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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
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 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
 






PART I—FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
TEXAS CAPITAL BANCSHARES, INC.
CONSOLIDATED BALANCE SHEETS - UNAUDITED
(in thousands except share data)September 30, 2022December 31, 2021
Assets
Cash and due from banks$240,609 $180,663 
Interest bearing cash and cash equivalents3,399,638 7,765,996 
Available-for-sale debt securities2,380,774 3,538,201 
Held-to-maturity debt securities955,875  
Equity securities32,973 45,607 
Investment securities3,369,622 3,583,808 
Loans held for sale3,142,178 8,123 
Loans held for investment, mortgage finance4,908,822 7,475,497 
Loans held for investment14,878,959 15,331,457 
Less: Allowance for credit losses on loans234,613 211,866 
Loans held for investment, net19,553,168 22,595,088 
Premises and equipment, net27,180 20,901 
Accrued interest receivable and other assets648,172 559,897 
Other assets held for sale26,450  
Goodwill and intangible assets, net1,496 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 deposits13,003,878 14,718,995 
Total deposits24,498,563 28,109,365 
Accrued interest payable18,465 7,699 
Other liabilities297,900 273,488 
Other liabilities held for sale75,564  
Short-term borrowings1,701,480 2,202,832 
Long-term debt930,766 928,738 
Total liabilities27,522,738 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 capital1,020,153 1,008,559 
Retained earnings2,050,563 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’ equity2,885,775 3,209,616 
Total liabilities and stockholders’ equity$30,408,513 $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 September 30,Nine months ended September 30,
(in thousands except per share data)2022202120222021
Interest income
Interest and fees on loans$282,473 $202,748 $688,420 $616,153 
Investment securities15,002 10,235 46,969 31,040 
Interest bearing cash and cash equivalents24,596 3,606 37,561 9,500 
Total interest income322,071 216,589 772,950 656,693 
Interest expense
Deposits60,317 14,719 94,513 50,994 
Short-term borrowings10,011 748 15,628 3,842 
Long-term debt12,663 10,586 34,651 27,052 
Total interest expense82,991 26,053 144,792 81,888 
Net interest income239,080 190,536 628,158 574,805 
Provision for credit losses12,000 5,000 32,000 (20,000)
Net interest income after provision for credit losses227,080 185,536 596,158 594,805 
Non-interest income
Service charges on deposit accounts5,701 4,622 17,726 13,972 
Wealth management and trust fee income3,631 3,382 11,594 9,380 
Brokered loan fees3,401 6,032 11,504 22,276 
Servicing income212 292 677 15,236 
Investment banking and trading income7,812 4,127 23,117 17,985 
Net gain/(loss) on sale of loans held for sale (1,185) 1,317 
Other4,576 7,509 7,239 26,605 
Total non-interest income25,333 24,779 71,857 106,771 
Non-interest expense
Salaries and benefits129,336 87,503 333,319 261,855 
Occupancy expense9,433 8,324 27,192 24,463 
Marketing8,282 2,123 21,765 5,720 
Legal and professional16,775 11,055 38,365 28,479 
Communications and technology18,470 28,374 48,819 58,695 
Federal Deposit Insurance Corporation (“FDIC”) insurance assessment3,953 4,500 11,252 16,339 
Servicing-related expenses 2,396  27,740 
Other10,798 8,712 33,730 29,072 
Total non-interest expense197,047 152,987 514,442 452,363 
Income before income taxes55,366 57,328 153,573 249,213 
Income tax expense13,948 13,938 38,346 60,404 
Net income41,418 43,390 115,227 188,809 
Preferred stock dividends4,313 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)$(71,501)
Amounts reclassified into net income609  3,498  
Other comprehensive income/(loss)(206,595)(18,131)(490,763)(71,501)
Income tax expense/(benefit)(43,384)(3,808)(103,059)(15,015)
Other comprehensive income/(loss), net of tax(163,211)(14,323)(387,704)(56,486)
Comprehensive income/(loss)$(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.
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 June 30, 2021300,000 $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 income29,067 
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, 2021300,000 $300,000 50,606,043 $506 $1,000,509 $1,887,457 (417)$(8)$(40,712)$3,147,752 
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 
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, 2022300,000 $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.
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— — — — — 188,809 — — — 188,809 
Change in other comprehensive income/(loss), net of taxes— — — — — — — — (56,486)(56,486)
Total comprehensive income132,323 
Stock-based compensation expense recognized in earnings
— — — — 22,100 — — — — 22,100 
Issuance of preferred stock300,000 300,000 — — (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, 2021300,000 $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, 2022300,000 $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.
6


TEXAS CAPITAL BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED
 Nine months ended September 30,
(in thousands)20222021
Operating activities
Net income$115,227 $188,809 
Adjustments to reconcile net income to net cash provided by operating activities:
Provision/(benefit) for credit losses32,000 (20,000)
Depreciation and amortization expense35,360 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 expense15,991 23,192 
Purchases and originations of loans held for sale(1,642)(1,413,899)
Proceeds from sales and repayments of loans held for sale5,050 1,675,246 
Changes in operating assets and liabilities:
Accrued interest receivable and other assets(2,152)86,707 
Accrued interest payable and other liabilities14,266 (41,920)
Net cash provided by operating activities214,100 546,313 
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 securities388,223 400,429 
Proceeds from maturities, redemptions and pay-downs of held-to-maturity debt securities66,500  
Sales/(purchases) of equity securities, net3,421  
Originations of loans held for investment, mortgage finance(77,518,608)(128,503,055)
Proceeds from pay-offs of loans held for investment, mortgage finance80,085,283 129,054,151 
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 period7,946,659 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 taxes48,569 99,915 
Transfers of loans from held for investment to held for sale3,137,792  
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.
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.
8


(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)2022202120222021
Numerator:
Net income$41,418 $43,390 $115,227 $188,809 
Preferred stock dividends4,313 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 shares49,891,727 50,600,732 50,506,364 50,568,439 
Effect of dilutive outstanding stock-settled awards526,157 538,823 584,151 555,836 
Denominator for dilutive earnings per common share—weighted average diluted common shares50,417,884 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 awards174,706 208,813 315,499 104,174 
(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 securities125,000  (23,310)101,690 
Residential mortgage-backed securities1,980,590 7 (350,496)1,630,101 
Credit risk transfer (“CRT”) securities14,713  (3,011)