DALLAS, April 17, 2019 (GLOBE NEWSWIRE) -- 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)
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.
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.
(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.
(1) Interim period ratios are annualized.
(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.
| 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.
INVESTOR CONTACT
Heather Worley, 214.932.6646
heather.worley@texascapitalbank.com
Source: Texas Capital Bancshares, Inc.