Texas Capital Bancshares Announces Operating Results for 2012

Texas Capital Bancshares Announces Operating Results for 2012

DALLAS--(BUSINESS WIRE)-- Texas Capital Bancshares, Inc. (NAS: TCBI) , the parent company of Texas Capital Bank, announced earnings and operating results for the fourth quarter and full year of 2012.

  • Net income increased 59% for the year, 3% decrease on a linked quarter basis (4% increase excluding litigation settlement) and 22% increase for the fourth quarter of 2012 as compared to the same quarter of 2011

  • EPS increased 51% for the year, 5% decrease on a linked quarter basis (3% increase excluding litigation settlement) and 13% increase for the fourth quarter of 2012 as compared to the same quarter of 2011

  • Results for the fourth quarter and 2012 include a pre-tax charge of $4.0 million, or $0.06 per share after-tax, related to settlement of litigation

  • Demand deposits increased 45% and total deposits increased 34% from 2011; linked quarter increases of 20% and 11%, respectively

  • Loans held for investment increased 22% and total loans increased 30% from 2011, reflecting linked quarter increases of 4% and 6%, respectively

"I am very pleased with the operating results we achieved both for this quarter and for the full year," said George Jones, CEO. "Our growth continues, and we are confident in our ability to continue to generate industry-leading results."

FINANCIAL SUMMARY

(dollars and shares in thousands)

2012

2011

% Change

ANNUAL OPERATING RESULTS(1)

Net Income

$

120,709

$

76,102

59

%

Diluted EPS

$

3.01

$

1.99

51

%

ROA

1.35

%

1.12

%

ROE

16.93

%

13.39

%

Diluted Shares

40,166

38,333

QUARTERLY OPERATING RESULTS(1)

Net Income

$

31,435

$

25,745

22

%

Diluted EPS

$

.76

$

.67

13

%

ROA

1.27

%

1.28

%

ROE

15.35

%

17.05

%

Diluted Shares

41,505

38,609

BALANCE SHEET(1)

Total Assets

$

10,540,542

$

8,137,225

30

%

Demand Deposits

2,535,375

1,751,944

45

%

Total Deposits

7,440,804

5,556,257

34

%

Loans Held for Investment

6,785,535

5,572,371

22

%

Loans Held for Sale

3,175,272

2,080,081

53

%

Total Loans

9,960,807

7,652,452

30

%

Stockholders' Equity

836,242

616,331

36

%


(1) Operating results, assets and loans are reporting from continuing operations

DETAILED FINANCIALS

Texas Capital Bancshares, Inc. reported net income from continuing operations of $120.7 million for the year ended December 31, 2012 compared to $76.1 million in 2011. For the fourth quarter of 2012, we earned $31.4 million compared to $25.7 million for the same period in 2011. On a fully diluted basis, earnings per common share from continuing operations were $3.01 for the year ended December 31, 2012, compared to $1.99 for 2011. For the fourth quarter of 2012, diluted earnings per share was $.76 compared to $.67 for the same period in 2011. Results for the fourth quarter of 2012 include a charge of $4.0 million related to settlement of litigation. The discussion below relates only to continuing operations.

Return on average equity was 16.93 percent and return on average assets was 1.35 percent for the year ended December 31, 2012, compared to 13.39 percent and 1.12 percent, respectively, 2011. Return on average equity was 15.35 percent and return on average assets was 1.27 percent for the fourth quarter of 2012, compared to 17.05 percent and 1.28 percent, respectively, for the fourth quarter of 2011.

Net interest income was $101.2 million for the fourth quarter of 2012, compared to $96.9 million in the third quarter of 2012 and $88.1 million for the fourth quarter of 2011. For 2012, net interest income reached $376.9 million compared to $302.9 million in 2011. The net interest margin in the fourth quarter of 2012 was 4.27 percent, a 33 basis point decrease from the fourth quarter of 2011 and a 9 basis point decrease from the third quarter of 2012. The year-to-date and quarter-to-date year over year decreases in net interest margin are due to the growth in loans with lower yields with an offsetting benefit of the reduction in funding costs. The growth in loans more than compensated for the reduction in yields and produced the strong growth in net interest income.

Average loans held for investment for the year ended December 31, 2012 were $6.1 billion, an increase of $1.1 billion, or 22 percent, from 2011. Average loans held for sale for the year ended December 31, 2012 were $2.3 billion, an increase of $1.1 billion, or 90 percent. Average loans held for investment for the fourth quarter of 2012 were $6.7 billion, an increase of $1.3 billion, or 23 percent, from the fourth quarter of 2011 and an increase of $349.6 million, or 6 percent, from the third quarter of 2012. Average loans held for sale for the fourth quarter of 2012 increased $564.2 million to $2.7 billion compared to the fourth quarter of 2011 and increased $226.1 million from the third quarter of 2012.

Average total deposits for the fourth quarter of 2012 increased $1.4 billion from the fourth quarter of 2011 and increased $358.4 million from the third quarter of 2012. For the same periods, the average balance of demand deposits increased $697.6 million, or 42 percent, to $2.4 billion from $1.7 billion during the fourth quarter of 2011 and increased $346.1 million, or 17 percent, from the third quarter of 2012.

In the fourth quarter of 2012, we experienced decreases in the levels of non-performing assets. Credit costs, including the provision for credit losses and valuation charges related to other real estate owned ("OREO") totaled $5.5 million in the fourth quarter of 2012 compared to $7.1 million in the fourth quarter of 2011 and $3.1 million in the third quarter of 2012. We recorded a $4.5 million provision for credit losses in the fourth quarter of 2012 compared to $6.0 million in the fourth quarter of 2011 and $3.0 million in the third quarter of 2012. For 2012, the total provision for loan losses was $11.5 million, a decrease of 60 percent from $28.5 million in 2011. At December 31, 2012, the combined reserve decreased to 1.15 percent of loans held for investment as compared to 1.31 percent at December 31, 2011 and 1.18 percent at September 30, 2012. In management's opinion, the reserve is appropriate and is derived from consistent application of the methodology for establishing the adequacy of reserves for Texas Capital Bank's loan portfolio. In the fourth quarter of 2012, net charge-offs were $3.5 million compared to net charge-offs of $3.4 million in the fourth quarter of 2011 and net charge-offs of $1.2 million in the third quarter of 2012. For 2012, net charge-offs were $6.1 million, 0.10 percent of average loans held for investment, compared to $29.2 million and a ratio of 0.58 percent in 2011. Non-accrual loans were $55.8 million, or .82 percent of loans held for investment at the end of the fourth quarter of 2012, $54.6 million, or .98 percent, at the end of the fourth quarter of 2011 and $57.3 million, or .87 percent, at the end of the third quarter 2012. At December 31, 2012, total OREO was $16.0 million compared to $34.1 million at the end of the fourth quarter of 2011, and $19.1 million at the end of the third quarter of 2012. The OREO balance of $16.0 million at December 31, 2012 is stated net of a $5.6 million valuation allowance. The valuation charge for OREO reflected in non-interest expense was $955,000 in the fourth quarter of 2012 compared to $1.1 million in the fourth quarter of 2011 and $64,000 in the third quarter of 2012.

Non-interest income increased $3.8 million during the fourth quarter of 2012, or 42 percent, compared to the same period of 2011 primarily related to a $1.6 million increase in brokered loan fees earned in the mortgage warehouse lending division and $1.9 million in other income which includes swap fees and gain on sales of OREO.

Non-interest expense for the fourth quarter of 2012 increased $9.7 million, or 19 percent, to $60.1 million from $50.4 million in the fourth quarter of 2011. The increase is primarily related to a $4.5 million increase in salaries and employee benefits to $31.2 million from $26.7 million, which was primarily due to general business growth and costs of performance-based incentives resulting from the increase in stock price. Non-interest expense for the fourth quarter of 2012 includes a pre-tax charge of $4.0 million ($0.06 per share after tax) for settlement of the judgment of $65.5 million against us in Oklahoma district court. In the settlement, all litigation against us in the Oklahoma courts and actions by us against the plaintiff in the Texas courts will be dismissed with prejudice. Because the settlement was within policy limits of insurance coverage maintained by the Company, we have claims against our insurance carrier for more than the charge, and we intend to pursue those claims aggressively. Legal and professional expense increased $958,000 from the fourth quarter of 2011 primarily due to general business growth. Allowance and other carrying costs for OREO expense decreased $1.0 million to $1.4 million, which included a $955,000 valuation expense during the fourth quarter of 2012. Of the $955,000 valuation expense in the fourth quarter of 2012, $23,000 related to direct write-downs and $932,000 related to increasing the valuation allowance, compared to $1.1 million in valuation expense in the fourth quarter 2011, $691,000 of which related to direct write-downs and $400,000 related to increasing the valuation allowance.

Stockholders' equity increased by 36 percent from $616.3 million at December 31, 2011 to $836.2 million at December 31, 2012, primarily related to the offering of 2.3 million common shares for net proceeds of $87 million in the third quarter of 2012 and retention of net income. In addition to the equity offering, we also completed a subordinated debt offering in the third quarter of 2012 of $111 million, increasing our total regulatory capital by approximately $198 million. The Bank is well capitalized under regulatory guidelines and at December 31, 2012, our ratio of tangible common equity to total tangible assets was 7.7 percent.

ABOUT TEXAS CAPITAL BANCSHARES, INC.

Texas Capital Bancshares, Inc. (NAS: TCBI) is the parent company of Texas Capital Bank, a commercial bank that delivers highly personalized financial services to businesses and private clients. Headquartered in Dallas, the Bank has full-service locations in Austin, Dallas, Fort Worth, Houston and San Antonio.

This news release may be deemed to include forward-looking statements which are based on Texas Capital's current estimates or expectations of future events or future results. Texas Capital is under no obligation, and expressly disclaims such obligation, to update, alter or revise its forward-looking statements, whether as a result of new information, future events, or otherwise. A number of factors, many of which are beyond Texas Capital's 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 risk of adverse impacts from general economic conditions, competition, interest rate sensitivity and exposure to regulatory and legislative changes.These and other factors that could cause results to differ materially from those described in the forward-looking statements can be found in the prospectus supplements, the Annual Report on Form 10-K and other filings made by Texas Capital with the Securities and Exchange Commission (SEC).

TEXAS CAPITAL BANCSHARES, INC.

SELECTED FINANCIAL HIGHLIGHTS (UNAUDITED)

(Dollars in thousands except per share data)

4th Quarter

3rd Quarter

2nd Quarter

1st Quarter

4th Quarter

2012

2012

2012

2012

2011

CONSOLIDATED STATEMENT OF INCOME

Interest income

$

107,769

$

102,011

$

95,546

$

93,131

$

92,967

Interest expense

6,614

5,156

4,906

4,902

4,820

Net interest income

101,155

96,855

90,640

88,229

88,147

Provision for credit losses

4,500

3,000

1,000

3,000

6,000

Net interest income after provision for credit losses

96,655

93,855

89,640

85,229

82,147

Non-interest income

12,836

10,552

10,462

9,190

8,994

Non-interest expense

60,074

53,521

53,973

52,276

50,353

Income from continuing operations before income taxes

49,417

50,886

46,129

42,143

40,788

Income tax expense

17,982

18,316

16,506

15,062

15,043

Income from continuing operations

31,435

32,570

29,623

27,081

25,745

Income (loss) from discontinued operations (after-tax)

(6

)

(34

)

(1

)

4

(5

)

Net income

$

31,429

$

32,536

$

29,622

$

27,085

$

25,740

Diluted EPS from continuing operations

$

.76

$

.80

$

.76

$

.70

$

.67

Diluted EPS

$

.76

$

.80

$

.76

$

.70

$

.67

Diluted shares

41,505,026

40,755,733

39,141,544

38,914,241

38,609,094

CONSOLIDATED BALANCE SHEET DATA

Total assets

$

10,540,542

$

9,881,362

$

9,144,360

$

8,559,917

$

8,137,225

Loans held for investment

6,785,535

6,549,089

6,234,692

5,792,349

5,572,371

Loans held for sale

3,175,272

2,818,622

2,408,032

2,255,281

2,080,081

Securities

100,195

107,288

114,964

123,828

143,710

Demand deposits

2,535,375

2,114,279

2,019,473

1,751,443

1,751,944

Total deposits

7,440,804

6,717,579

6,660,290

6,063,558

5,556,257

Other borrowings

1,947,161

2,046,169

1,609,039

1,657,728

1,768,116

Subordinated notes

111,000

111,000

-

-

-

Long-term debt

113,406

113,406

113,406

113,406

113,406

Stockholders' equity

836,242

802,406

680,705

647,341

616,331

End of period shares outstanding

40,727,579

40,580,283

38,114,012

37,912,054

37,666,291

Book value (excluding securities gains/losses)

$

20.45

$

19.68

$

17.75

$

16.96

$

16.24

Tangible book value (excluding securities gains/losses)

$

19.96

$

19.18

$

17.22

$

16.42

$

15.69

SELECTED FINANCIAL RATIOS

Net interest margin

4.27

%

4.36

%

4.49

%

4.54

%

4.60

%

Return on average assets

1.27

%

1.40

%

1.40

%

1.33

%

1.28

%

Return on average equity

15.35

%

17.27

%

18.08

%

17.36

%

17.05

%

Non-interest income to earning assets

.54

%

.47

%

.52

%

.47

%

.47

%

Efficiency ratio

52.7

%

49.8

%

53.4

%

53.7

%

51.8

%

Efficiency ratio (excluding OREO valuation/write-down)

51.9

%

49.8

%