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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
| | | | | |
☒ | Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. |
For the quarterly period ended September 30, 2022
| | | | | |
☐ | Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. |
For the transition period from to
Commission file number 001-34657
TEXAS CAPITAL BANCSHARES, INC.
(Exact name of registrant as specified in its charter)
| | | | | | | | |
Delaware | | 75-2679109 |
(State or other jurisdiction of incorporation or organization) | | (I.R.S. Employer Identification Number) |
| | | | | | | | | | | | | | | | | | | | |
2000 McKinney Avenue | |
Suite 700 | |
| Dallas | TX | USA | | | 75201 |
(Address of principal executive offices) | (Zip Code) |
(214) 932-6600
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
________________________________________
Securities registered pursuant to Section 12(b) of the Act:
| | | | | | | | | | | | | | |
Title of each class | | Trading Symbol(s) | | Name of each exchange on which registered |
Common Stock, par value $0.01 per share | | TCBI | | Nasdaq Stock Market |
| | | | |
5.75% Non-Cumulative Perpetual Preferred Stock Series B, par value $0.01 per share | | TCBIO | | Nasdaq Stock Market |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ý ¨ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. | | | | | | | | | | | | | | | | | | | | | | | |
Large Accelerated Filer | x | | Accelerated Filer | | ☐ | | |
Non-Accelerated Filer | ☐ | | Smaller Reporting Company | | ☐ | | |
| | | 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. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ý
On October 19, 2022, the number of shares set forth below was outstanding with respect to each of the issuer's classes of common stock:
Common Stock, par value $0.01 per share 49,899,211
Texas Capital Bancshares, Inc.
Form 10-Q
Quarter Ended September 30, 2022
Index
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| Item 1. | | |
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| Item 2. | | |
| Item 3. | | |
| Item 4. | | |
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| Item 1. | | |
| Item 1A. | | |
| Item 2. | | |
| Item 6. | | |
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PART I—FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
TEXAS CAPITAL BANCSHARES, INC.
CONSOLIDATED BALANCE SHEETS - UNAUDITED | | | | | | | | | | | |
(in thousands except share data) | September 30, 2022 | | December 31, 2021 |
Assets | | | |
Cash and due from banks | $ | 240,609 | | | $ | 180,663 | |
Interest bearing cash and cash equivalents | 3,399,638 | | | 7,765,996 | |
| | | |
Available-for-sale debt securities | 2,380,774 | | | 3,538,201 | |
Held-to-maturity debt securities | 955,875 | | | — | |
Equity securities | 32,973 | | | 45,607 | |
Investment securities | 3,369,622 | | | 3,583,808 | |
Loans held for sale | 3,142,178 | | | 8,123 | |
| | | |
Loans held for investment, mortgage finance | 4,908,822 | | | 7,475,497 | |
Loans held for investment | 14,878,959 | | | 15,331,457 | |
Less: Allowance for credit losses on loans | 234,613 | | | 211,866 | |
Loans held for investment, net | 19,553,168 | | | 22,595,088 | |
| | | |
| | | |
Premises and equipment, net | 27,180 | | | 20,901 | |
Accrued interest receivable and other assets | 648,172 | | | 559,897 | |
Other assets held for sale | 26,450 | | | — | |
Goodwill and intangible assets, net | 1,496 | | | 17,262 | |
Total assets | $ | 30,408,513 | | | $ | 34,731,738 | |
| | | |
Liabilities and Stockholders’ Equity | | | |
Liabilities: | | | |
Non-interest bearing deposits | $ | 11,494,685 | | | $ | 13,390,370 | |
Interest bearing deposits | 13,003,878 | | | 14,718,995 | |
| | | |
Total deposits | 24,498,563 | | | 28,109,365 | |
Accrued interest payable | 18,465 | | | 7,699 | |
| | | |
Other liabilities | 297,900 | | | 273,488 | |
Other liabilities held for sale | 75,564 | | | — | |
Short-term borrowings | 1,701,480 | | | 2,202,832 | |
Long-term debt | 930,766 | | | 928,738 | |
| | | |
| | | |
Total liabilities | 27,522,738 | | | 31,522,122 | |
| | | |
Stockholders’ equity: | | | |
Preferred stock, $0.01 par value, $1,000 liquidation value: | | | |
Authorized shares - 10,000,000 | | | |
Issued shares - 300,000 shares issued at September 30, 2022 and December 31, 2021 | 300,000 | | | 300,000 | |
Common stock, $0.01 par value: | | | |
Authorized shares - 100,000,000 | | | |
Issued shares - 50,840,022 and 50,618,911 at September 30, 2022 and December 31, 2021, respectively | 509 | | | 506 | |
Additional paid-in capital | 1,020,153 | | | 1,008,559 | |
Retained earnings | 2,050,563 | | | 1,948,274 | |
Treasury stock - 942,296 and 417 shares at cost at September 30, 2022 and December 31, 2021, respectively | (50,031) | | | (8) | |
Accumulated other comprehensive loss, net of taxes | (435,419) | | | (47,715) | |
Total stockholders’ equity | 2,885,775 | | | 3,209,616 | |
Total liabilities and stockholders’ equity | $ | 30,408,513 | | | $ | 34,731,738 | |
See accompanying notes to consolidated financial statements.
TEXAS CAPITAL BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF INCOME AND OTHER
COMPREHENSIVE INCOME/(LOSS) - UNAUDITED
| | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended September 30, | | Nine months ended September 30, |
(in thousands except per share data) | 2022 | | 2021 | | 2022 | | 2021 |
Interest income | | | | | | | |
Interest and fees on loans | $ | 282,473 | | | $ | 202,748 | | | $ | 688,420 | | | $ | 616,153 | |
Investment securities | 15,002 | | | 10,235 | | | 46,969 | | | 31,040 | |
| | | | | | | |
Interest bearing cash and cash equivalents | 24,596 | | | 3,606 | | | 37,561 | | | 9,500 | |
Total interest income | 322,071 | | | 216,589 | | | 772,950 | | | 656,693 | |
Interest expense | | | | | | | |
Deposits | 60,317 | | | 14,719 | | | 94,513 | | | 50,994 | |
| | | | | | | |
| | | | | | | |
Short-term borrowings | 10,011 | | | 748 | | | 15,628 | | | 3,842 | |
Long-term debt | 12,663 | | | 10,586 | | | 34,651 | | | 27,052 | |
| | | | | | | |
| | | | | | | |
Total interest expense | 82,991 | | | 26,053 | | | 144,792 | | | 81,888 | |
Net interest income | 239,080 | | | 190,536 | | | 628,158 | | | 574,805 | |
Provision for credit losses | 12,000 | | | 5,000 | | | 32,000 | | | (20,000) | |
Net interest income after provision for credit losses | 227,080 | | | 185,536 | | | 596,158 | | | 594,805 | |
Non-interest income | | | | | | | |
Service charges on deposit accounts | 5,701 | | | 4,622 | | | 17,726 | | | 13,972 | |
Wealth management and trust fee income | 3,631 | | | 3,382 | | | 11,594 | | | 9,380 | |
| | | | | | | |
Brokered loan fees | 3,401 | | | 6,032 | | | 11,504 | | | 22,276 | |
Servicing income | 212 | | | 292 | | | 677 | | | 15,236 | |
Investment banking and trading income | 7,812 | | | 4,127 | | | 23,117 | | | 17,985 | |
Net gain/(loss) on sale of loans held for sale | — | | | (1,185) | | | — | | | 1,317 | |
Other | 4,576 | | | 7,509 | | | 7,239 | | | 26,605 | |
Total non-interest income | 25,333 | | | 24,779 | | | 71,857 | | | 106,771 | |
Non-interest expense | | | | | | | |
Salaries and benefits | 129,336 | | | 87,503 | | | 333,319 | | | 261,855 | |
Occupancy expense | 9,433 | | | 8,324 | | | 27,192 | | | 24,463 | |
Marketing | 8,282 | | | 2,123 | | | 21,765 | | | 5,720 | |
Legal and professional | 16,775 | | | 11,055 | | | 38,365 | | | 28,479 | |
Communications and technology | 18,470 | | | 28,374 | | | 48,819 | | | 58,695 | |
Federal Deposit Insurance Corporation (“FDIC”) insurance assessment | 3,953 | | | 4,500 | | | 11,252 | | | 16,339 | |
Servicing-related expenses | — | | | 2,396 | | | — | | | 27,740 | |
| | | | | | | |
| | | | | | | |
Other | 10,798 | | | 8,712 | | | 33,730 | | | 29,072 | |
Total non-interest expense | 197,047 | | | 152,987 | | | 514,442 | | | 452,363 | |
Income before income taxes | 55,366 | | | 57,328 | | | 153,573 | | | 249,213 | |
Income tax expense | 13,948 | | | 13,938 | | | 38,346 | | | 60,404 | |
Net income | 41,418 | | | 43,390 | | | 115,227 | | | 188,809 | |
Preferred stock dividends | 4,313 | | | 4,312 | | | 12,938 | | | 14,408 | |
Net income available to common stockholders | $ | 37,105 | | | $ | 39,078 | | | $ | 102,289 | | | $ | 174,401 | |
Other comprehensive income/(loss): | | | | | | | |
Change in unrealized gain/(loss) | $ | (207,204) | | | $ | (18,131) | | | $ | (494,261) | | | $ | (71,501) | |
Amounts reclassified into net income | 609 | | | — | | | 3,498 | | | — | |
Other comprehensive income/(loss) | (206,595) | | | (18,131) | | | (490,763) | | | (71,501) | |
Income tax expense/(benefit) | (43,384) | | | (3,808) | | | (103,059) | | | (15,015) | |
Other comprehensive income/(loss), net of tax | (163,211) | | | (14,323) | | | (387,704) | | | (56,486) | |
Comprehensive income/(loss) | $ | (121,793) | | | $ | 29,067 | | | $ | (272,477) | | | $ | 132,323 | |
Basic earnings per common share | $ | 0.74 | | | $ | 0.77 | | | $ | 2.03 | | | $ | 3.45 | |
Diluted earnings per common share | $ | 0.74 | | | $ | 0.76 | | | $ | 2.00 | | | $ | 3.41 | |
See accompanying notes to consolidated financial statements.
TEXAS CAPITAL BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY - UNAUDITED
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Preferred Stock | | Common Stock | | Additional | | | | Treasury Stock | | Accumulated Other | | |
| Paid-in | | Retained | | Comprehensive | | |
(in thousands except share data) | Shares | | Amount | | Shares | | Amount | | Capital | | Earnings | | Shares | | Amount | | Income/(Loss) | | Total |
Balance at June 30, 2021 | 300,000 | | | $ | 300,000 | | | 50,592,618 | | | $ | 506 | | | $ | 992,469 | | | $ | 1,848,379 | | | (417) | | | $ | (8) | | | $ | (26,389) | | | $ | 3,114,957 | |
| | | | | | | | | | | | | | | | | | | |
Comprehensive income: | | | | | | | | | | | | | | | | | | | |
Net income | — | | | — | | | — | | | — | | | — | | | 43,390 | | | — | | | — | | | — | | | 43,390 | |
Change in other comprehensive income/(loss), net of taxes | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (14,323) | | | (14,323) | |
Total comprehensive income | | | | | | | | | | | | | | | | | | | 29,067 | |
| | | | | | | | | | | | | | | | | | | |
Stock-based compensation expense recognized in earnings | — | | | — | | | — | | | — | | | 8,324 | | | — | | | — | | | — | | | — | | | 8,324 | |
| | | | | | | | | | | | | | | | | | | |
Preferred stock dividend | — | | | — | | | — | | | — | | | — | | | (4,312) | | | — | | | — | | | — | | | (4,312) | |
Issuance of stock related to stock-based awards | — | | | — | | | 13,425 | | | — | | | (284) | | | — | | | — | | | — | | | — | | | (284) | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Balance at September 30, 2021 | 300,000 | | | $ | 300,000 | | | 50,606,043 | | | $ | 506 | | | $ | 1,000,509 | | | $ | 1,887,457 | | | (417) | | | $ | (8) | | | $ | (40,712) | | | $ | 3,147,752 | |
| | | | | | | | | | | | | | | | | | | |
Balance at June 30, 2022 | 300,000 | | | $ | 300,000 | | | 50,820,337 | | | $ | 508 | | | $ | 1,015,105 | | | $ | 2,013,458 | | | (942,296) | | | $ | (50,031) | | | $ | (272,208) | | | $ | 3,006,832 | |
| | | | | | | | | | | | | | | | | | | |
Comprehensive income: | | | | | | | | | | | | | | | | | | | |
Net income | — | | | — | | | — | | | — | | | — | | | 41,418 | | | — | | | — | | | — | | | 41,418 | |
Change in other comprehensive income/(loss), net of taxes | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (163,211) | | | (163,211) | |
Total comprehensive loss | | | | | | | | | | | | | | | | | | | (121,793) | |
| | | | | | | | | | | | | | | | | | | |
Stock-based compensation expense recognized in earnings | — | | | — | | | — | | | — | | | 5,376 | | | — | | | — | | | — | | | — | | | 5,376 | |
Preferred stock dividend | — | | | — | | | — | | | — | | | — | | | (4,313) | | | — | | | — | | | — | | | (4,313) | |
Issuance of stock related to stock-based awards | — | | | — | | | 19,685 | | | 1 | | | (328) | | | — | | | — | | | — | | | — | | | (327) | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Balance at September 30, 2022 | 300,000 | | | $ | 300,000 | | | 50,840,022 | | | $ | 509 | | | $ | 1,020,153 | | | $ | 2,050,563 | | | (942,296) | | | $ | (50,031) | | | $ | (435,419) | | | $ | 2,885,775 | |
See accompanying notes to consolidated financial statements.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Preferred Stock | | Common Stock | | Additional | | | | Treasury Stock | | Accumulated Other | | |
| Paid-in | | Retained | | Comprehensive | | |
(in thousands except share data) | Shares | | Amount | | Shares | | Amount | | Capital | | Earnings | | Shares | | Amount | | Income/(Loss) | | Total |
Balance at December 31, 2020 (audited) | 6,000,000 | | | $ | 150,000 | | | 50,470,867 | | | $ | 504 | | | $ | 991,898 | | | $ | 1,713,056 | | | (417) | | | $ | (8) | | | $ | 15,774 | | | $ | 2,871,224 | |
| | | | | | | | | | | | | | | | | | | |
Comprehensive income: | | | | | | | | | | | | | | | | | | | |
Net income | — | | | — | | | — | | | — | | | — | | | 188,809 | | | — | | | — | | | — | | | 188,809 | |
Change in other comprehensive income/(loss), net of taxes | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (56,486) | | | (56,486) | |
Total comprehensive income | | | | | | | | | | | | | | | | | | | 132,323 | |
| | | | | | | | | | | | | | | | | | | |
Stock-based compensation expense recognized in earnings | — | | | — | | | — | | | — | | | 22,100 | | | — | | | — | | | — | | | — | | | 22,100 | |
Issuance of preferred stock | 300,000 | | | 300,000 | | | — | | | — | | | (10,277) | | | — | | | — | | | — | | | — | | | 289,723 | |
Preferred stock dividend | — | | | — | | | — | | | — | | | — | | | (14,408) | | | — | | | — | | | — | | | (14,408) | |
Issuance of stock related to stock-based awards | — | | | — | | | 135,176 | | | 2 | | | (3,212) | | | — | | | — | | | — | | | — | | | (3,210) | |
Redemption of preferred stock | (6,000,000) | | | (150,000) | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (150,000) | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Balance at September 30, 2021 | 300,000 | | | $ | 300,000 | | | 50,606,043 | | | $ | 506 | | | $ | 1,000,509 | | | $ | 1,887,457 | | | (417) | | | $ | (8) | | | $ | (40,712) | | | $ | 3,147,752 | |
| | | | | | | | | | | | | | | | | | | |
Balance at December 31, 2021 (audited) | 300,000 | | | $ | 300,000 | | | 50,618,911 | | | $ | 506 | | | $ | 1,008,559 | | | $ | 1,948,274 | | | (417) | | | $ | (8) | | | $ | (47,715) | | | $ | 3,209,616 | |
| | | | | | | | | | | | | | | | | | | |
Comprehensive income: | | | | | | | | | | | | | | | | | | | |
Net income | — | | | — | | | — | | | — | | | — | | | 115,227 | | | — | | | — | | | — | | | 115,227 | |
Change in other comprehensive income/(loss), net of taxes | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (387,704) | | | (387,704) | |
Total comprehensive loss | | | | | | | | | | | | | | | | | | | (272,477) | |
| | | | | | | | | | | | | | | | | | | |
Stock-based compensation expense recognized in earnings | — | | | — | | | — | | | — | | | 15,805 | | | — | | | — | | | — | | | — | | | 15,805 | |
| | | | | | | | | | | | | | | | | | | |
Preferred stock dividend | — | | | — | | | — | | | — | | | — | | | (12,938) | | | — | | | — | | | — | | | (12,938) | |
Issuance of stock related to stock-based awards | — | | | — | | | 221,111 | | | 3 | | | (4,211) | | | — | | | — | | | — | | | — | | | (4,208) | |
Repurchase of common stock | — | | | — | | | — | | | — | | | — | | | — | | | (941,879) | | | (50,023) | | | — | | | (50,023) | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Balance at September 30, 2022 | 300,000 | | | $ | 300,000 | | | 50,840,022 | | | $ | 509 | | | $ | 1,020,153 | | | $ | 2,050,563 | | | (942,296) | | | $ | (50,031) | | | $ | (435,419) | | | $ | 2,885,775 | |
See accompanying notes to consolidated financial statements.
TEXAS CAPITAL BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED
| | | | | | | | | | | |
| Nine months ended September 30, |
(in thousands) | 2022 | | 2021 |
Operating activities | | | |
Net income | $ | 115,227 | | | $ | 188,809 | |
Adjustments to reconcile net income to net cash provided by operating activities: | | | |
Provision/(benefit) for credit losses | 32,000 | | | (20,000) | |
| | | |
Depreciation and amortization expense | 35,360 | | | 65,943 | |
Net (gain)/loss on sale of loans held for sale | — | | | (1,317) | |
Decrease in valuation allowance on mortgage servicing rights | — | | | (16,448) | |
| | | |
| | | |
Stock-based compensation expense | 15,991 | | | 23,192 | |
| | | |
Purchases and originations of loans held for sale | (1,642) | | | (1,413,899) | |
Proceeds from sales and repayments of loans held for sale | 5,050 | | | 1,675,246 | |
| | | |
| | | |
| | | |
Changes in operating assets and liabilities: | | | |
Accrued interest receivable and other assets | (2,152) | | | 86,707 | |
Accrued interest payable and other liabilities | 14,266 | | | (41,920) | |
Net cash provided by operating activities | 214,100 | | | 546,313 | |
Investing activities | | | |
Purchases of available-for-sale debt securities | (665,388) | | | (952,982) | |
Proceeds from maturities, redemptions and pay-downs of available-for-sale debt securities | 388,223 | | | 400,429 | |
| | | |
Proceeds from maturities, redemptions and pay-downs of held-to-maturity debt securities | 66,500 | | | — | |
Sales/(purchases) of equity securities, net | 3,421 | | | — | |
Originations of loans held for investment, mortgage finance | (77,518,608) | | | (128,503,055) | |
Proceeds from pay-offs of loans held for investment, mortgage finance | 80,085,283 | | | 129,054,151 | |
Proceeds from sale of mortgage servicing rights | — | | | 108,925 | |
Net (increase)/decrease in loans held for investment, excluding mortgage finance | (2,690,164) | | | 118,166 | |
Purchases of premises and equipment, net | (10,456) | | | (2,619) | |
| | | |
| | | |
| | | |
Net cash provided by/(used in) investing activities | (341,189) | | | 223,015 | |
Financing activities | | | |
Net decrease in deposits | (3,610,802) | | | (1,182,921) | |
Issuance of stock related to stock-based awards | (4,208) | | | (3,210) | |
| | | |
Net proceeds from issuance of preferred stock | — | | | 289,723 | |
Redemption of preferred stock | — | | | (150,000) | |
Preferred stock dividends paid | (12,938) | | | (14,408) | |
Repurchase of common stock | (50,023) | | | — | |
Net decrease in short-term borrowings | (501,352) | | | (908,281) | |
| | | |
| | | |
Net proceeds from issuance of long-term debt | — | | | 639,440 | |
Redemption of long-term debt | — | | | (111,000) | |
| | | |
Net cash used in financing activities | (4,179,323) | | | (1,440,657) | |
Net decrease in cash and cash equivalents | (4,306,412) | | | (671,329) | |
Cash and cash equivalents at beginning of period | 7,946,659 | | | 9,206,380 | |
Cash and cash equivalents at end of period | $ | 3,640,247 | | | $ | 8,535,051 | |
Supplemental disclosures of cash flow information: | | | |
Cash paid during the period for interest | $ | 134,026 | | | $ | 84,118 | |
Cash paid during the period for income taxes | 48,569 | | | 99,915 | |
Transfers of loans from held for investment to held for sale | 3,137,792 | | | — | |
Transfers of debt securities from available-for-sale to held-to-maturity | 1,019,365 | | | — | |
| | | |
See accompanying notes to consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
(1) Operations and Summary of Significant Accounting Policies
Organization and Nature of Business
Texas Capital Bancshares, Inc. (“we,” “us”, or the “Company”), a Delaware corporation, was incorporated in November 1996 and commenced banking operations in December 1998. The consolidated financial statements of the Company include the accounts of the Company and its wholly owned subsidiary, Texas Capital Bank (the “Bank”).
We serve the needs of commercial businesses and professionals and entrepreneurs located in Texas as well as operate several lines of business serving a regional or national clientele of commercial borrowers. We are primarily a secured lender, with the majority of our loans held for investment, excluding mortgage finance loans and other national lines of business, being made to businesses headquartered in or with operations in Texas. Our national lines of business provide specialized lending products to businesses throughout the United States.
On September 6, 2022, we announced the sale of BankDirect Capital Finance (“BDCF” or “disposal group”), our insurance premium finance subsidiary, to AFCO Credit Corporation, an indirect wholly-owned subsidiary of Truist Financial Corp. The sale of BDCF includes its business operations and loan portfolio of approximately $3.1 billion as of September 30, 2022. The sale is an all-cash transaction for a purchase price of approximately $3.4 billion, representing an 8.5% asset premium compared to the value of the purchased loan portfolio as of September 30, 2022.
The transaction resulted in the recognition of a disposal group that is classified as held for sale but does not meet the criteria for discontinued operations reporting. As such, the loans, assets and liabilities related to the disposal group were transferred at the lower of cost or fair value to loans held for sale, other assets held for sale and other liabilities held for sale, respectively, on the consolidated balance sheet as of September 30, 2022. The pre-tax net income for the disposal group for the three months ended September 30, 2022 and 2021 was $11.9 million and $17.4 million, respectively, and was $49.5 million and $48.7 million for the nine months ended September 30, 2022 and 2021, respectively.
The sale is expected to close in the fourth quarter of 2022, subject to various customary closing conditions.
Basis of Presentation
Our accounting and reporting policies conform to accounting principles generally accepted in the United States (“GAAP”) and to generally accepted practices within the banking industry. Certain prior period balances have been reclassified to conform to the current period presentation.
The consolidated interim financial statements are unaudited, and certain information and disclosures in the notes to consolidated unaudited financial statements that are presented in accordance with GAAP have been condensed or omitted. In the opinion of management, the interim financial statements include all normal and recurring adjustments and the disclosures made present a fair presentation of our financial position and results of operations. The consolidated financial statements have been prepared in accordance with GAAP for interim financial information and the instructions to Form 10-Q adopted by the U.S. Securities and Exchange Commission (“SEC”). Accordingly, the financial statements and the notes to the consolidated unaudited financial statements required by GAAP for complete annual financial statements do not include all of the information and should be read in conjunction with our consolidated financial statements, and notes thereto, for the year ended December 31, 2021, included in our Annual Report on Form 10-K for the year ended December 31, 2021 (the “2021 Form 10-K”). Operating results for the interim periods disclosed herein are not necessarily indicative of the results that may be expected for a full year or any future period.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. Actual results could differ from those estimates. The allowance for credit losses, the fair value of financial instruments and the status of contingencies are particularly susceptible to significant change.
(2) Earnings Per Share
The following table presents the computation of basic and diluted earnings per share:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended September 30, | | Nine months ended September 30, |
(in thousands except share and per share data) | 2022 | | 2021 | | 2022 | | 2021 |
Numerator: | | | | | | | |
Net income | $ | 41,418 | | | $ | 43,390 | | | $ | 115,227 | | | $ | 188,809 | |
Preferred stock dividends | 4,313 | | | 4,312 | | | 12,938 | | | 14,408 | |
Net income available to common stockholders | $ | 37,105 | | | $ | 39,078 | | | $ | 102,289 | | | $ | 174,401 | |
Denominator: | | | | | | | |
Denominator for basic earnings per common share—weighted average common shares | 49,891,727 | | | 50,600,732 | | | 50,506,364 | | | 50,568,439 | |
Effect of dilutive outstanding stock-settled awards | 526,157 | | | 538,823 | | | 584,151 | | | 555,836 | |
| | | | | | | |
Denominator for dilutive earnings per common share—weighted average diluted common shares | 50,417,884 | | | 51,139,555 | | | 51,090,515 | | | 51,124,275 | |
| | | | | | | |
Basic earnings per common share | $ | 0.74 | | | $ | 0.77 | | | $ | 2.03 | | | $ | 3.45 | |
Diluted earnings per common share | $ | 0.74 | | | $ | 0.76 | | | $ | 2.00 | | | $ | 3.41 | |
| | | | | | | |
Anti-dilutive outstanding stock-settled awards | 174,706 | | | 208,813 | | | 315,499 | | | 104,174 | |
(3) Investment Securities
The following is a summary of our investment securities:
| | | | | | | | | | | | | | | | | | | | | | | |
(in thousands) | Amortized Cost(1) | | Gross Unrealized Gains | | Gross Unrealized Losses | | Estimated Fair Value |
September 30, 2022 | | | | | | | |
Available-for-sale debt securities: | | | | | | | |
U.S. Treasury securities | $ | 668,093 | | | $ | — | | | $ | (30,812) | | | $ | 637,281 | |
U.S. government agency securities | 125,000 | | | — | | | (23,310) | | | 101,690 | |
Residential mortgage-backed securities | 1,980,590 | | | 7 | | | (350,496) | | | 1,630,101 | |
| | | | | | | |
| | | | | | | |
Credit risk transfer (“CRT”) securities | 14,713 | | | — | | | (3,011) | | | |