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Section 1: 8-K (8-K)

Document
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 8-K
 
Current Report Pursuant
to Section 13 or 15(d) of the
Securities and Exchange Act of 1934
Date of Report (Date of earliest event reported): April 16, 2019
 
TEXAS CAPITAL BANCSHARES, INC.
(Name of Registrant)
 
Delaware
(State or other jurisdiction of
incorporation or organization)
001-34657
(Commission
File Number)
75-2679109
(I.R.S. Employer
Identification Number)
2000 McKinney Avenue, Suite 700, Dallas, Texas, U.S.A.
(Address of principal executive officers)
75201
(Zip Code)
214-932-6600
(Registrant's telephone number,
including area code)
N/A
(Former address of principal executive offices)
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
¨

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
 
¨
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
 
¨
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
 
¨
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
 




Item 2.02.    Results of Operations and Financial Condition.
(a)
On April 17, 2019, Texas Capital Bancshares, Inc. (the "Company") issued a press release and made a concurrent public presentation regarding its operating and financial results for its fiscal quarter and year ended March 31, 2019. A copy of the press release is attached hereto as Exhibit 99.1. A copy of the presentation is attached hereto as Exhibit 99.2.
The information in Item 2.02 of this report (including the exhibits hereto) shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall such information be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, except as expressly set forth by specific reference in such a filing.
Item 5.07.    Submission of Matters to a Vote of Security Holders.
On April 16, 2019, the Company held its 2019 Annual Meeting of Stockholders (the "Annual Meeting"). The matters voted on at the Annual Meeting and final voting results are summarized below.

Proposal One - A Company proposal to elect twelve directors for a term of one year or until their successors are elected and qualified:
 
 
Number of Shares
 
 
 
 
Voted For
 
Votes Withheld
 
Broker Non-Votes
Larry L. Helm
 
41,133,959

 
 
591,523

 
 
1,830,013

 
C. Keith Cargill
 
41,250,945

 
 
474,537

 
 
1,830,013

 
Jonathan E. Baliff
 
41,207,225

 
 
518,257

 
 
1,830,013

 
James H. Browning
 
24,992,957

 
 
16,802,525

 
 
1,830,013

 
David S. Huntley
 
41,145,200

 
 
580,282

 
 
1,830,013

 
Charles S. Hyle
 
41,165,093

 
 
560,389

 
 
1,830,013

 
Elysia Holt Ragusa
 
19,068,725

 
 
22,656,757

 
 
1,830,013

 
Steven P. Rosenberg
 
40,425,209

 
 
1,300,273

 
 
1,830,013

 
Robert W. Stallings
 
40,745,841

 
 
979,641

 
 
1,830,013

 
Dale W. Tremblay
 
38,485,454

 
 
3,240,028

 
 
1,830,013

 
Ian J. Turpin
 
24,515,913

 
 
17,209,569

 
 
1,830,013

 
Patricia A. Watson
 
41,053,341

 
 
672,141

 
 
1,830,013

 
Each of the twelve director nominees was elected for a one-year term.

Proposal 2 - A Company proposal to approve, on an advisory basis, the 2018 compensation of our named executive officers:
 
Number of Shares
 
Voted For
 
Voted Against
 
Abstentions
 
Broker Non-Votes
 
40,805,744

 
 
880,558

 
 
39,177

 
 
1,830,016

 
The 2018 compensation of our named executive officers was approved on an advisory basis.





Proposal 3 - A Company proposal to ratify the appointment of Ernst & Young LLP as the Company's independent registered public accounting firm for the fiscal year ending December 31, 2019:
 
Number of Shares
 
Voted For
 
Voted Against
 
Abstentions
 
Broker Non-Votes
 
42,253,557

 
 
1,281,184

 
 
20,754

 
 
0
 
The appointment of Ernst & Young LLP as the Company's independent registered public accounting firm was ratified.
Item 9.01.    Financial Statements and Exhibits.

(d)
Exhibits
99.1
Press Release, dated April 17, 2019 announcing Texas Capital Bancshares, Inc.'s operating and financial results for its fiscal quarter and year ended March 31, 2019

99.2
Presentation given April 17, 2019 discussing Texas Capital Bancshares, Inc.’s operating and financial results for its fiscal quarter and year ended March 31, 2019





SIGNATURE


Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Date:
April 17, 2019
TEXAS CAPITAL BANCSHARES, INC.
 
 
 
 
 
 
 
By:
 
/s/ Julie Anderson
 
 
 
 
 
Julie Anderson
Chief Financial Officer



(Back To Top)

Section 2: EX-99.1 (EXHIBIT 99.1 EARNINGS RELEASE)

Exhibit
Exhibit 99.1
397560559_tcbilogoa60.jpg
INVESTOR CONTACT
Heather Worley, 214.932.6646
[email protected]
TEXAS CAPITAL BANCSHARES, INC. ANNOUNCES OPERATING RESULTS FOR Q1 2019
DALLAS - April 17, 2019 - Texas Capital Bancshares, Inc. (NASDAQ: TCBI), the parent company of Texas Capital Bank, announced earnings and operating results for the first quarter of 2019.
“We begin 2019 with strong operating results," said Keith Cargill, CEO. "Our first quarter earnings highlight improvements in key performance metrics, including positive operating leverage which we attribute to strategic initiatives put in place last year. We are confident in continuing to deliver on key strategic initiatives to diversify and reduce the cost of our deposits and build on our reputation for delivering a premier client experience, not simply transactions."
Loans held for investment ("LHI"), excluding mortgage finance loans, increased 2% on a linked quarter basis (increasing 1% on an average basis) and 8% from the first quarter of 2018 (increasing 9% on an average basis).
Total mortgage finance loans, including mortgage correspondent aggregation ("MCA") loans held for sale ("LHS"), increased 5% on a linked quarter basis (decreasing 1% on an average basis) and increased 42% from the first quarter of 2018 (increasing 33% on an average basis).
Demand deposits decreased 8% and total deposits remained flat on a linked quarter basis (decreased 6% and increased 1%, respectively, on an average basis), and decreased 9% and increased 10%, respectively, from the first quarter of 2018 (decreased 14% and increased 8%, respectively, on an average basis).
Net income increased 15% on a linked quarter basis and increased 15% from the first quarter of 2018.
EPS increased 16% on a linked quarter basis and increased 16% from the first quarter of 2018.
FINANCIAL SUMMARY
(Dollars and shares in thousands)
 
Q1 2019
 
Q1 2018
 
% Change
QUARTERLY OPERATING RESULTS
 
 
 
 
 
Net income
$
82,839

 
$
71,945

 
15
 %
Net income available to common stockholders
$
80,401

 
$
69,507

 
16
 %
Diluted EPS
$
1.60

 
$
1.38

 
16
 %
Diluted shares
50,345

 
50,353

 
 %
ROA
1.26
%
 
1.22
%
 
 
ROE
13.58
%
 
13.39
%
 
 
BALANCE SHEET
 
 
 
 
 
LHS
$
1,901,637

 
$
1,088,565

 
75
 %
LHI, mortgage finance
6,299,710

 
4,689,938

 
34
 %
LHI
17,061,590

 
15,741,772

 
8
 %
Total LHI
23,361,300

 
20,431,710

 
14
 %
Total loans
25,262,937

 
21,520,275

 
17
 %
Total assets
28,383,111

 
24,449,147

 
16
 %
Demand deposits
6,743,607

 
7,413,340

 
(9
)%
Total deposits
20,650,127

 
18,764,533

 
10
 %
Stockholders’ equity
2,581,942

 
2,273,429

 
14
 %





DETAILED FINANCIALS
For the first quarter of 2019, net income was $82.8 million and net income available to common stockholders was $80.4 million, compared to net income of $71.9 million and net income available to common stockholders of $69.5 million for the same period in 2018. On a fully diluted basis, earnings per common share were $1.60 for the quarter ended March 31, 2019 compared to $1.38 for the same period of 2018. The increases reflect a $10.9 million increase in net income primarily driven by increases in net interest income and non-interest income for the first quarter of 2019 compared to the first quarter of 2018, partially offset by increases in the provision for credit losses and non-interest expense.

Return on common equity ("ROE") was 13.58 percent and return on average assets ("ROA") was 1.26 percent for the first quarter of 2019, compared to 11.82 percent and 1.09 percent, respectively, for the fourth quarter of 2018 and 13.39 percent and 1.22 percent, respectively, for the first quarter of 2018. The linked quarter increases in ROE and ROA for the first quarter of 2019 resulted primarily from the decrease in the provision for credit losses and increase in non-interest income, offset by the increase in non-interest expense.

Net interest income was $235.6 million for the first quarter of 2019, compared to $240.7 million for the fourth quarter of 2018 and $210.3 million for the first quarter of 2018. The linked quarter decrease in net interest income was due primarily to the decrease in day count in the quarter. The year-over-year increase in net interest income was due primarily to increases in loan yields and growth in average total loans, partially offset by increases in average interest-bearing deposits and cost of deposits. Net interest margin for the first quarter of 2019 was 3.73 percent, a decrease of 5 basis points from the fourth quarter of 2018 and an increase of 2 basis points from the first quarter of 2018. LHI, excluding mortgage finance loans, yields increased 10 basis points from the fourth quarter of 2018, and increased 68 basis points compared to the first quarter of 2018. Mortgage finance loans, excluding MCA loans, yields for the first quarter of 2019 increased 9 basis points compared to the fourth quarter of 2018 and increased 11 basis points compared to the first quarter of 2018. Total cost of deposits for the first quarter of 2019 increased 16 basis points to 1.33 percent compared to 1.17 percent for the fourth quarter of 2018, and increased 67 basis points from 0.66 percent for the first quarter of 2018.

Average LHI, excluding mortgage finance loans, for the first quarter of 2019 were $16.9 billion, an increase of $222.9 million, or 1 percent, from the fourth quarter of 2018 and an increase of $1.4 billion, or 9 percent, from the first quarter of 2018. Average total mortgage finance loans, including MCA loans, for the first quarter of 2019 were $7.1 billion, a decrease of $41.8 million, or 1 percent, from the fourth quarter of 2018 and an increase of $1.8 billion, or 33 percent, from the first quarter of 2018.

Average total deposits for the first quarter of 2019 increased $136.1 million, or 1 percent, from the fourth quarter of 2018 and increased $1.6 billion, or 8 percent, from the first quarter of 2018. Average demand deposits for the first quarter of 2019 decreased $415.3 million, or 6 percent, to $7.0 billion from $7.5 billion for the fourth quarter of 2018, and decreased $1.1 billion, or 14 percent, from the first quarter of 2018 as a result of the rising interest rate environment and the shift to interest-bearing deposits.

We recorded a $20.0 million provision for credit losses for the first quarter of 2019 compared to $35.0 million for the fourth quarter of 2018 and $12.0 million for the first quarter of 2018. The provision for the first quarter of 2019 was driven by the consistent application of our methodology. The linked quarter decrease resulted from a decrease in charge-offs during the first quarter of 2019 compared to the fourth quarter of 2018, partially offset by an increase in non-accrual loans. The total allowance for credit losses at March 31, 2019 increased to 0.93 percent of LHI, compared to 0.90 percent at December 31, 2018 and decreased from 0.98 percent at March 31, 2018. In management’s opinion, the allowance is appropriate and is derived from consistent application of the methodology for establishing reserves for the loan portfolio.

We experienced an increase in non-performing assets ("NPAs") in the first quarter of 2019 compared to the fourth quarter of 2018 and first quarter of 2018. The ratio of total NPAs to total LHI plus other real estate owned ("OREO") for the first quarter of 2019 was 0.57 percent, compared to 0.36 percent for the fourth quarter of 2018 and 0.65 percent for the first quarter of 2018. Net charge-offs for the first quarter of 2019 were $4.6 million compared to $32.6 million for the fourth quarter of 2018 and $5.2 million for the first quarter of 2018. For the first quarter of 2019, net charge-offs were 0.09 percent of average total LHI, compared to 0.60 percent for the fourth quarter of 2018 and 0.11 percent for the same period in 2018.

Non-interest income increased $14.7 million, or 96 percent, during the first quarter of 2019 compared to the fourth quarter of 2018, and increased $10.1 million, or 50 percent, compared to the first quarter of 2018. The linked quarter increase is primarily related to increases in the net gain on sale of loans held for sale and other non-interest income, primarily due to an $8.5 million legal claim settled during the first quarter of 2019. The year-over-year increase primarily related to increases in the net gain on sale of loans and other non-interest income, primarily due to an $8.5 million legal claim settled during the first quarter of 2019, offset by a decrease in servicing income.


2




Non-interest expense for the first quarter of 2019 increased $10.5 million, or 8 percent, compared to the fourth quarter of 2018, and increased $13.4 million, or 11 percent, compared to the first quarter of 2018. The linked quarter increase in non-interest expense was primarily related to increases in salaries and employee benefits, marketing and servicing related expenses, offset by a decrease in legal and professional expenses. The year-over-year increase was primarily due to increases in salaries and employee benefits, marketing, legal and professional and communications and technology expenses, offset by a $2.2 million decrease in allowance and other carrying costs for OREO related to the decline in OREO properties held.

Stockholders’ equity increased by 14 percent from $2.3 billion at March 31, 2018 to $2.6 billion at March 31, 2019, primarily due to the retention of net income. Texas Capital Bank is well capitalized under regulatory guidelines. At March 31, 2019, our ratio of tangible common equity to total tangible assets was 8.5% percent.
    

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.

This news release may be deemed to include forward-looking statements which are based on management’s current estimates or expectations of future events or future results. These statements are not historical in nature and can generally be identified by such words as “believe,” “expect,” “estimate,” “anticipate,” “plan,” “may,” “will,” “intend” and similar expressions. 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, expectations regarding rates of default and loan 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 loan 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. 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 and in other filings we make with the Securities and Exchange Commission. The information contained in this release speaks only as of its date. We are under no obligation, and expressly disclaim such obligation, to update, alter or revise our forward-looking statements, whether as a result of new information, future events, or otherwise.

3




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
 
2019
2018
2018
2018
2018
CONSOLIDATED STATEMENTS OF INCOME
 
 
 
 
 
Interest income
$
325,561

$
321,718

$
301,754

$
286,852

$
253,869

Interest expense
89,947

81,045

69,579

55,140

43,569

Net interest income
235,614

240,673

232,175

231,712

210,300

Provision for credit losses
20,000

35,000

13,000

27,000

12,000

Net interest income after provision for credit losses
215,614

205,673

219,175

204,712

198,300

Non-interest income
30,014

15,280

25,518

17,279

19,947

Non-interest expense
140,378

129,862

136,143

132,131

126,960

Income before income taxes
105,250

91,091

108,550

89,860

91,287

Income tax expense
22,411

19,200

22,998

18,424

19,342

Net income
82,839

71,891

85,552

71,436

71,945

Preferred stock dividends
2,438

2,437

2,438

2,437

2,438

Net income available to common stockholders
$
80,401

$
69,454

$
83,114

$
68,999

$
69,507

 
 
 
 
 
 
Diluted EPS
$
1.60

$
1.38

$
1.65

$
1.38

$
1.38

Diluted shares
50,345,399

50,333,412

50,381,349

50,096,015

50,353,497

CONSOLIDATED BALANCE SHEET DATA
 
 
 
 
 
Total assets
$
28,383,111

$
28,257,767

$
27,127,107

$
27,781,910

$
24,449,147

LHI
17,061,590

16,690,550

16,569,538

16,536,721

15,741,772

LHI, mortgage finance
6,299,710

5,877,524

5,477,787

5,923,058

4,689,938

LHS
1,901,637

1,969,474

1,651,930

1,276,768

1,088,565

Liquidity assets(1)
2,154,155

2,865,874

2,615,570

3,288,107

2,296,673

Investment securities
230,749

120,216

117,389

24,408

24,929

Demand deposits
6,743,607

7,317,161

7,031,460

7,648,125

7,413,340

Total deposits
20,650,127

20,606,113

20,385,637

20,334,871

18,764,533

Other borrowings
4,497,892

4,541,174

3,686,818

4,520,849

2,835,540

Subordinated notes
281,858

281,767

281,677

281,586

281,496

Long-term debt
113,406

113,406

113,406

113,406

113,406

Stockholders’ equity
2,581,942

2,500,394

2,426,442

2,343,530

2,273,429

 
 
 
 
 
 
End of period shares outstanding
50,263,611

50,200,710

50,177,260

50,151,064

49,669,774

Book value
$
48.38

$
46.82

$
45.37

$
43.74

$
42.75

Tangible book value(2)
$
48.02

$
46.45

$
45.00

$
43.36

$
42.37

SELECTED FINANCIAL RATIOS
 
 
 
 
 
Net interest margin
3.73
%
3.78
%
3.70
%
3.93
%
3.71
%
Return on average assets
1.26
%
1.09
%
1.31
%
1.16
%
1.22
%
Return on average common equity
13.58
%
11.82
%
14.68
%
12.72
%
13.39
%
Non-interest income to average earning assets
0.47
%
0.24
%
0.40
%
0.29
%
0.35
%
Efficiency ratio(3)
52.8
%
50.7
%
52.8
%
53.1
%
55.1
%
Non-interest expense to average earning assets
2.21
%
2.03
%
2.15
%
2.23
%
2.23
%
Tangible common equity to total tangible assets(4)
8.5
%
8.3
%
8.3
%
7.8
%
8.6
%
Common Equity Tier 1
8.6
%
8.6
%
8.6
%
8.3
%
8.8
%
Tier 1 capital
9.6
%
9.5
%
9.6
%
9.3
%
9.9
%
Total capital
11.4
%
11.3
%
11.5
%
11.1
%
11.9
%
Leverage
10.0
%
9.9
%
9.7
%
9.9
%
9.9
%
(1)
Liquidity assets include Federal funds sold and interest-bearing deposits in other banks.
(2)
Stockholders’ equity excluding preferred stock, less goodwill and intangibles, divided by shares outstanding at period end.
(3)
Non-interest expense divided by the sum of net interest income and non-interest income.
(4)
Stockholders’ equity excluding preferred stock and accumulated other comprehensive income less goodwill and intangibles divided by total assets less accumulated other comprehensive income and goodwill and intangibles.

4




TEXAS CAPITAL BANCSHARES, INC.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(Dollars in thousands)
 
March 31, 2019
March 31, 2018
%
Change
Assets
 
 
 
Cash and due from banks
$
177,137

$
154,497

15
 %
Interest-bearing deposits
2,129,155

2,271,673

(6
)%
Federal funds sold and securities purchased under resale agreements
25,000

25,000

 %
Securities, available-for-sale
230,749

24,929

826
 %
LHS, at fair value
1,901,637

1,088,565

75
 %
LHI, mortgage finance
6,299,710

4,689,938

34
 %
LHI (net of unearned income)
17,061,590

15,741,772

8
 %
Less: Allowance for loan losses
208,573

190,898

9
 %
LHI, net
23,152,727

20,240,812

14
 %
Mortgage servicing rights, net
44,088

76,561

(42
)%
Premises and equipment, net
24,200

27,564

(12
)%
Accrued interest receivable and other assets
679,966

520,624

31
 %
Goodwill and intangibles, net
18,452

18,922

(2
)%
Total assets
$
28,383,111

$
24,449,147

16
 %
 
 
 
 
Liabilities and Stockholders’ Equity
 
 
 
Liabilities:
 
 
 
Deposits:
 
 
 
Non-interest bearing
$
6,743,607

$
7,413,340

(9
)%
Interest bearing
13,906,520

11,351,193

23
 %
Total deposits
20,650,127

18,764,533

10
 %
 
 
 


Accrued interest payable
24,488

5,174

373
 %
Other liabilities
233,398

175,569

33
 %
Federal funds purchased and repurchase agreements
897,892

535,540

68
 %
Other borrowings
3,600,000

2,300,000

57
 %
Subordinated notes, net
281,858

281,496

 %
Trust preferred subordinated debentures
113,406

113,406

 %
Total liabilities
25,801,169

22,175,718

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 March 31, 2019 and 2018
150,000

150,000

 %
Common stock, $.01 par value:
 
 
 
Authorized shares - 100,000,000
 
 
 
Issued shares - 50,264,028 and 49,670,191 at March 31, 2019 and 2018, respectively
503

497

1
 %
Additional paid-in capital
969,079

962,553

1
 %
Retained earnings
1,461,893

1,159,925

26
 %
Treasury stock (shares at cost: 417 at March 31, 2019 and 2018)
(8
)
(8
)
 %
Accumulated other comprehensive income, net of taxes
475

462

3
 %
Total stockholders’ equity
2,581,942

2,273,429

14
 %
Total liabilities and stockholders’ equity
$
28,383,111

$
24,449,147

16
 %

5




TEXAS CAPITAL BANCSHARES, INC.
 
 
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
 
 
(Dollars in thousands except per share data)
 
 
 
Three Months Ended March 31,
 
2019
2018
Interest income
 
 
Interest and fees on loans
$
312,703

$
243,864

Investment securities
1,460

206

Federal funds sold and securities purchased under resale agreements
379

1,045

Interest-bearing deposits in other banks
11,019

8,754

Total interest income
325,561

253,869

Interest expense
 
 
Deposits
69,054

31,702

Federal funds purchased
3,516

969

Other borrowings
11,854

5,680

Subordinated notes
4,191

4,191

Trust preferred subordinated debentures
1,332

1,027

Total interest expense
89,947

43,569

Net interest income
235,614

210,300

Provision for credit losses
20,000

12,000

Net interest income after provision for credit losses
215,614

198,300

Non-interest income
 
 
Service charges on deposit accounts
2,979

3,137

Wealth management and trust fee income
2,009

1,924

Brokered loan fees
5,066

5,168

Servicing income
2,734

5,492

Swap fees
1,031

1,562

Net gain/(loss) on sale of LHS
(505
)
(2,173
)
Other
16,700

4,837

Total non-interest income
30,014

19,947

Non-interest expense
 
 
Salaries and employee benefits
77,823

72,537

Net occupancy expense
7,879

7,234

Marketing
11,708

8,677

Legal and professional
10,030

7,530

Communications and technology
9,198

6,633

FDIC insurance assessment
5,122

6,103

Servicing related expenses
5,382

3,805

Allowance and other carrying costs for OREO

2,155

Other
13,236

12,286

Total non-interest expense
140,378

126,960

Income before income taxes
105,250

91,287

Income tax expense
22,411

19,342

Net income
82,839

71,945

Preferred stock dividends
2,438

2,438

Net income available to common stockholders
$
80,401

$
69,507

 
 
 
Basic earnings per common share
$
1.60

$
1.40

Diluted earnings per common share
$
1.60

$
1.38



6




TEXAS CAPITAL BANCSHARES, INC.
SUMMARY OF LOAN LOSS EXPERIENCE
(Dollars in thousands)
 
1st Quarter
4th Quarter
3rd Quarter
2nd Quarter
1st Quarter
 
2019
2018
2018
2018
2018
Allowance for loan losses:
 
 
 
 
 
Beginning balance
$
191,522

$
190,306

$
179,096

$
190,898

$
184,655

Loans charged-off:
 
 
 
 
 
Commercial
4,865

34,419

1,301

38,305

5,667

Real estate





Construction





Consumer


767



Leases


319



Total charge-offs
4,865

34,419

2,387

38,305

5,667

Recoveries:
 
 
 
 
 
Commercial
266

1,399

389

320

360

Real estate

26

11

8

24

Construction





Consumer
10

360

10

9

59

Leases
1

1

12

1

19

Total recoveries
277

1,786

422

338

462

Net charge-offs
4,588

32,633

1,965

37,967

5,205

Provision for loan losses
21,639

33,849

13,175

26,165

11,448

Ending balance
$
208,573

$
191,522

$
190,306

$
179,096

$
190,898

 
 
 
 
 
 
Allowance for off-balance sheet credit losses:
 
 
 
 
 
Beginning balance
$
11,434

$
10,283

$
10,458

$
9,623

$
9,071

Provision for off-balance sheet credit losses
(1,639
)
1,151

(175
)
835

552

Ending balance
$
9,795

$
11,434

$
10,283

$
10,458

$
9,623

 
 
 
 
 
 
Total allowance for credit losses
$
218,368

$
202,956

$
200,589

$
189,554

$
200,521

 
 
 
 
 
 
Total provision for credit losses
$
20,000

$
35,000

$
13,000

$
27,000

$
12,000

 
 
 
 
 
 
Allowance for loan losses to LHI
0.89
%
0.85
%
0.86
%
0.80
%
0.93
%
Allowance for loan losses to average LHI
0.96
%
0.88
%
0.87
%
0.86
%
0.98
%
Net charge-offs to average LHI(1)
0.09
%
0.60
%
0.04
%
0.73
%
0.11
%
Net charge-offs to average LHI for last twelve months(1)
0.36
%
0.37
%
0.22
%
0.28
%
0.15
%
Total provision for credit losses to average LHI(1)
0.37
%
0.64
%
0.24
%
0.52
%
0.25
%
Total allowance for credit losses to LHI
0.93
%
0.90
%
0.91
%
0.84
%
0.98
%
(1)
Interim period ratios are annualized.

7




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
 
2019
2018
2018
2018
2018
 
 
 
 
 
 
Non-performing assets (NPAs):
 
 
 
 
 
Non-accrual loans
$
133,690

$
80,375

$
107,532

$
83,295

$
123,542

Other real estate owned (OREO)

79

79

9,526

9,558

Total LHI NPAs
$
133,690

$
80,454

$
107,611

$
92,821

$
133,100

 
 
 
 
 
 
Non-accrual loans to LHI
0.57
%
0.36
%
0.49
%
0.37
%
0.60
%
Total LHI NPAs to LHI plus OREO
0.57
%
0.36
%
0.49
%
0.41
%
0.65
%
Total LHI NPAs to earning assets
0.49
%
0.29
%
0.41
%
0.35
%
0.56
%
Allowance for loan losses to non-accrual loans
1.6x

2.4x

1.8x

2.2x

1.5x

 
 
 
 
 
 
Loans past due 90 days and still accruing(1)
$
12,245

$
9,353

$
11,295

$
7,357

$
13,563

Loans past due 90 days to LHI
0.05
%
0.04
%
0.05
%
0.03
%
0.07
%
LHS past due 90 days and still accruing(2)
$
13,693

$
16,829

$
25,238

$
27,858

$
35,226

(1)
At March 31, 2019, loans past due 90 days and still accruing includes premium finance loans of $12.0 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 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.

8





TEXAS CAPITAL BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(Dollars in thousands)
 
 
 
 
 
 
 
1st Quarter
4th Quarter
3rd Quarter
2nd Quarter
1st Quarter
 
2019
2018
2018
2018
2018
Interest income
 
 
 
 
 
Interest and fees on loans
$
312,703

$
310,470

$
291,189

$
279,447

$
243,864

Investment securities
1,460

1,274

1,161

193

206

Federal funds sold and securities purchased under resale agreements
379

984

1,018

745

1,045

Interest-bearing deposits in other banks
11,019

8,990

8,386

6,467

8,754

Total interest income
325,561

321,718

301,754

286,852

253,869

Interest expense
 
 
 
 
 
Deposits
69,054

61,773

52,034

39,607

31,702

Federal funds purchased
3,516

2,097

1,800

1,665

969

Other borrowings
11,854

11,726

10,317

8,484

5,680

Subordinated notes
4,191

4,191

4,191

4,191

4,191

Trust preferred subordinated debentures
1,332

1,258

1,237

1,193

1,027

Total interest expense
89,947

81,045

69,579

55,140

43,569

Net interest income
235,614

240,673

232,175

231,712

210,300

Provision for credit losses
20,000

35,000

13,000

27,000

12,000

Net interest income after provision for credit losses
215,614

205,673

219,175

204,712

198,300

Non-interest income
 
 
 
 
 
Service charges on deposit accounts
2,979

3,168

3,477

3,005

3,137

Wealth management and trust fee income
2,009

2,152

2,065

2,007

1,924

Brokered loan fees
5,066

5,408

6,141

5,815

5,168

Servicing income
2,734

2,861

4,987

4,967

5,492

Swap fees
1,031

1,356

1,355

1,352

1,562

Net gain/(loss) on sale of LHS
(505
)
(8,087
)
(444
)
(5,230
)
(2,173
)
Other
16,700

8,422

7,937

5,363

4,837

Total non-interest income
30,014

15,280

25,518

17,279

19,947

Non-interest expense
 
 
 
 
 
Salaries and employee benefits
77,823

69,500

77,327

72,404

72,537

Net occupancy expense
7,879

7,390

8,362

7,356

7,234

Marketing
11,708

10,208

10,214

10,236

8,677

Legal and professional
10,030

13,042

10,764

11,654

7,530

Communications and technology
9,198

8,845

7,435

7,143

6,633

FDIC insurance assessment
5,122

5,423

6,524

6,257

6,103

Servicing related expenses
5,382

2,555

4,207

4,367

3,805

Allowance and other carrying costs for OREO

7

(1,864
)
176

2,155

Other
13,236

12,892

13,174

12,538

12,286

Total non-interest expense
140,378

129,862

136,143

132,131

126,960

Income before income taxes
105,250

91,091

108,550

89,860

91,287

Income tax expense
22,411

19,200

22,998

18,424

19,342

Net income
82,839

71,891

85,552

71,436

71,945

Preferred stock dividends
2,438

2,437

2,438

2,437

2,438

Net income available to common shareholders
$
80,401

$
69,454

$
83,114

$
68,999

$
69,507



9




TEXAS CAPITAL BANCSHARES, INC.
QUARTERLY FINANCIAL SUMMARY - UNAUDITED
Consolidated Daily Average Balances, Average Yields and Rates
(Dollars in thousands)
 
1st Quarter 2019
 
4th Quarter 2018
 
3rd Quarter 2018
 
2nd Quarter 2018
 
1st Quarter 2018
 
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
$
30,625

$
274

3.62
%
 
$
23,977

$
259

4.29
%
 
$
24,221

$
191

3.14
%
 
$
24,514

$
193

3.15
%
 
$
23,854

$
206

3.50
%
Investment securities - Non-taxable(2)
114,341

1,501

5.33
%
 
93,394

1,285

5.46
%
 
91,298

1,228

5.33
%
 


%
 


%
Federal funds sold and securities purchased under resale agreements
63,652

379

2.41
%
 
173,654

984

2.25
%
 
203,972

1,018

1.98
%
 
166,613

745

1.79
%
 
261,641

1,045

1.62
%
Interest-bearing deposits in other banks
1,823,106

11,019

2.45
%
 
1,585,763

8,990

2.25
%
 
1,697,787

8,386

1.96
%
 
1,498,474

6,467

1.73
%
 
2,302,938

8,754

1.54
%
LHS, at fair value
2,122,302

25,303

4.84
%
 
2,049,395

24,407

4.72
%
 
1,484,459

17,272

4.62
%
 
1,516,047

17,026

4.50
%
 
1,187,594

12,535

4.28
%
LHI, mortgage finance loans
4,931,879

46,368

3.81
%
 
5,046,540

47,305

3.72
%
 
5,443,829

49,715

3.62
%
 
4,898,411

47,056

3.85
%
 
4,097,995

37,362

3.70
%
LHI(1)(2)
16,866,456

242,155

5.82
%
 
16,643,559

239,995

5.72
%
 
16,331,622

225,604

5.48
%
 
15,883,317

216,755

5.47
%
 
15,425,323

195,333

5.14
%
Less allowance for loan
       losses
192,122



 
182,814



 
179,227



 
189,238



 
184,238



LHI, net of allowance
21,606,213

288,523

5.42
%
 
21,507,285

287,300

5.30
%
 
21,596,224

275,319

5.06
%
 
20,592,490

263,811

5.14
%
 
19,339,080

232,695

4.88
%
Total earning assets
25,760,239

326,999

5.15
%
 
25,433,468

323,225

5.04
%
 
25,097,961

303,414

4.80
%
 
23,798,138

288,242

4.86
%
 
23,115,107

255,235

4.48
%
Cash and other assets
894,797

 
 
 
828,156

 
 
 
877,954

 
 
 
808,099

 
 
 
797,506

 
 
Total assets
$
26,655,036

 
 
 
$
26,261,624

 
 
 
$
25,975,915

 
 
 
$
24,606,237

 
 
 
$
23,912,613

 
 
Liabilities and Stockholders’ Equity
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Transaction deposits
$
3,263,976

$
16,001

1.99
%
 
$
3,233,960

$
15,150

1.86
%
 
$
3,253,310

$
13,642

1.66
%
 
$
2,889,834

$
10,295

1.43
%
 
$
2,792,954

$
8,651

1.26
%
Savings deposits
8,751,200

41,673

1.93
%
 
8,354,332

36,913

1.75
%
 
7,820,742

29,930

1.52
%
 
7,784,937

25,454

1.31
%
 
7,982,256

21,958

1.12
%
Time deposits
2,010,476

11,380

2.30
%
 
1,886,016

9,710

2.04
%
 
1,778,831

8,462

1.89
%
 
979,735

3,858

1.58
%
 
506,375

1,093

0.88
%
Total interest bearing deposits
14,025,652

69,054

2.00
%
 
13,474,308

61,773

1.82
%
 
12,852,883

52,034

1.61
%
 
11,654,506

39,607

1.36
%
 
11,281,585

31,702

1.14
%
Other borrowings
2,412,254

15,370

2.58
%
 
2,290,520

13,823

2.39
%
 
2,275,640

12,117

2.11
%
 
2,113,391

10,149

1.93
%
 
1,721,914

6,649

1.57
%
Subordinated notes
281,799

4,191

6.03
%
 
281,708

4,191

5.90
%
 
281,619

4,191

5.90
%
 
281,527

4,191

5.97
%
 
281,437

4,191

6.04
%
Trust preferred subordinated debentures
113,406

1,332

4.76
%
 
113,406

1,258

4.40
%
 
113,406

1,237

4.33
%
 
113,406

1,193

4.22
%
 
113,406

1,027

3.67
%
Total interest bearing liabilities
16,833,111

89,947

2.17
%
 
16,159,942

81,045

1.99
%
 
15,523,548

69,579

1.78
%
 
14,162,830

55,140

1.56
%
 
13,398,342

43,569

1.32
%
Demand deposits
7,047,120

 
 
 
7,462,392

 
 
 
7,940,503

 
 
 
8,017,578

 
 
 
8,147,721

 
 
Other liabilities
223,142

 
 
 
157,278

 
 
 
116,302

 
 
 
100,074

 
 
 
110,698

 
 
Stockholders’ equity
2,551,663

 
 
 
2,482,012

 
 
 
2,395,562

 
 
 
2,325,755

 
 
 
2,255,852

 
 
Total liabilities and stockholders’ equity
$
26,655,036

 
 
 
$
26,261,624

 
 
 
$
25,975,915

 
 
 
$
24,606,237

 
 
 
$
23,912,613

 
 
Net interest income(2)
 
$
237,052

 
 
 
$
242,180

 
 
 
$
233,835

 
 
 
$
233,102

 
 
 
$
211,666

 
Net interest margin
 


3.73
%
 
 
 
3.78
%
 
 
 
3.70
%
 
 
 
3.93
%
 
 
 
3.71
%
(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.

10

(Back To Top)

Section 3: EX-99.2 (EXHIBIT 99.2 EARNINGS PRESENTATION)

q12019earningswebcast
TCBI Q1 2019 Earnings April 17, 2019


 
Certain matters discussed within or in connection with these materials may contain “forward-looking statements” as defined in federal securities laws, which are subject to risks and uncertainties and are based on Texas Capital’s current estimates or expectations of future events or future results. These statements are not historical in nature and can generally be identified by such words as “believe,” “expect,” “estimate,” “anticipate,” “plan,” “may,” “will,” “intend” and similar expressions. 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, expectations regarding rates of default and loan 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 loan 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. 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 and in other filings we make with the Securities and Exchange Commission. Forward-looking statements speak only as of the date of this presentation. Texas Capital is under no obligation, and expressly disclaims any obligation, to update, alter or revise its forward-looking statements, whether as a result of new information, future events or otherwise. 2


 
Opening Remarks & Financial Highlights Total Loans Total Deposits Net Income EPS ROE ROA Operating HFI Results $23.4 billion $20.7 billion $82.8 million $1.60 13.58% 1.26% • Net interest income decreased 2% from Q4-2018 and increased 12% from Q1-2018 Net Interest Income • Net interest margin decreased 5 bps from Q4-2018 to 3.73% and increased 2 bps from Q1-2018 and Margin • LIBOR movement reflected in core LHI yields with stabilized mortgage finance yields, but offset by lower core LHI fees • Average LHI, excluding MFLs, grew 1% from Q4-2018 ($222.9 million); 9% from Q1-2018 ($1.4 billion) Balance Sheet • Average total MFLs decreased 1% from Q4-2018 ($41.8 million); increased 33% from Q1-2018 ($1.8 billion) Growth • Average total deposits increased 1% from Q4-2018 ($136.1 million); 8% from Q1-2018 ($1.6 billion) M • Net revenue increased 4% from Q4-2018 and increased 15% from Q1-2018 Operating Leverage • Non-interest expense increased 8% from Q4-2018 (includes seasonal payroll expense items and MSR impairment charge) and increased 11% from Q1-2018 Credit • NCOs / average total LHI of .09% for Q1-2019 compared to .60% for Q4-2018 and .11% for Q1-2018 Quality • Non-accrual loans / total LHI of .57%, compared to .36% in Q4-2018 and .60% in Q1-2018 3


 
Energy and Leveraged Lending Update Energy Outstandings 3/31/19 Energy • Outstanding energy loans represented 7% of total loans, or $1.7 billion, 1% at Q1-2019 compared to 8%, or $1.8 billion, at Q4-2018 and 7%, or $1.4 billion, at Q1-2018 2% 10% • Non-accruals totaled $76.7 million at Q1-2019 compared to $37.5 million at Q4-2018 and $50.4 million at Q1-2018; increase primarily related to legacy deals that have deteriorated Total E&P • Criticized energy loans totaled $102.4 million (6% of outstanding Total Midstream energy loans) at Q1-2019 compared to $83.4 million (5%) at Q4-2018 and $64.1 million (5%) at Q1-2018 Total Salt Water Disposal • Allocated reserves of $48.6 million represents 3% of outstanding energy Total Other loans 87% C&I Leveraged • Outstanding C&I leveraged loans represented 5% of total loans, or $1.2 billion, at Q1-2019 compared to 5%, or $1.2 billion, at Q4-2018 and 6%, or $1.2 billion, at Q1-2018 C&I Leveraged Outstandings 3/31/19 • Non-accruals totaled $30.6 million (3% of outstanding C&I leveraged loans) at Q1-2019, compared to $28.8 million (2%) at Q4-2018 and $54.4 million (5%) at Q1-2018 • Criticized loans totaled $218.9 million (18% of outstanding C&I 9% Accommodation and Food Services leveraged loans) at Q1-2019, compared to $151.0 million (12%) at Q4- 8% Arts, Entertainment, and Recreation 2018 and $138.1 million (12%) at Q1-2018 36% • Allocated reserves of $68.9 million represents 6% of outstanding C&I Manufacturing leveraged loans • No significant concentration in any industry 25% Professional, Scientific, and Technical Services • No significant change since year end of senior leverage greater than 3.0x and total leverage greater than 4.0x, slightly over 50% of the portfolio 10% Wholesale Trade 12% Other Services - includes 11 industries, all individually 5% or less 4


 
Mortgage Finance, LHI Core Strengths • Technology investments have allowed for scalability • Historically low credit risk • Strong funding opportunities • Other product offerings developed to serve the industry • Commitment to clients in the industry allow for increased market share Efficiency Earnings & Combined Yield 6.0 50.0% 60 12.00% 45.0% 11.00% 5.0 5.4 4.0 40.0% 50 3.8 3.5 3.2 10.00% 4.9 5.0 4.9 49.7 35.0% 47.1 47.3 46.4 9.00% 4.0 40 3.4 4.1 30.0% 8.00% 37.4 3.0 25.0% 30 7.00% 15.0% 20.0% 6.00% 2.0 12.1% 12.2% 12.6% 12.1% 15.0% 20 4.04% 4.16% 3.91% 3.99% 4.07% 5.00% 1.0 10.0% Income ($M) 10 4.00% 5.0% 3.00% AvgBalance ($B) 0.0 0.0% 0 2.00% Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 1M LIBOR* 1.66% 1.97% 2.11% 2.35% 2.50% MFLs, LHI Efficiency Ratio Interest Income Fees (NIR) Combined Yield *Average of quarter’s daily 1M LIBOR rates 5


 
Net Interest Income & Margin Earning Asset & Margin Trends Quarterly Change NII ($MM) NIM (%) 4.40% $25.0 $240.7 Q4 2018 3.78% $1.9 $2.0 $2.0 (5.4) Decrease in day count .00 $1.7 $23.6 $23.7 $23.1 4.20% $2.6 8.6 Increase in LHI loan yields .14 $22.1 (4.4) Decrease in LHI fees (.07) $20.0 $20.5 3.93% 4.00% 1.9 Increase in loan balances .00 1.1 Increase in MF yields .02 3.78% $15.0 3.71% 3.70% 3.73% 3.80% .6 Increase in LHS yields .01 (7.5) Increase in funding costs (.12) Portfolio Balances Balances ($B) Portfolio 3.60% (.0) Other (.03) $10.0 235.6 Q1 2019 3.73% 3.40% NIM Highlights • Catchup of LIBOR moves from Q4-2018 reflected in $5.0 traditional LHI yields 3.20% • Lower loan fees in Q1-2019 compared to Q4-2018 • Mortgage finance yields stabilized • Rate of increase in total funding costs declined 1 bp from $- 3.00% Q4-2018; increase of 15 bps during Q1-2019 compared Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 to 16 bps during Q4-2018 Total Loans Other Earning Assets NIM 6


 
Loan Growth Average Balance Trends ($B) Total Loan Composition ($25.3Billion at 3/31/19) $24.0 8.00% $7.1 $7.1 7.80% $22.0 $6.9 7.60% Business Assets 29% $6.4 7.40% $20.0 7.20% $5.3 Energy $18.0 7.00% 5% 6.80% $16.0 $16.9 6.60% $16.3 $16.6 6.40% Highly Liquid $15.9 Unsecured $14.0 $15.4 6.20% Assets 4% 2% 5.82% 6.00% $12.0 5.72% 5.80% Owner Occupied 5.47% 5.48% 5.60% R/E $10.0 5% 5.14% 5.40% PortfolioBalances ($B) $8.0 5.20% Residential R/E 5.00% Mkt. Risk $6.0 4.80% 5% 4.60% $4.0 4.40% $2.0 4.20% 4.00% Total Mortgage Comml R/E Mkt. Finance $- 3.80% Risk 32% Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 14% Other Assets LHI (excl. MFLs) Total MFLs LHI (excl. MFL) Yield 4% Growth Highlights • Growth in average traditional LHI; up $222.9 million (1%) from Q4-2018 and $1.4 billion (9%) from Q1-2018 • Modest growth in traditional LHI at end of the quarter; period-end balance $195.1 million higher than Q1-2019 average balance • Decrease in average total MFL balances of $41.8 million (1%) from Q4-2018 and an increase of $1.8 billion (33%) from Q1-2018 • Average total MFLs represent 29% of average total loans at Q1-2019 compared to 30% in Q4-2018 and 32% at period end 7


 
Deposit Growth Average Balance Trends ($B) Funding Costs 1.40% 1.38% $22.0 1.23% $20.0 1.33% $7.9 $7.5 $7.0 1.20% $8.0 1.07% $18.0 $8.1 1.17% 1.00% $16.0 0.90% 0.99% $14.0 0.80% 0.74% $13.5 $14.0 $12.0 $12.9 0.81% $11.7 $10.0 $11.3 0.60% 0.66% Deposit Balances ($B) Balances Deposit $8.0 0.40% $6.0 $4.0 0.20% $2.0 $- 0.00% Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Interest-Bearing Deposits DDAs Avg Cost of Deposits Total Funding Costs Growth Highlights • Deposit costs increased 16 bps during Q1-2019 and total funding costs increased 15 bps; compared to increases of 18 bps and 16 bps, respectively, in Q4-2018 • Slight increase in linked quarter average total deposits with growth in interest-bearing • Continued focus on cost-effective deposit growth with new verticals and core client relationships • Betas on interest bearing deposits declined slightly in Q1-2019 8


 
Non-interest Expense Quarterly Change NIE - Efficiency Increase/ • Changes in Salaries & Benefits components Non-interest expense ($MM) (Decrease) • Slowing of hiring positively impacting NIE Q4 2018 $129.9 growth Salaries and employee benefits – salaries only 1.2 • Annual incentive accrual ramps throughout the year and generally lower in Q1 Salaries and employee benefits – non-LTI • FICA and seasonal payroll related items peak in incentives and annual incentive pool (2.1) Q1 Salaries and employee benefits – FICA and • Increase in FAS 123R expense mainly due to seasonal payroll related items 4.3 stock price Salaries and employee benefits – FAS 123R • Deferred compensation MTM offset in other (includes stock price changes) 3.2 non-interest income by MTM on related Salaries and employee benefits – MTM on deferred deferred compensation investments compensation 2.5 • Marketing expense has variable component tied to Salaries and employee benefits – severance (.8) deposits • Servicing related expenses includes MSR impairment Marketing expense 1.5 of $2.9 million recorded in Q1-2019 related to drop in Legal and professional (3.0) long-term interest rates Servicing related expenses 2.8 • Efficiency ratio 52.8% for Q1-2019 compared to 50.7% for Q4-2018 and 55.1% for Q1-2018 All other – includes occupancy, technology, FDIC insurance assessment and OREO related expenses .9 Q1 2019 $140.4 9


 
Asset Quality Allowance for Credit Losses NCO/Average Total LHI $220.0 3.5x 3.4x3.5x $218.4 3.3x3.4x 1.40% $200.0 3.2x3.3x $200.5 $200.6 $203.0 3.2x 3.1x $180.0 $189.6 3.x 1.20% 2.9x3.x 2.8x2.9x $160.0 2.8x 2.7x 1.00% 2.6x $140.0 2.4x 2.5x 2.2x 2.5x2.4x 2.3x2.4x $120.0 2.3x 0.80% 2.2x 2.1x2.2x 1.8x 2.1x $100.0 2.x 0.60% ALLL ALLL ($M) 1.6x 1.9x 1.8x1.9x $80.0 1.5x 1.8x 1.7x 0.37% 1.6x 0.40% $60.0 1.5x 0.29% 1.4x1.5x 1.3x1.4x 0.16% $40.0 1.3x 0.20% 1.2x 0.07% 0.09% 1.1x $20.0 1.x 1.x .9x 0.00% .8x $- .8x 2015 2016 2017 2018 Q1 2019 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 ALLL ALLL to Non-accrual Loans Combined Criticized Loans as % of Total LHI Reserves/ .90% 1.03% .94% .90% .93% 5.00% Total LHI $600.0 $602.8 4.00% $500.0 Asset Quality Highlights • Credit cost of $20.0 million for Q1-2019, compared to $35.0 million in Q4- $442.1 $400.0 3.00% 2018 and $14.0 million ($12.0 million provision, $2.0 million OREO 2.58% valuation allowance) in Q1-2018 $369.6 $364.0 $359.6 $300.0 1.96% • NCOs $4.6 million, or 9 bps of average total LHI, in Q1-2019 compared to 1.81% 1.62% 1.63% 2.00% $32.6 million, or 60 bps, in Q4-2018 and 11 bps in Q1-2018 Criticized Loans Criticized Loans ($M) $200.0 • NPL ratio increased to .57% of total LHI compared to .36% at Q4-2018 1.00% • Increase in criticized loans to $602.8 million at Q1-2019 compared to $100.0 $442.1 million at Q4-2018 $- 0.00% Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Criticized Loans Criticized Loans as a % of Total LHI 10


 
Performance Summary - Quarterly (in thousands) Q1 2019 Q4 2018 Q3 2018 Q2 2018 Q1 2018 Net interest income $ 235,614 $ 240,673 $ 232,175 $ 231,712 $ 210,300 Non-interest income 30,014 15,280 25,518 17,279 19,947 Net revenue 265,628 255,953 257,693 248,991 230,247 Provision for credit losses 20,000 35,000 13,000 27,000 12,000 OREO write-down - - (2,000) - 2,000 Non-interest expense 140,378 129,862 138,143 132,131 124,960 Income before income taxes 105,250 91,091 108,550 89,860 91,287 Income tax expense 22,411 19,200 22,998 18,424 19,342 Net income 82,839 71,891 85,552 71,436 71,945 Preferred stock dividends 2,438 2,437 2,438 2,437 2,438 Net income available to common shareholders $ 80,401 $ 69,454 $ 83,114 $ 68,999 $ 69,507 Diluted EPS $ 1.60 $ 1.38 $ 1.65 $ 1.38 $ 1.38 Net interest margin 3.73% 3.78% 3.70% 3.93% 3.71% ROA 1.26% 1.09% 1.31% 1.16% 1.22% ROE 13.58% 11.82% 14.68% 12.72% 13.39% Efficiency 52.8% 50.7% 52.8% 53.1% 55.1% Efficiency, excl. OREO write-down 52.8% 50.7% 53.6% 53.1% 54.3% 11


 
2019 Outlook Business 2019 Outlook v. 2018 Results Comments & Changes since January Driver 23, 2019 Average LHI Mid to high single digit percent growth Decreased from high single digit percent growth Average LHI – High-teens percent growth Increased from low single digit percent growth Mortgage Finance Loans held for sale $2.5 billion average Up from $1.9 billion average (MCA) Average Deposits High single digit percent growth Up from mid to high single digit percent growth Net Revenue High single digit percent growth - Net Interest 3.60% to 3.70% Decreased from 3.75% to 3.85% Margin Provision Expense Mid to high $80 million level - NIE Mid single digit percent growth - Efficiency Ratio Low-50s - 12


 
Long-term Outlook Rising-Rate Financial Goals Benefit ~ 10 bps ROA > 1.3% ~1.5% ROCE > 15% (~1.5%) Efficiency Ratio < 50% Fed Fund Target Max Reaches 3.50% Key Assumptions • Continuation of current economic conditions, allowing the Bank to capitalize on Inflection Point initiatives of growing higher return businesses and limiting investments in lower return or non-strategic portfolios • Despite more potential volatility in provision, NCOs remain 20-25 bps of average total LHI • Mortgage Finance brand strengthens and relationships expand, despite additional growth headwinds generated by point in rate cycle • Lower-cost, lower-beta deposit verticals achieve growth and ROI targets • Product enhancements and expanded offerings maintain non-interest income contribution to total revenue, even amidst ex-liquidity NIM expansion • Internal investments yield efficiency benefits and allow Bank to maintain moderate overhead growth over the horizon • Bank remains committed to efficient use of shareholder capital and maintaining liquidity at appropriate levels 13


 
Closing Comments • Delivering premier client experience embedded in our strategic priorities for 2019 • Solid traditional LHI growth in Q1-2019, with further risk appropriate growth levels the remainder of the year net of targeted runoff in leveraged lending portfolio • Better than expected growth for mortgage finance in seasonally weaker quarter with prospects of a robust Q2 and Q3 resulting from lower long-term rates • Deposit initiatives continue to progress with continued roll-out in 2019 to improve funding mix and cost of funding longer term • Confirming guidance on loan loss provisioning to ensure we’re strengthening our balance sheet late cycle • Targeted approach in slowing pace of NIE growth is working, as we continue to be more deliberate with hiring and improve efficiencies through technology and better processes 14


 
Q&A 15


 
Appendix 16


 
Average Balances, Yields & Rates - Quarterly (in thousands) Q1 2019 Q4 2018 Q1 2018 Avg. Bal. Yield Rate Avg. Bal. Yield Rate Avg. Bal. Yield Rate Assets Securities $ 144,966 4.97% $ 117,371 5.22% $ 23,854 3.50% Liquidity assets 1,886,758 2.45% 1,759,417 2.25% 2,564,579 1.55% Loans held for sale 2,122,302 4.84% 2,049,395 4.72% 1,187,594 4.28% LHI, mortgage finance 4,931,879 3.81% 5,046,540 3.72% 4,097,995 3.70% LHI 16,866,456 5.82% 16,643,559 5.72% 15,425,323 5.14% Total LHI, net of reserve 21,606,213 5.42% 21,507,285 5.30% 19,339,080 4.88% Total earning assets 25,760,239 5.15% 25,433,468 5.04% 23,115,107 4.48% Total assets $26,655,036 $26,261,624 $23,912,613 Liabilities and Stockholders’ Equity Total interest bearing deposits $14,025,652 2.00% $13,474,308 1.82% $11,281,585 1.14% Other borrowings 2,412,254 2.58% 2,290,520 2.39% 1,721,914 1.57% Total long-term debt 395,205 5.67% 395,114 5.47% 394,843 5.36% Total interest bearing liabilities 16,833,111 2.17% 16,159,942 1.99% 13,398,342 1.32% Demand deposits 7,047,120 7,462,392 8,147,721 Total deposits 21,072,772 1.33% 20,936,700 1.17% 19,429,306 .66% Stockholders’ equity 2,551,663 2,482,012 2,255,852 Total liabilities and stockholders’ equity $26,655,036 1.38% $26,261,624 1.23% $23,912,613 .74% Net interest margin 3.73% 3.78% 3.71% Total deposits and borrowed funds $23,485,026 1.46% $23,227,220 1.29% $21,151,220 .74% 17


 
Average Balance Sheet - Quarterly (in thousands) QTD Average Q1/Q4 % YOY % Q1 2019 Q4 2018 Q1 2018 Change Change Total assets $26,655,036 $26,261,624 $23,912,613 1% 11% Loans held for sale 2,122,302 2,049,395 1,187,594 4% 79% Loans held for investment 16,866,456 16,643,559 15,425,323 1% 9% Loans held for investment, mortgage 4,931,879 5,046,540 4,097,995 finance (2)% 20% Total loans held for investment 21,798,335 21,690,099 19,523,318 0% 12% Total loans 23,920,637 23,739,494 20,710,912 1% 15% Liquidity assets 1,886,758 1,759,417 2,564,579 7% (26)% Demand deposits 7,047,120 7,462,392 8,147,721 (6)% (14)% Total deposits 21,072,772 20,936,700 19,429,306 1% 8% Stockholders’ equity 2,551,663 2,482,012 2,255,852 3% 13% 18


 
Period End Balance Sheet (in thousands) Period End Q1/Q4 % YOY % Q1 2019 Q4 2018 Q1 2018 Change Change Total assets $28,383,111 $28,257,767 $24,449,147 0% 16% Loans held for sale 1,901,637 1,969,474 1,088,565 (3)% 75% Loans held for investment 17,061,590 16,690,550 15,741,772 2% 8% Loans held for investment, mortgage 6,299,710 5,877,524 4,689,938 7% 34% finance Total loans held for investment 23,361,300 22,568,074 20,431,710 4% 14% Total loans 25,262,937 24,537,548 21,520,275 3% 17% Liquidity assets 2,154,155 2,865,874 2,296,673 (25)% (6)% Demand deposits 6,743,607 7,317,161 7,413,340 (8)% (9)% Total deposits 20,650,127 20,606,113 18,764,533 0% 10% Stockholders’ equity 2,581,942 2,500,394 2,273,429 3% 14% 19


 
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