10-Q 1 tcbi-20220630.htm 10-Q tcbi-20220630
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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 June 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
DallasTXUSA75201
(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 classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $0.01 per shareTCBINasdaq Stock Market
5.75% Non-Cumulative Perpetual Preferred Stock Series B, par value $0.01 per shareTCBIONasdaq 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 FilerxAccelerated Filer
Non-Accelerated FilerSmaller 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 July 20, 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 49,884,477



Texas Capital Bancshares, Inc.
Form 10-Q
Quarter Ended June 30, 2022

Index
 






PART I—FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
TEXAS CAPITAL BANCSHARES, INC.
CONSOLIDATED BALANCE SHEETS - UNAUDITED
(in thousands except share data)June 30, 2022December 31, 2021
(Unaudited)
Assets
Cash and due from banks$242,425 $180,663 
Interest-bearing cash and cash equivalents4,032,931 7,765,996 
Available-for-sale debt securities2,535,646 3,538,201 
Held-to-maturity debt securities980,935  
Equity securities36,118 45,607 
Investment securities3,552,699 3,583,808 
Loans held for sale4,266 8,123 
Loans held for investment, mortgage finance6,549,507 7,475,497 
Loans held for investment17,517,866 15,331,457 
Less: Allowance for credit losses on loans229,013 211,866 
Loans held for investment, net23,838,360 22,595,088 
Premises and equipment, net28,722 20,901 
Accrued interest receivable and other assets622,501 559,897 
Goodwill and intangible assets, net17,059 17,262 
Total assets$32,338,963 $34,731,738 
Liabilities and Stockholders’ Equity
Liabilities:
Non-interest bearing deposits$12,555,367 $13,390,370 
Interest bearing deposits12,884,654 14,718,995 
Total deposits25,440,021 28,109,365 
Accrued interest payable8,928 7,699 
Other liabilities314,548 273,488 
Short-term borrowings2,651,536 2,202,832 
Long-term debt917,098 928,738 
Total liabilities29,332,131 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 June 30, 2022 and December 31, 2021
300,000 300,000 
Common stock, $0.01 par value:
Authorized shares - 100,000,000
Issued shares - 50,820,337 and 50,618,911 at June 30, 2022 and December 31, 2021, respectively
508 506 
Additional paid-in capital1,015,105 1,008,559 
Retained earnings2,013,458 1,948,274 
Treasury stock - 942,296 and 417 shares at cost at June 30, 2022 and December 31, 2021, respectively
(50,031)(8)
Accumulated other comprehensive loss, net of taxes(272,208)(47,715)
Total stockholders’ equity3,006,832 3,209,616 
Total liabilities and stockholders’ equity$32,338,963 $34,731,738 
See accompanying notes to consolidated financial statements.
3


TEXAS CAPITAL BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF INCOME AND OTHER
COMPREHENSIVE INCOME/(LOSS) - UNAUDITED
 Three months ended June 30,Six months ended June 30,
(in thousands except per share data)2022202120222021
Interest income
Interest and fees on loans$218,290 $203,074 $405,947 $413,405 
Investment securities14,665 10,918 31,967 20,805 
Interest-bearing cash and cash equivalents9,394 2,961 12,965 5,894 
Total interest income242,349 216,953 450,879 440,104 
Interest expense
Deposits20,566 16,271 34,196 36,275 
Short-term borrowings4,859 502 5,617 3,094 
Long-term debt11,393 10,723 21,988 16,466 
Total interest expense36,818 27,496 61,801 55,835 
Net interest income205,531 189,457 389,078 384,269 
Provision for credit losses22,000 (19,000)20,000 (25,000)
Net interest income after provision for credit losses183,531 208,457 369,078 409,269 
Non-interest income
Service charges on deposit accounts6,003 4,634 12,025 9,350 
Wealth management and trust fee income4,051 3,143 7,963 5,998 
Brokered loan fees4,133 6,933 8,103 16,244 
Servicing income228 5,935 465 14,944 
Investment banking and trading income11,126 8,071 15,305 13,858 
Net gain/(loss) on sale of loans held for sale (3,070) 2,502 
Other701 11,993 2,663 19,096 
Total non-interest income26,242 37,639 46,524 81,992 
Non-interest expense
Salaries and benefits103,885 86,830 203,983 174,352 
Occupancy expense8,874 7,865 17,759 16,139 
Marketing8,506 1,900 13,483 3,597 
Legal and professional11,288 9,147 21,590 17,424 
Communications and technology15,649 14,352 30,349 30,321 
Federal Deposit Insurance Corporation (“FDIC”) insurance assessment3,318 5,226 7,299 11,839 
Servicing-related expenses 12,355  25,344 
Other12,783 11,385 22,932 20,360 
Total non-interest expense164,303 149,060 317,395 299,376 
Income before income taxes45,470 97,036 98,207 191,885 
Income tax expense11,311 23,555 24,398 46,466 
Net income34,159 73,481 73,809 145,419 
Preferred stock dividends4,312 6,317 8,625 10,096 
Net income available to common stockholders$29,847 $67,164 $65,184 $135,323 
Other comprehensive income/(loss):
Change in unrealized gain/(loss)$(86,438)$38,037 $(287,057)$(53,370)
Amounts reclassified into net income1,903  2,889  
Other comprehensive income/(loss)(84,535)38,037 (284,168)(53,370)
Income tax expense/(benefit)(17,752)7,989 (59,675)(11,207)
Other comprehensive income/(loss), net of tax(66,783)30,048 (224,493)(42,163)
Comprehensive income/(loss)$(32,624)$103,529 $(150,684)$103,256 
Basic earnings per common share$0.59 $1.33 $1.29 $2.68 
Diluted earnings per common share$0.59 $1.31 $1.28 $2.65 
See accompanying notes to consolidated financial statements.
4



TEXAS CAPITAL BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY - UNAUDITED
Preferred StockCommon StockAdditional Treasury StockAccumulated Other 
 Paid-inRetainedComprehensive 
(in thousands except share data)SharesAmountSharesAmountCapitalEarningsSharesAmountIncome/(Loss)Total
Balance at March 31, 20216,300,000 $450,000 50,558,184 $505 $984,207 $1,781,215 (417)$(8)$(56,437)$3,159,482 
Comprehensive income:
Net income— — — — — 73,481 — — — 73,481 
Change in other comprehensive income/(loss), net of taxes— — — — — — — — 30,048 30,048 
Total comprehensive income103,529 
Stock-based compensation expense recognized in earnings
— — — — 8,315 — — — — 8,315 
Preferred stock dividend — — — — — (6,317)— — — (6,317)
Issuance of stock related to stock-based awards
— — 34,434 1 (53)— — — — (52)
Redemption of preferred stock(6,000,000)(150,000)— — — — — — — (150,000)
Balance at June 30, 2021300,000 $300,000 50,592,618 $506 $992,469 $1,848,379 (417)$(8)$(26,389)$3,114,957 
Balance at March 31, 2022300,000 $300,000 50,710,858 $507 $1,011,353 $1,983,611 (417)$(8)$(205,425)$3,090,038 
Comprehensive income:
Net income— — — — — 34,159 — — — 34,159 
Change in other comprehensive income/(loss), net of taxes— — — — — — — — (66,783)(66,783)
Total comprehensive loss(32,624)
Stock-based compensation expense recognized in earnings
— — — — 5,022 — — — — 5,022 
Preferred stock dividend— — — — — (4,312)— — — (4,312)
Issuance of stock related to stock-based awards
— — 109,479 1 (1,270)— — — — (1,269)
Repurchase of common stock— — — — — — (941,879)(50,023)— (50,023)
Balance at June 30, 2022300,000 $300,000 50,820,337 $508 $1,015,105 $2,013,458 (942,296)$(50,031)$(272,208)$3,006,832 


See accompanying notes to consolidated financial statements.
5


Preferred StockCommon StockAdditional Treasury StockAccumulated Other 
 Paid-inRetainedComprehensive 
(in thousands except share data)SharesAmountSharesAmountCapitalEarningsSharesAmountIncome/(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— — — — — 145,419 — — — 145,419 
Change in other comprehensive income/(loss), net of taxes— — — — — — — — (42,163)(42,163)
Total comprehensive income103,256 
Stock-based compensation expense recognized in earnings
— — — — 13,776 — — — — 13,776 
Issuance of preferred stock300,000 300,000 — — (10,277)— — — — 289,723 
Preferred stock dividend — — — — — (10,096)— — — (10,096)
Issuance of stock related to stock-based awards
— — 121,751 2 (2,928)— — — — (2,926)
Redemption of preferred stock(6,000,000)(150,000)— — — — — — — (150,000)
Balance at June 30, 2021300,000 $300,000 50,592,618 $506 $992,469 $1,848,379 (417)$(8)$(26,389)$3,114,957 
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— — — — — 73,809 — — — 73,809 
Change in other comprehensive income/(loss), net of taxes— — — — — — — — (224,493)(224,493)
Total comprehensive loss(150,684)
Stock-based compensation expense recognized in earnings
— — — — 10,429 — — — — 10,429 
Preferred stock dividend— — — — — (8,625)— — — (8,625)
Issuance of stock related to stock-based awards
— — 201,426 2 (3,883)— — — — (3,881)
Repurchase of common stock— — — — — — (941,879)(50,023)— (50,023)
Balance at June 30, 2022300,000 $300,000 50,820,337 $508 $1,015,105 $2,013,458 (942,296)$(50,031)$(272,208)$3,006,832 
See accompanying notes to consolidated financial statements.
6


TEXAS CAPITAL BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED
 Six months ended June 30,
(in thousands)20222021
Operating activities
Net income$73,809 $145,419 
Adjustments to reconcile net income to net cash provided by operating activities:
Provision/(benefit) for credit losses20,000 (25,000)
Depreciation and amortization expense24,081 47,531 
Net (gain)/loss on sale of loans held for sale (2,502)
Decrease in valuation allowance on mortgage servicing rights (16,448)
Stock-based compensation expense10,612 14,804 
Purchases and originations of loans held for sale(1,072)(1,409,716)
Proceeds from sales and repayments of loans held for sale4,600 1,618,331 
Changes in operating assets and liabilities:
Accrued interest receivable and other assets(10,753)85,388 
Accrued interest payable and other liabilities25,259 (19,164)
Net cash provided by operating activities146,536 438,643 
Investing activities
Purchases of available-for-sale debt securities(637,803)(903,395)
Proceeds from maturities, redemptions and pay-downs of available-for-sale debt securities333,811 240,891 
Proceeds from maturities, redemptions and pay-downs of held-to-maturity debt securities40,224  
Sales/(purchases) of equity securities, net855  
Originations of loans held for investment, mortgage finance(54,492,183)(88,516,423)
Proceeds from pay-offs of loans held for investment, mortgage finance55,418,173 88,823,033 
Proceeds from sale of mortgage servicing rights 108,646 
Net (increase)/decrease in loans held for investment, excluding mortgage finance(2,188,546)174,095 
Purchases of premises and equipment, net(9,201)(1,516)
Net cash used in investing activities(1,534,670)(74,669)
Financing activities
Net decrease in deposits(2,669,344)(2,157,026)
Issuance of stock related to stock-based awards(3,881)(2,926)
Net proceeds from issuance of preferred stock 289,723 
Redemption of preferred stock (150,000)
Preferred stock dividends paid(8,625)(10,096)
Repurchase of common stock(50,023) 
Net increase/(decrease) in short-term borrowings448,704 (1,097,270)
Net proceeds from issuance of long-term debt 639,440 
Redemption of long-term debt (111,000)
Net cash used in financing activities(2,283,169)(2,599,155)
Net decrease in cash and cash equivalents(3,671,303)(2,235,181)
Cash and cash equivalents at beginning of period7,946,659 9,206,380 
Cash and cash equivalents at end of period$4,275,356 $6,971,199 
Supplemental disclosures of cash flow information:
Cash paid during the period for interest$60,572 $58,869 
Cash paid during the period for income taxes29,350 36,701 
Transfers of debt securities from available-for-sale to held-to-maturity1,019,365  
See accompanying notes to consolidated financial statements.
7


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.
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 June 30,Six months ended June 30,
(in thousands except share and per share data)2022202120222021
Numerator:
Net income$34,159 $73,481 $73,809 $145,419 
Preferred stock dividends4,312 6,317 8,625 10,096 
Net income available to common stockholders$29,847 $67,164 $65,184 $135,323 
Denominator:
Denominator for basic earnings per common share—weighted average common shares50,258,681 50,580,184 50,462,735 50,549,236 
Effect of dilutive outstanding stock-settled awards542,947 513,476 607,034 553,851 
Denominator for dilutive earnings per common share—weighted average diluted common shares50,801,628 51,093,660 51,069,769 51,103,087 
Basic earnings per common share$0.59 $1.33 $1.29 $2.68 
Diluted earnings per common share$0.59 $1.31 $1.28 $2.65 
Anti-dilutive outstanding stock-settled awards430,224 153,232 301,842 98,079 
8


(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
June 30, 2022
Available-for-sale debt securities:
U.S. Treasury securities$638,427 $974 $(13,598)$625,803 
U.S. government agency securities125,000  (16,382)108,618 
Residential mortgage-backed securities2,036,101 21 (246,567)1,789,555 
Credit risk transfer (“CRT”) securities14,713  (3,043)11,670 
Total available-for-sale debt securities2,814,241 995 (279,590)2,535,646 
Held-to-maturity debt securities:
Residential mortgage-backed securities980,935  (81,688)899,247 
Total held-to-maturity debt securities