’s website at www.ibtx.com or, alternatively, by directing a request by telephone or mail to Independent Bank Group, Inc., 7777 Henneman Way, McKinney, Texas 75070, [phone], and documents filed with the SEC by TCBI will be available free of charge by accessing TCBI’s website at www.texascapitalbank.com under the tab “About Us,” and then under the heading “Investor Relations” or, alternatively, by directing a request by telephone or mail to Texas Capital Bancshares, Inc., 2000 McKinney Avenue, Suite 700, Dallas, Texas 75201, [phone].

Participants in the Solicitation

IBTX, TCBI and certain of their respective directors and executive officers may be deemed to be participants in the solicitation of proxies from the shareholders of IBTX and TCBI in connection with the proposed transaction under the rules of the SEC. Certain information regarding the interests of these participants and a description of their direct and indirect interests, by security holdings or otherwise, will be included in the joint proxy statement/prospectus regarding the proposed transaction when it becomes available. Additional information about IBTX, and its directors and executive officers, may be found in IBTX’s annual report on Form 10-K filed with the SEC on March 2, 2020, as amended by IBTX’s Form 10-K/A filed with the SEC on March 6, 2020, and other documents filed by IBTX with the SEC. Additional information about TCBI, and its directors and executive officers, may be found in TCBI’s annual report on Form 10-K filed with the SEC on February 12, 2020, as amended by TCBI’s Form 10-K/A filed with the SEC on March 2, 2020, and other documents filed by TCBI with the SEC. These documents can be obtained free of charge from the sources described above.

TEXAS CAPITAL BANCSHARES, INC.
SELECTED FINANCIAL HIGHLIGHTS (UNAUDITED)
(Dollars in thousands except per share data)
	1st Quarter			4th Quarter			3rd Quarter			2nd Quarter			1st Quarter
	2020			2019			2019			2019			2019
CONSOLIDATED STATEMENTS OF INCOME
Interest income	$	306,008		$	337,757		$	355,101		$	346,893		$	325,561
Interest expense	77,689			89,372			102,933			103,340			89,947
Net interest income	228,319			248,385			252,168			243,553			235,614
Provision for credit losses	96,000			17,000			11,000			27,000			20,000
Net interest income after provision for credit losses	132,319			231,385			241,168			216,553			215,614
Non-interest income	11,780			17,761			20,301			24,364			30,014
Non-interest expense	165,417			158,690			149,370			141,561			140,378
Income/(loss) before income taxes	(21,318		)	90,456			112,099			99,356			105,250
Income tax expense/(benefit)	(4,631		)	16,539			23,958			21,387			22,411
Net income/(loss)	(16,687		)	73,917			88,141			77,969			82,839
Preferred stock dividends	2,438			2,437			2,438			2,437			2,438
Net income/(loss) available to common stockholders	$	(19,125	)	$	71,480		$	85,703		$	75,532		$	80,401
Diluted earnings/(loss) per common share	$	(0.38	)	$	1.42		$	1.70		$	1.50		$	1.60
Diluted common shares	50,474,802			50,461,723			50,416,402			50,383,870			50,345,399
CONSOLIDATED BALANCE SHEET DATA
Total assets	$	35,879,416		$	32,548,069		$	33,526,437		$	29,970,384		$	28,383,111
LHI	16,857,579			16,476,413			16,772,824			16,924,535			17,061,590
LHI, mortgage finance	7,588,803			8,169,849			7,951,432			7,415,363			6,299,710
LHS	774,064			2,577,134			2,674,225			1,057,586			1,901,637
Liquidity assets(1)	9,498,189			4,263,766			4,993,185			3,480,902			2,154,155
Investment securities	228,784			239,871			238,022			240,851			230,749
Demand deposits	9,420,303			9,438,459			10,289,572			7,685,340			6,743,607
Total deposits	27,134,263			26,478,593			27,413,303			22,999,077			20,650,127
Other borrowings	5,195,267			2,541,766			2,639,967			3,607,234			4,497,892
Subordinated notes	282,219			282,129			282,038			281,948			281,858
Long-term debt	113,406			113,406			113,406			113,406			113,406
Stockholders’ equity	2,803,533			2,832,258			2,757,433			2,668,452			2,581,942
End of period shares outstanding	50,407,778			50,337,741			50,317,654			50,297,552			50,263,611
Book value	$	52.64		$	53.29		$	51.82		$	50.07		$	48.38
Tangible book value(2)	$	52.28		$	52.93		$	51.46		$	49.71		$	48.02
SELECTED FINANCIAL RATIOS
Net interest margin	2.78		%	2.95		%	3.16		%	3.41		%	3.73		%
Return on average assets	(0.20		)%	0.85		%	1.06		%	1.05		%	1.26		%
Return on average common equity	(2.85		)%	10.68		%	13.22		%	12.20		%	13.58		%
Non-interest income to average earning assets	0.14		%	0.21		%	0.25		%	0.34		%	0.47		%
Efficiency ratio(3)	68.9		%	59.6		%	54.8		%	52.8		%	52.8		%
Efficiency ratio, adjusted(4)	65.8		%	57.7		%	51.2		%	49.5		%	50.1		%
Non-interest expense to average earning assets	2.00		%	1.87		%	1.86		%	1.97		%	2.21		%
Tangible common equity to total tangible assets(5)	7.3		%	8.2		%	7.7		%	8.3		%	8.5		%
Common Equity Tier 1	9.3		%	8.9		%	8.6		%	8.7		%	8.6		%
Tier 1 capital	10.2		%	9.8		%	9.5		%	9.6		%	9.6		%
Total capital	12.0		%	11.4		%	11.1		%	11.3		%	11.4		%
Leverage	8.5		%	8.4		%	8.6		%	9.2		%	10.0		%

(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 $5.2 million, $9.4 million, $11.9 million, $11.6 million and $9.1 million for the first quarter of 2020, as well as the fourth, third, second and first 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)
	March 31, 2020			March 31, 2019			% Change
Assets
Cash and due from banks	$	162,386		$	177,137		(8	)%
Interest-bearing deposits	9,468,189			2,129,155			345	%
Federal funds sold and securities purchased under resale agreements	30,000			25,000			20	%
Securities, available-for-sale	228,784			230,749			(1	)%
LHS, at fair value	774,064			1,901,637			(59	)%
LHI, mortgage finance	7,588,803			6,299,710			20	%
LHI (net of unearned income)	16,857,579			17,061,590			(1	)%
Less:  Allowance for credit losses on loans	240,958			208,573			16	%
LHI, net	24,205,424			23,152,727			5	%
Mortgage servicing rights, net	70,619			44,088			60	%
Premises and equipment, net	29,663			24,200			23	%
Accrued interest receivable and other assets	892,305			679,966			31	%
Goodwill and intangibles, net	17,982			18,452			(3	)%
Total assets	$	35,879,416		$	28,383,111		26	%
Liabilities and Stockholders’ Equity
Liabilities:
Deposits:
Non-interest bearing	$	9,420,303		$	6,743,607		40	%
Interest bearing	17,713,960			13,906,520			27	%
Total deposits	27,134,263			20,650,127			31	%
Accrued interest payable	16,969			24,488			(31	)%
Other liabilities	333,759			233,398			43	%
Federal funds purchased and repurchase agreements	295,267			897,892			(67	)%
Other borrowings	4,900,000			3,600,000			36	%
Subordinated notes, net	282,219			281,858			—	%
Trust preferred subordinated debentures	113,406			113,406			—	%
Total liabilities	33,075,883			25,801,169			28	%
Stockholders’ equity:
Preferred stock, $.01 par value, $1,000 liquidation value:
Authorized shares - 10,000,000
Issued shares - 6,000,000 shares issued at March 31, 2020 and 2019	150,000			150,000			—	%
Common stock, $.01 par value:
Authorized shares - 100,000,000
Issued shares - 50,408,195 and 50,264,028 at March 31, 2020 and 2019, respectively	504			503			—	%
Additional paid-in capital	979,939			969,079			1	%
Retained earnings	1,668,329			1,461,893			14	%
Treasury stock (shares at cost: 417 at March 31, 2020 and 2019)	(8		)	(8		)	—	%
Accumulated other comprehensive income, net of taxes	4,769			475			N/M
Total stockholders’ equity	2,803,533			2,581,942			9	%
Total liabilities and stockholders’ equity	$	35,879,416		$	28,383,111		26	%

TEXAS CAPITAL BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(Dollars in thousands except per share data)
	Three Months Ended March 31,
	2020			2019
Interest income
Interest and fees on loans	$	283,625		$	312,703
Investment securities	2,183			1,460
Federal funds sold and securities purchased under resale agreements	614			379
Interest-bearing deposits in other banks	19,586			11,019
Total interest income	306,008			325,561
Interest expense
Deposits	62,174			69,054
Federal funds purchased	669			3,516
Other borrowings	9,582			11,854
Subordinated notes	4,191			4,191
Trust preferred subordinated debentures	1,073			1,332
Total interest expense	77,689			89,947
Net interest income	228,319			235,614
Provision for credit losses	96,000			20,000
Net interest income after provision for credit losses	132,319			215,614
Non-interest income
Service charges on deposit accounts	3,293			2,979
Wealth management and trust fee income	2,467			2,009
Brokered loan fees	8,015			5,066
Servicing income	4,746			2,734
Swap fees	2,757			1,031
Net gain/(loss) on sale of LHS	(13,000		)	(505		)
Other	3,502			16,700
Total non-interest income	11,780			30,014
Non-interest expense
Salaries and employee benefits	76,667			77,823
Net occupancy expense	8,712			7,879
Marketing	8,460			11,708
Legal and professional	17,466			10,030
Communications and technology	13,608			9,198
FDIC insurance assessment	5,849			5,122
Servicing-related expenses	16,354			5,382
Merger-related expenses	7,270			—
Other	11,031			13,236
Total non-interest expense	165,417			140,378
Income/(loss) before income taxes	(21,318		)	105,250
Income tax expense/(benefit)	(4,631		)	22,411
Net income/(loss)	(16,687		)	82,839
Preferred stock dividends	2,438			2,438
Net income/(loss) available to common stockholders	$	(19,125	)	$	80,401
Basic earnings/(loss) per common share	$	(0.38	)	$	1.60
Diluted earnings/(loss) per common share	$	(0.38	)	$	1.60

TEXAS CAPITAL BANCSHARES, INC.
SUMMARY OF CREDIT LOSS EXPERIENCE
(Dollars in thousands)
	1st Quarter			4th Quarter			3rd Quarter			2nd Quarter			1st Quarter
	2020			2019			2019			2019			2019
Allowance for credit losses on loans:
Beginning balance	$	195,047		$	190,138		$	214,572		$	208,573		$	191,522
Impact of CECL adoption	8,585			—			—			—			—
Loans charged-off:
Commercial	20,653			13,968			21,124			4,880			4,865
Energy	37,730			797			16,655			15,173			—
Real estate	—			—			—			177			—
Total charge-offs	58,383			14,765			37,779			20,230			4,865
Recoveries:
Commercial	257			1,754			799			224			277
Energy	423			209			107			—			—
Real estate	—			—			—			—			—
Total recoveries	680			1,963			906			224			277
Net charge-offs	57,703			12,802			36,873			20,006			4,588
Provision for credit losses on loans	95,029			17,711			12,439			26,005			21,639
Ending balance	$	240,958		$	195,047		$	190,138		$	214,572		$	208,573
Allowance for off-balance sheet credit losses:
Beginning balance	$	8,640		$	9,351		$	10,790		$	9,795		$	11,434
Impact of CECL adoption	563			—			—			—			—
Provision for off-balance sheet credit losses	971			(711		)	(1,439		)	995			(1,639		)
Ending balance	$	10,174		$	8,640		$	9,351		$	10,790		$	9,795
Total allowance for credit losses	$	251,132		$	203,687		$	199,489		$	225,362		$	218,368
Total provision for credit losses	$	96,000		$	17,000		$	11,000		$	27,000		$	20,000
Allowance for credit losses on loans to LHI	0.99		%	0.79		%	0.77		%	0.88		%	0.89		%
Allowance for credit losses on loans to average LHI	1.02		%	0.79		%	0.76		%	0.90		%	0.96		%
Net charge-offs to average LHI(1)	0.98		%	0.21		%	0.58		%	0.34		%	0.09		%
Net charge-offs to average LHI for last twelve months(1)	0.53		%	0.31		%	0.41		%	0.27		%	0.36		%
Total provision for credit losses to average LHI(1)	1.63		%	0.27		%	0.17		%	0.45		%	0.37		%
Total allowance for credit losses to LHI	1.03		%	0.83		%	0.81		%	0.93		%	0.93		%

(1)

Interim period ratios are annualized.

TEXAS CAPITAL BANCSHARES, INC.
SUMMARY OF NON-PERFORMING ASSETS AND PAST DUE LOANS
(Dollars in thousands)
	1st Quarter			4th Quarter			3rd Quarter			2nd Quarter			1st Quarter
	2020			2019			2019			2019			2019
Non-performing assets (NPAs):
Non-accrual loans	$	219,165		$	225,384		$	120,686		$	114,084		$	133,690
Other real estate owned (OREO)	—			—			—			—			—
Total LHI NPAs	$	219,165		$	225,384		$	120,686		$	114,084		$	133,690
Non-accrual loans to LHI	0.90		%	0.91		%	0.49		%	0.47		%	0.57		%
Total LHI NPAs to LHI plus OREO	0.90		%	0.91		%	0.49		%	0.47		%	0.57		%
Total LHI NPAs to earning assets	0.63		%	0.71		%	0.37		%	0.39		%	0.49		%
Allowance for credit losses on loans to non-accrual loans	1.1x			.9x			1.6x			1.9x			1.6x
Loans past due 90 days and still accruing(1)	$	21,274		$	17,584		$	29,648		$	15,212		$	12,245
Loans past due 90 days to LHI	0.09		%	0.07		%	0.12		%	0.06		%	0.05		%
LHS past due 90 days and still accruing(2)	$	9,014		$	8,207		$	9,187		$	11,665		$	13,693

(1)		At March 31, 2020, loans past due 90 days and still accruing includes premium finance loans of $8.6 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)
	1st Quarter			4th Quarter			3rd Quarter			2nd Quarter			1st Quarter
	2020			2019			2019			2019			2019
Interest income
Interest and fees on loans	$	283,625		$	312,147		$	329,344		$	329,842		$	312,703
Investment securities	2,183			2,618			2,316			2,260			1,460
Federal funds sold and securities purchased under resale agreements	614			439			554			157			379
Interest-bearing deposits in other banks	19,586			22,553			22,887			14,634			11,019
Total interest income	306,008			337,757			355,101			346,893			325,561
Interest expense
Deposits	62,174			70,987			80,967			72,529			69,054
Federal funds purchased	669			1,319			1,835			5,202			3,516
Other borrowings	9,582			11,712			14,703			20,124			11,854
Subordinated notes	4,191			4,191			4,191			4,191			4,191
Trust preferred subordinated debentures	1,073			1,163			1,237			1,294			1,332
Total interest expense	77,689			89,372			102,933			103,340			89,947
Net interest income	228,319			248,385			252,168			243,553			235,614
Provision for credit losses	96,000			17,000			11,000			27,000			20,000
Net interest income after provision for credit losses	132,319			231,385			241,168			216,553			215,614
Non-interest income
Service charges on deposit accounts	3,293			2,785			2,707			2,849			2,979
Wealth management and trust fee income	2,467			2,342			2,330			2,129			2,009
Brokered loan fees	8,015			8,645			8,691			7,336			5,066
Servicing income	4,746			4,030			3,549			3,126			2,734
Swap fees	2,757			1,559			1,196			601			1,031
Net gain/(loss) on sale of LHS	(13,000		)	(7,757		)	(6,011		)	(5,986		)	(505		)
Other	3,502			6,157			7,839			14,309			16,700
Total non-interest income	11,780			17,761			20,301			24,364			30,014
Non-interest expense
Salaries and employee benefits	76,667			80,262			80,106			76,889			77,823
Net occupancy expense	8,712			9,075			8,125			7,910			7,879
Marketing	8,460			12,807			14,753			14,087			11,708
Legal and professional	17,466			21,032			11,394			10,004			10,030
Communications and technology	13,608			13,801			10,805			11,022			9,198
FDIC insurance assessment	5,849			5,613			5,220			4,138			5,122
Servicing-related expenses	16,354			2,960			8,165			6,066			5,382
Merger-related expenses	7,270			1,370			—			—			—
Other	11,031			11,770			10,802			11,445			13,236
Total non-interest expense	165,417			158,690			149,370			141,561			140,378
Income/(loss) before income taxes	(21,318		)	90,456			112,099			99,356			105,250
Income tax expense/(benefit)	(4,631		)	16,539			23,958			21,387			22,411
Net income/(loss)	(16,687		)	73,917			88,141			77,969			82,839
Preferred stock dividends	2,438			2,437			2,438			2,437			2,438
Net income/(loss) available to common shareholders	$	(19,125	)	$	71,480		$	85,703		$	75,532		$	80,401

TEXAS CAPITAL BANCSHARES, INC.
QUARTERLY FINANCIAL SUMMARY - UNAUDITED
Consolidated Daily Average Balances, Average Yields and Rates
(Dollars in thousands)
	1st Quarter 2020									4th Quarter 2019									3rd Quarter 2019									2nd Quarter 2019									1st 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	$	42,799		$	274		2.57	%		$	40,904		$	693		6.72	%		$	39,744		$	357		3.56	%		$	38,887		$	287		2.96	%		$	30,625		$	274		3.62	%
Investment securities - Non-taxable(2)	195,578			2,417			4.97	%		197,591			2,437			4.89	%		200,090			2,480			4.92	%		192,115			2,498			5.21	%		114,341			1,501			5.33	%
Federal funds sold and securities purchased under resale agreements	199,727			614			1.24	%		102,320			439			1.70	%		100,657			554			2.18	%		28,436			157			2.22	%		63,652			379			2.41	%
Interest-bearing deposits in other banks	6,225,948			19,586			1.27	%		5,387,000			22,553			1.66	%		4,184,217			22,887			2.17	%		2,491,827			14,634			2.36	%		1,823,106			11,019			2.45	%
LHS, at fair value	3,136,381			27,480			3.52	%		3,567,836			33,411			3.72	%		2,555,269			26,206			4.07	%		2,494,883			27,607			4.44	%		2,122,302			25,303			4.84	%
LHI, mortgage finance loans	7,054,682			55,324			3.15	%		7,870,888			63,114			3.18	%		8,118,025			68,660			3.36	%		7,032,963			63,523			3.62	%		4,931,879			46,368			3.81	%
LHI(1)(2)	16,598,775			201,781			4.89	%		16,667,259			216,686			5.16	%		16,901,391			235,557			5.53	%		16,781,733			239,829			5.73	%		16,866,456			242,155			5.82	%
Less allowance for credit losses on loans	201,837			—			—			189,353			—			—			212,898			—			—			206,654			—			—			192,122			—			—
LHI, net of allowance	23,451,620			257,105			4.41	%		24,348,794			279,800			4.56	%		24,806,518			304,217			4.87	%		23,608,042			303,352			5.15	%		21,606,213			288,523			5.42	%
Total earning assets	33,252,053			307,476			3.72	%		33,644,445			339,333			4.00	%		31,886,495			356,701			4.44	%		28,854,190			348,535			4.84	%		25,760,239			326,999			5.15	%
Cash and other assets	976,520									974,866									1,000,117									940,793									894,797
Total assets	$	34,228,573								$	34,619,311								$	32,886,612								$	29,794,983								$	26,655,036
Liabilities and Stockholders’ Equity
Transaction deposits	$	3,773,067		$	13,582		1.45	%		$	3,817,294		$	16,428		1.71	%		$	3,577,905		$	18,442		2.04	%		$	3,475,404		$	18,037		2.08	%		$	3,263,976		$	16,001		1.99	%
Savings deposits	11,069,429			35,961			1.31	%		11,111,326			40,603			1.45	%		10,331,078			45,586			1.75	%		8,896,537			40,994			1.85	%		8,751,200			41,673			1.93	%
Time deposits	2,842,535			12,631			1.79	%		2,453,655			13,956			2.26	%		2,706,434			16,939			2.48	%		2,227,460			13,498			2.43	%		2,010,476			11,380			2.30	%
Total interest bearing deposits	17,685,031			62,174			1.41	%		17,382,275			70,987			1.62	%		16,615,417			80,967			1.93	%		14,599,401			72,529			1.99	%		14,025,652			69,054			2.00	%
Other borrowings	3,020,255			10,251			1.37	%		2,822,465			13,031			1.83	%		2,896,477			16,538			2.27	%		4,018,231			25,326			2.53	%		2,412,254			15,370			2.58	%
Subordinated notes	282,165			4,191			5.97	%		282,074			4,191			5.89	%		281,979			4,191			5.90	%		281,889			4,191			5.96	%		281,799			4,191			6.03	%
Trust preferred subordinated debentures	113,406			1,073			3.80	%		113,406			1,163			4.07	%		113,406			1,237			4.33	%		113,406			1,294			4.58	%		113,406			1,332			4.76	%
Total interest bearing liabilities	21,100,857			77,689			1.48	%		20,600,220			89,372			1.72	%		19,907,279			102,933			2.05	%		19,012,927			103,340			2.18	%		16,833,111			89,947			2.17	%
Demand deposits	10,003,495									10,933,887									9,992,406									7,929,266									7,047,120
Other liabilities	270,868									278,964									264,506									220,305									223,142
Stockholders’ equity	2,853,353									2,806,240									2,722,421									2,632,485									2,551,663
Total liabilities and stockholders’ equity	$	34,228,573								$	34,619,311								$	32,886,612								$	29,794,983								$	26,655,036
Net interest income(2)				$	229,787								$	249,961								$	253,768								$	245,195								$	237,052
Net interest margin							2.78	%								2.95	%								3.16	%								3.41	%								3.73	%

(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.

CONTACT: INVESTOR CONTACT
Julie Anderson, 214.932.6773
[e-mail]

MEDIA CONTACT
Shannon Wherry, 469.399.8527
[e-mail]