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): July 18, 2007 (July 18, 2007)
TEXAS CAPITAL BANCSHARES, INC.
(Name of Registrant)
         
Delaware
(State or other jurisdiction of
incorporation or organization) 		  000-30533
(Commission
File Number) 		  75-2679109
(I.R.S. Employer
Identification Number)
2100 McKinney Avenue, Suite 900, 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:
o   Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
o   Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
o   Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
o   Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 
 

 

 

Item 2.02. Results of Operations and Financial Condition.
(a)   On July 18, 2007, Texas Capital Bancshares, Inc. issued a press release and made a concurrent public presentation regarding its operating and financial results for its fiscal quarter ended June 30, 2007. 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 this report (including the exhibit 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 5.03 Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year.
In August 2006, the Securities and Exchange Commission approved an amendment to NASDAQ Rule 4350 that requires NASDAQ listed companies on and after January 1, 2008 to be eligible to participate in a Direct Registration Program (“DRP”). A DRP permits an investor’s ownership to be recorded and maintained on the books of the issuer or the transfer agent without the issuance of a physical stock certificate. Investors then receive annual statements from the issuer indicating their holdings.
As a result, on July 17, 2007, the Board of Directors of Texas Capital Bancshares, Inc. (the “Company”) approved an amendment (the “Amendment”) to the Company’s Amended and Restated Bylaws (the “Bylaws”), effective July 17, 2007. The Amendment modified Section 1 of Article IX of the Bylaws to permit the issuance of shares of the Company’s stock in uncertificated form. The Amendment also permits direct or “book-entry” registration of shares of the Company’s stock and thereby facilitates the Company’s eligibility to participate in a DRP.
Item 9.01. Financial Statements and Exhibits.
     (c) Exhibits
     
5.3
  First Amendment to the Amended and Restated Bylaws of Texas Capital Bancshares, Inc., dated as of July 17, 2007
 
   
99.1
  Press Release, dated July 18, 2007, of Texas Capital Bancshares, Inc., announcing its operating and financial results for its fiscal quarter ended June 30, 2007
 
   
99.2
  Presentation given July 18, 2007 discussing Texas Capital Bancshares, Inc.’s operating and financial results for its fiscal quarter ended June 30, 2007
FORWARD-LOOKING STATEMENTS
     The information in this report contains forward-looking statements within the meaning of Section 27A of the United States Securities Act of 1933 and Section 21E of the United States Securities Exchange Act of 1934. Such statements are based upon current expectations that involve risks and uncertainties that may be outside of our control. Any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. For example, words such as “may,” “will,” “should,” “estimates,” “predicts,” “potential,” “continue,” “strategy,” “believes,” “anticipates,” “plans,”

 

 

“expects,” “intends,” and similar expressions are intended to identify forward-looking statements. Our actual results and the timing of certain events may differ significantly from the results discussed in the forward-looking statements.

 

 

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: July 19, 2007  TEXAS CAPITAL BANCSHARES, INC.
  		 
  By:   /s/ Peter B. Bartholow    
    Peter B. Bartholow   
    Chief Financial Officer   

 

 

         
EXHIBIT INDEX
     
Exhibit   Description
5.3
  First Amendment to the Amended and Restated Bylaws of Texas Capital Bancshares, Inc., dated as of July 17, 2007
 
   
99.1
  Press Release, dated April 18, 2007, of Texas Capital Bancshares, Inc., announcing its operating and financial results for its fiscal quarter ended March 31, 2007
 
   
99.2
  Presentation given April 18, 2007 discussing Texas Capital Bancshares, Inc.’s operating and financial results for its fiscal quarter ended March 31, 2007

 

 

Exhibit 5.3
FIRST AMENDMENT TO THE AMENDED AND RESTATED BYLAWS
OF
TEXAS CAPITAL BANCSHARES, INC.
ARTICLE IX
SHARES AND STOCKHOLDERS
     “Section 1. Certificates Representing Shares
     (a) Shares of any or all of the corporation’s stock may be evidenced by certificates for shares of stock, in such form as the board of directors may from time to time prescribe, or may be issued in uncertificated form. The issuance of shares in uncertificated form shall not affect shares already represented by a certificate. Except as expressly provided by law, there shall be no difference in the rights or obligations of stockholders based on whether or not their shares are represented by certificates.
     (b) To the extent that persons or entities hold stock certificates in the corporation, each certificate shall be signed in the name of the corporation by the president or a vice-president, and by the treasurer or an assistant treasurer, or the secretary or an assistant secretary of the corporation. Any of or all the signatures on the certificate may be facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the corporation with the same effect as if he were such officer, transfer agent or registrar at the date of issue. Certificates of stock shall be consecutively numbered and shall be in such form consistent with law as shall be prescribed by the board of directors.”
     Dated July 17, 2007.

 

 

Exhibit 99.1
(TEXAS CAPITAL BANCSHARES, INC. LOGO)
For immediate release
July 18, 2007
INVESTOR CONTACT
Myrna Vance, 214.932.6646
myrna.vance@texascapitalbank.com
TEXAS CAPITAL BANCSHARES ANNOUNCES OPERATING RESULTS FOR Q2 2007
DALLAS — July 18, 2007 — Texas Capital Bancshares, Inc. (NASDAQ: TCBI), the parent company of Texas Capital Bank, announced earnings and operating results for the second quarter of 2007.
  •   EPS increased 29% for the quarter
 
  •   Net income increased 33%
 
  •   Loans held for investment grew 28%
 
  •   Total deposits grew 7%
“Once again, we have reported another quarter of exceptional growth — all organic with no acquisitions,” said Jody Grant, Chairman and CEO. “Our adherence to our model and our focus on expense control have enabled us to continue improving profitability. We look forward to a strong second half of 2007.”
FINANCIAL SUMMARY
(dollars and shares in thousands)
                         
                    %  
    Q2 2007     Q2 2006     Change  
QUARTERLY OPERATING RESULTS
                       
Net Income (1)
  $ 8,385     $ 6,323       33 %
Diluted EPS (1)
  $ .31     $ .24       29 %
ROA (1)
    .88 %     .78 %        
ROE (1)
    12.59 %     11.36 %        
Diluted Shares
    26,711       26,525          
 
                       
BALANCE SHEET
                       
Total Assets (1)
  $ 3,943,518     $ 3,381,099       17 %
Demand Deposits
    495,010       532,130       (7 )%
Total Deposits
    3,112,560       2,922,494       7 %
Loans Held for Investment
    3,083,911       2,417,814       28 %
Total Loans (1)
    3,267,679       2,550,926       28 %
Stockholders’ Equity
    270,097       224,693       20 %
 
(1)   From continuing operations

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DETAILED FINANCIALS
Texas Capital Bancshares, Inc. reported net income from continuing operations of $8.4 million for the second quarter of 2007 compared to $6.3 million for the second quarter of 2006. On a fully diluted basis, earnings per share from continuing operations were $.31 for the three months ended June 30, 2007, compared to $.24 for the same quarter last year, an increase of 29 percent. Results of discontinued operations were net loss of $180,000 and net income of $18,000 for the second quarters 2007 and 2006, respectively. Due to the minor differences between reported earnings and income from continuing operations, the discussion below relates only to continuing operations.
Return on average equity was 12.59 percent and return on average assets was .88 percent for the second quarter of 2007, compared to 11.36 and .78 percent, respectively, for the second quarter of 2006.
Net interest income was $34.5 million for the second quarter of 2007, compared to $29.0 million for the second quarter of 2006. The increase was due to an increase in average earning assets of $604.5 million over levels reported in the second quarter of 2006. The increase in average earning assets included a $604.7 million increase in average loans held for investment and an increase of $88.5 million in average loans held for sale, offset by a decrease of $86.1 million in average securities. The net interest margin in the second quarter of 2007 was 3.83 percent, a 4 basis point decrease from the second quarter of 2006 and a 5 basis point increase from the first quarter of 2007.
Average total deposits increased by $440.0 million from the second quarter of 2006 and decreased by $82.5 from the first quarter of 2007. For the same periods, the average balance of demand deposits decreased by 2.2 percent to $458.1 million from $468.4 million during the second quarter of 2006 and increased $19.0 million, or 4 percent, from the first quarter of 2007. Average interest bearing liabilities increased $563.8 million from the second quarter of 2006, which included a $64.6 million increase in other borrowings.
Key measures of credit quality remained favorable. In the second quarter of 2007, net charge-offs were $27,000, compared to net charge-offs of $1.5 million in the second quarter of 2006 and net recoveries of $386,000 in the first quarter of 2007. For the most recent 12-month period, net charge-offs were $34,000. Non-accrual loans were $8.7 million, or .28 percent of loans at the end of the second quarter of 2007, compared to $5.1 million, or .21 percent of loans at the end of second quarter of 2006, and $8.8 million, or .31 percent at the end of the first quarter of 2007. Loans 90 days past due and still accruing were $1.9 million at the end of the second quarter of 2007 compared to $2.7 million at the end of the second quarter of 2006. At June 30, 2007, the $1.9 million of past due loans included $1.2 million in premium finance loans. The premium finance loans are generally secured by obligations of insurance carriers to refund premiums on cancelled insurance policies. The refund of premiums from the insurance carriers can take 180 days or longer from the cancellation date. Loans 90 days past due also include a USDA guaranteed loan of $554,000. The Company recorded a $1.5 million provision for loan losses in the second quarter of 2007, compared to $2.3 million in the second quarter of 2006 and $1.2 million in the first quarter of 2007. Reserve coverage of historical losses, non-performing assets and classified loans remains strong. In management’s opinion, the reserve is adequate and is derived from consistent application of the methodology for establishing the adequacy of reserves for Texas Capital Bank’s loan portfolio.
Non-interest income for the second quarter of 2007 increased $1.3 million, or 33 percent, to $5.3 million from $4.0 million in the second quarter of 2006. The increase is primarily

2

 

related to a $678,000 increase in rental income on leased equipment from $815,000 to $1.5 million related to expansion of our operating lease portfolio. Trust fee income increased $328,000 due to continued growth of trust assets.
Non-interest expense for the second quarter of 2007 increased $4.2 million, or 20 percent, to $25.4 million from $21.2 million in the second quarter of 2006. The increase is primarily related to a $2.3 million increase in salaries and employee benefits to $14.8 million from $12.5 million, of which $563,000 relates to an increase in FAS 123R expense. The remaining increase in salaries and employee benefits resulted from growth, including higher level of variable incentives. Expansion of the operating lease portfolio resulted in an increase of $418,000 in equipment depreciation expense to $1.2 million in the second quarter of 2007 from $786,000 in the second quarter of 2006.
ABOUT TEXAS CAPITAL BANCSHARES, INC.
Texas Capital Bancshares, Inc. (NASDAQ: TCBI) is the parent company of Texas Capital Bank, a commercial bank that delivers highly personalized financial services to businesses and private clients. Headquartered in Dallas, the Bank has full-service locations in Austin, Dallas, Fort Worth, Houston and San Antonio.
This release contains forward-looking statements, which are subject to risks and uncertainties. A number of factors, many of which are beyond Texas Capital Bancshares’ control, could cause actual results to differ materially from future results expressed or implied by such forward-looking statements. These risks and uncertainties include the risk of adverse impacts from general economic conditions, competition, interest rate sensitivity and exposure to regulatory and legislative changes. These and other factors that could cause results to differ materially from those described in the forward-looking statements can be found in the Form 10-K and other filings made by Texas Capital Bancshares with the Securities and Exchange Commission.

3

 

TEXAS CAPITAL BANCSHARES, INC.
SELECTED FINANCIAL HIGHLIGHTS (UNAUDITED)
(Dollars in thousands except per share data)
                                         
    2 nd Quarter     1 st Quarter     4 th Quarter     3 rd Quarter     2 nd Quarter  
    2007     2007     2006     2006     2006  
     
CONSOLIDATED STATEMENT OF OPERATIONS
                                       
Interest income
  $ 72,419     $ 67,163     $ 66,178     $ 62,848     $ 57,434  
Interest expense
    37,948       35,496       34,346       32,747       28,421  
     
Net interest income
    34,471       31,667       31,832       30,101       29,013  
Provision for loan losses
    1,500       1,200       1,000       750       2,250  
     
Net interest income after provision for loan losses
    32,971       30,467       30,832       29,351       26,763  
Non-interest income
    5,288       5,136       4,833       4,478       3,989  
Non-interest expense
    25,411       24,095       23,993       21,635       21,156  
     
Income from continuing operations before income taxes
    12,848       11,508       11,672       12,194       9,596  
Income tax expense
    4,463       3,922       3,958       4,157       3,273  
     
Net income from continuing operations
    8,385       7,586       7,714       8,037       6,323  
Income (loss) from discontinued operations (after-tax)
    (180 )     36       356       (167 )     18  
     
Net income
  $ 8,205     $ 7,622     $ 8,070     $ 7,870     $ 6,341  
     
Diluted EPS from continuing operations
  $ .31     $ .29     $ .29     $ .30     $ .24  
Diluted EPS
  $ .31     $ .29     $ .31     $ .30     $ .24  
 
                                       
Diluted shares
    26,711,437       26,440,556       26,373,726       26,411,834       26,524,552  
 
                                       
CONSOLIDATED BALANCE SHEET DATA (1)
                                       
Total assets
  $ 3,943,518     $ 3,807,232     $ 3,658,505     $ 3,463,009     $ 3,381,099  
Loans held for investment
    3,083,911       2,885,963       2,722,097       2,543,059       2,417,814  
Loans held for sale
    183,768       208,074       199,014       151,255       133,112  
Securities
    490,967       508,296       532,053       554,732       573,053  
Demand deposits
    495,010       507,686       513,930       467,750       532,130  
Total deposits
    3,112,560       3,086,737       3,069,330       2,776,648       2,922,494  
Other borrowings
    421,668       331,118       211,559       338,801       173,730  
Long-term debt
    113,406       113,406       113,406       113,406       72,168  
Stockholders’ equity
    270,097       263,616       253,515       239,792       224,693  
End of period shares
    26,189,562       26,101,994       26,065,124       26,031,829       25,940,874  
Book value (excluding securities gains/losses)
  $ 10.64     $ 10.27     $ 9.93     $ 9.50     $ 9.20  
Tangible book value
  $ 10.01     $ 9.79     $ 9.23     $ 8.71     $ 8.18  
 
                                       
SELECTED FINANCIAL RATIOS
                                       
From continuing operations
                                       
Net interest margin
    3.83 %     3.78 %     3.86 %     3.80 %     3.87 %
Return on average assets
    .88 %     .84 %     .87 %     .94 %     .78 %
Return on average equity
    12.59 %     12.12 %     12.53 %     13.83 %     11.36 %
Non-interest income to earning assets
    .58 %     .61 %     .58 %     .56 %     .53 %
Efficiency ratio
    63.9 %     65.5 %     65.4 %     62.6 %     64.1 %
Non-interest expense to earning assets
    2.80 %     2.86 %     2.89 %     2.71 %     2.80 %
From consolidated
                                       
Net interest margin
    3.84 %     3.77 %     3.84 %     4.01 %     4.10 %
Return on average assets
    .86 %     .84 %     .90 %     .91 %     .78 %
Return on average equity
    12.32 %     12.18 %     13.11 %     13.54 %     11.39 %
 
                                       
Tier 1 capital ratio
    9.8 %     9.8 %     9.7 %     11.1 %     10.1 %
Total capital ratio
    10.9 %     11.1 %     11.2 %     11.8 %     10.7 %
Tier 1 leverage ratio
    9.4 %     9.5 %     9.2 %     10.2 %     9.1 %
 
(1)   From continuing operations

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TEXAS CAPITAL BANCSHARES, INC.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(Dollars in thousands)
                         
    June 30,     June 30,     %  
    2007     2006     Change  
     
Assets
                       
Cash and due from banks
  $ 83,603     $ 163,737       (49 )%
Securities, available-for-sale
    490,967       573,053       (14 )%
Loans held for sale
    183,768       133,112       38 %
Loans held for sale from discontinued operations
    1,264       31,381       (96 )%
Loans held for investment (net of unearned income)
    3,083,911       2,417,814       28 %
Less: Allowance for loan losses
    24,062       19,646       22 %
     
Loans held for investment, net
    3,059,849       2,398,168       28 %
Premises and equipment, net
    33,776       26,031       30 %
Accrued interest receivable and other assets
    83,622       74,590       12 %
Goodwill and intangibles, net
    7,933       12,408       (36 )%
     
Total assets
  $ 3,944,782     $ 3,412,480       16 %
     
 
                       
Liabilities and Stockholders’ Equity
                       
Liabilities:
                       
Deposits:
                       
Non-interest bearing
  $ 495,010     $ 532,130       (7 )%
Interest bearing
    1,631,397       1,592,239       2 %
Interest bearing in foreign branches
    986,153       798,125       24 %
     
Total deposits
    3,112,560       2,922,494       7 %
 
                       
Accrued interest payable
    6,678       5,880       14 %
Other liabilities
    20,373       13,515       51 %
Federal funds purchased
    148,450       100,060       48 %
Repurchase agreements
    22,672       70,557       (68 )%
Other borrowings
    250,546       3,113       N/M  
Long-term debt
    113,406       72,168       57 %
     
Total liabilities
    3,674,685       3,187,787       15 %
 
                       
Stockholders’ equity:
                       
Common stock, $.01 par value:
                       
Authorized shares — 100,000,000
                       
Issued shares — 26,189,562 and 25,940,874 at June 30, 2007 and 2006, respectively
    262       259          
Additional paid-in capital
    186,319       178,204          
Retained earnings
    91,990       60,223          
Treasury stock (shares at cost: 84,691 and 84,274 at June 30, 2007 and 2006, respectively)
    (581 )     (573 )        
Deferred compensation
    573       573          
Accumulated other comprehensive loss
    (8,466 )     (13,993 )        
     
Total stockholders’ equity
    270,097       224,693       20 %
     
Total liabilities and stockholders’ equity
  $ 3,944,782     $ 3,412,480       16 %
     

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TEXAS CAPITAL BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(In thousands except per share data)
                                 
    Three Months Ended June 30     Six Months Ended June 30  
    2007     2006     2007     2006  
     
Interest income
                               
Interest and fees on loans
  $ 66,526     $ 50,692     $ 127,700     $ 94,492  
Securities
    5,868       6,726       11,837       13,557  
Federal funds sold
    10       3       15       27  
Deposits in other banks
    15       13       30       24  
     
Total interest income
    72,419       57,434       139,582       108,100  
Interest expense
                               
Deposits
    29,731       22,369       60,621       41,676  
Federal funds purchased
    3,767       2,433       5,920       4,341  
Repurchase agreements
    270       1,562       664       2,764  
Other borrowings
    2,117       890       2,129       1,444  
Long-term debt
    2,063       1,167       4,110       1,995  
     
Total interest expense
    37,948       28,421       73,444       52,220  
     
Net interest income
    34,471       29,013       66,138       55,880  
Provision for loan losses
    1,500       2,250       2,700       2,250  
     
Net interest income after provision for loan losses
    32,971       26,763       63,438       53,630  
Non-interest income
                               
Service charges on deposit accounts
    953       805       1,846       1,661  
Trust fee income
    1,194       866       2,271       1,709  
Bank owned life insurance (BOLI) income
    301       292       599       578  
Brokered loan fees
    574       483       1,053       852  
Equipment rental income
    1,493       815       2,952       1,328  
Other
    773       728       1,703       1,603  
     
Total non-interest income
    5,288       3,989       10,424       7,731  
Non-interest expense
                               
Salaries and employee benefits
    14,762       12,484       29,319       24,330  
Net occupancy expense
    2,055       1,953       4,075       3,964  
Leased equipment depreciation
    1,204       786       2,411       1,167  
Marketing
    728       905       1,485       1,607  
Legal and professional
    1,742       1,360       3,403       2,812  
Communications and data processing
    838       733       1,670       1,425  
Franchise taxes
    89       104       130       165  
Other
    3,993       2,831       7,013       5,815  
     
Total non-interest expense
    25,411       21,156       49,506       41,285  
     
Income from continuing operations before income taxes
    12,848       9,596       24,356       20,076  
Income tax expense
    4,463       3,273       8,385       6,846  
     
Income from continuing operations (after-tax)
    8,385       6,323       15,971       13,230  
Income (loss) from discontinued operations (after-tax)
    (180 )     18       (144 )     (246 )
     
Net income
  $ 8,205     $ 6,341     $ 15,827     $ 12,984  
     
 
                               
Basic earnings per share:
                               
Income from continuing operations
  $ .32     $ .24     $ .61     $ .51  
Net income
  $ .31     $ .24     $ .61     $ .50  
 
                               
Diluted earnings per share:
                               
Income from continuing operations
  $ .31     $ .24     $ .60     $ .50  
Net income
  $ .31     $ .24     $ .60     $ .49  

6

 

TEXAS CAPITAL BANCSHARES, INC.
SUMMARY OF LOAN LOSS EXPERIENCE
(Dollars in thousands)
                                         
    2 nd Quarter     1 st Quarter     4 th Quarter     3 rd Quarter     2 nd Quarter  
    2007     2007     2006     2006     2006  
     
Beginning balance
  $ 22,589     $ 21,003     $ 20,841     $ 19,646     $ 18,909  
Loans charged-off:
                                       
Commercial
    93       146       837       70       1,618  
Consumer
    3       —       —       —       —  
Leases
    58       —       36       —       30  
     
Total
    154       146       873       70       1,648  
Recoveries:
                                       
Commercial
    49       504       12       441       5  
Consumer
    —       13       —       —       —  
Leases
    78       15       23       74       130  
     
Total recoveries
    127       532       35       515       135  
     
Net charge-offs (recoveries)
    27       (386 )     838       (445 )     1,513  
Provision for loan losses
    1,500       1,200       1,000       750       2,250  
     
Ending balance
  $ 24,062     $ 22,589     $ 21,003     $ 20,841     $ 19,646  
     
 
                                       
Reserve to loans held for investment (2)
    .78 %     .78 %     .77 %     .82 %     .81 %
Reserve to average loans held for investment (2)
    .81 %     .82 %     .80 %     .84 %     .83 %
Net charge-offs (recoveries) to average loans (1) (2)
    .00 %     (.06 )%     .13 %     (.07 )%     .26 %
Net charge-offs (recoveries) to average loans for last twelve months (1) (2)
    .00 %     .06 %     .08 %     .05 %     .07 %
Provision for loan losses to average loans (1) (2)
    .20 %     .18 %     .15 %     .12 %     .38 %
 
                                       
Non-performing loans:
                                       
Loans past due (90 days) (3)
  $ 1,860     $ 4,828     $ 2,192     $ 2,627     $ 2,746  
Non-accrual
    8,718       8,843       9,088       6,432       5,063  
     
Total
  $ 10,578     $ 13,671     $ 11,280     $ 9,059     $ 7,809  
     
 
                                       
Other real estate owned
  $ 89     $ 89     $ 882     $ 882     $ 89  
 
                                       
Reserve to non-performing loans
    2.3x       1.7x       1.9x       2.3x       2.5x  
Reserve to non-accrual loans
    2.8x       2.6x       2.3x       3.2x       3.9x  
Reserve to non-performing assets
    2.3x       1.6x       1.7x       2.1x       2.5x  
Non-accrual loans to loans (2)
    .28 %     .31 %     .33 %     .25 %     .21 %
Loans past due 90 days to loans (2)
    .06 %     .17 %     .08 %     .10 %     .11 %
Non-performing loans to loans (2)
    .34 %     .47 %     .41 %     .36 %     .32 %
 
(1)   Interim period ratios are annualized.
 
(2)   Excludes loans held for sale.
 
(3)   At June 30, 2007, loans past due 90 days and still accruing includes premium finance loans of $1.2 million. These loans are generally secured by obligations of insurance carriers to refund premiums on cancelled insurance policies. The refund of premiums from the insurance carriers can take 180 days or longer from the cancellation date. The total also includes $554,000 USDA guaranteed loans.

7

 

TEXAS CAPITAL BANCSHARES, INC.
CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
(Dollars in thousands)
                                         
    2 nd Quarter     1 st Quarter     4 th Quarter     3 rd Quarter     2 nd Quarter  
    2007     2007     2006     2006     2006  
     
Interest income
                                       
Interest and fees on loans
  $ 66,526     $ 61,174     $ 59,882     $ 56,320     $ 50,692  
Securities
    5,868       5,969       6,266       6,488       6,726  
Federal funds sold
    10       5       14       24       3  
Deposits in other banks
    15       15       16       16       13  
     
Total interest income
    72,419       67,163       66,178       62,848       57,434  
Interest expense
                                       
Deposits
    29,731       30,890       29,487       28,337       22,369  
Federal funds purchased
    3,767       2,153       1,793       1,753       2,433  
Repurchase agreements
    270       394       587       665       1,562  
Other borrowings
    2,117       12       393       634       890  
Long-term debt
    2,063       2,047       2,086       1,358       1,167  
     
Total interest expense
    37,948       35,496       34,346       32,747       28,421  
     
Net interest income
    34,471       31,667       31,832       30,101       29,013  
Provision for loan losses
    1,500       1,200       1,000       750       2,250  
     
Net interest income after provision for loan losses
    32,971       30,467       30,832       29,351       26,763  
Non-interest income
                                       
Service charges on deposit accounts
    953       893       865       780       805  
Trust fee income
    1,194       1,077       1,073       1,008       866  
Bank owned life insurance (BOLI) income
    301       298       301       255       292  
Brokered loan fees
    574       479       521       656       483  
Equipment rental income
    1,493       1,459       1,433       1,147       815  
Other
    773       930       640       632       728  
     
Total non-interest income
    5,288       5,136       4,833       4,478       3,989  
Non-interest expense
                                       
Salaries and employee benefits
    14,762       14,557       13,711       12,542       12,484  
Net occupancy expense
    2,055       2,020       2,111       1,907       1,953  
Leased equipment depreciation
    1,204       1,207       1,002       928       786  
Marketing
    728       757       785       690       905  
Legal and professional
    1,742       1,661       2,084       1,590       1,360  
Communications and data processing
    838       832       862       843       733  
Franchise taxes
    89       41       58       58       104  
Other
    3,993       3,020       3,380       3,077       2,831  
     
Total non-interest expense
    25,411       24,095       23,993       21,635       21,156  
     
Income from continuing operations before income taxes
    12,848       11,508       11,672       12,194       9,596  
Income tax expense
    4,463       3,922       3,958       4,157       3,273  
     
Income from continuing operations (after-tax)
    8,385       7,586       7,714       8,037       6,323  
Income (loss) from discontinued operations (after-tax)
    (180 )     36       356       (167 )     18  
     
Net income
  $ 8,205     $ 7,622     $ 8,070     $ 7,870     $ 6,341  
     

8

 

TEXAS CAPITAL BANCSHARES, INC.
QUARTERLY FINANCIAL SUMMARY — UNAUDITED
Consolidated Daily Average Balances, Average Yields and Rates
Continuing Operations
(Dollars in thousands)
                                                                                                                         
    2 nd Quarter 2007     1 st Quarter 2007     4 th Quarter 2006     3 rd Quarter 2006     2 nd Quarter 2006  
    Average     Revenue/     Yield/     Average     Revenue/     Yield/     Average     Revenue/     Yield/     Average     Revenue/     Yield/     Average     Revenue/     Yield/  
    Balance     Expense (1)     Rate     Balance     Expense (1)     Rate     Balance     Expense (1)     Rate     Balance     Expense (1)     Rate     Balance     Expense (1)     Rate  
     
Assets
                                                                                                                       
Securities — Taxable
  $ 452,118     $ 5,435       4.82 %   $ 467,219     $ 5,535       4.80 %   $ 490,001     $ 5,830       4.72 %   $ 507,156     $ 6,055       4.74 %   $ 537,934     $ 6,291       4.69 %
Securities — Non-taxable (2)
    48,291       666       5.53 %     48,549       668       5.58 %     48,573       669       5.46 %     48,595       666       5.44 %     48,614       669       5.52 %
Federal funds sold
    768       10       5.22 %     418       5       4.85 %     1,004       14       5.53 %     1,750       24       5.44 %     200       3       6.02 %
Deposits in other banks
    1,264       15       4.76 %     1,097       15       5.55 %     1,207       16       5.26 %     1,498       16       4.24 %     908       13       5.74 %
Loans held for sale
    191,979       3,440       7.19 %     156,400       2,791       7.24 %     155,620       2,791       7.12 %     150,225       2,747       7.25 %     103,483       1,752       6.79 %
Loans held for investment
    2,964,863       63,086       8.53 %     2,767,834       58,383       8.55 %     2,620,307       57,091       8.64 %     2,479,057       53,573       8.57 %     2,360,189       48,940       8.32 %
Less reserve for loan losses
    22,633       —       —       21,001       —       —       20,751       —       —       19,823       —       —       19,129       —       —  
                     
Loans, net of reserve
    3,134,209       66,526       8.51 %     2,903,233       61,174       8.55 %     2,755,176       59,882       8.62 %     2,609,459       56,320       8.56 %     2,444,543       50,692       8.32 %
                     
Total earning assets
    3,636,650       72,652       8.01 %     3,420,516       67,397       7.99 %     3,295,961       66,411       7.99 %     3,168,458       63,081       7.90 %     3,032,199       57,668       7.63 %
Cash and other assets
    205,011                       231,412                       225,092                       217,663                       208,502                  
                                                                                                     
Total assets
  $ 3,841,661                     $ 3,651,928                     $ 3,521,053                     $ 3,386,121                     $ 3,240,701                  
                                                                                                     
Liabilities and Stockholders’ Equity
                                                                                                                       
Transaction deposits
  $ 93,488     $ 236       1.01 %   $ 105,592     $ 282       1.08 %   $ 97,428     $ 276       1.12 %   $ 99,549     $ 284       1.13 %   $ 112,046     $ 310       1.11 %
Savings deposits
    794,668       8,792       4.44 %     821,526       9,175       4.53 %     879,452       10,063       4.54 %     769,271       8,703       4.49 %     701,007       7,257       4.15 %
Time deposits
    655,440       8,416       5.15 %     769,485       9,756       5.14 %     598,258       7,658       5.08 %     643,708       8,069       4.97 %     684,630       7,784       4.56 %
Deposits in foreign branches
    966,686       12,287       5.10 %     915,229       11,677       5.17 %     875,851       11,490       5.20 %     845,338       11,281       5.29 %     562,223       7,018       5.01 %
                     
Total interest bearing deposits
    2,510,282       29,731       4.75 %     2,611,832       30,890       4.80 %     2,450,989       29,487       4.77 %     2,357,866       28,337       4.77 %     2,059,906       22,369       4.36 %
Other borrowings
    469,999       6,154       5.25 %     207,303       2,559       5.01 %     219,644       2,773       5.01 %     238,350       3,052       5.08 %     405,424       4,885       4.83 %
Long-term debt
    113,406       2,063       7.30 %     113,406       2,047       7.32 %     113,406       2,086       7.30 %     73,064       1,358       7.37 %     64,521       1,167       7.25 %
                     
Total interest bearing liabilities
    3,093,687       37,948       4.92 %     2,932,541       35,496       4.91 %     2,784,039       34,346       4.89 %     2,669,280       32,747       4.87 %     2,529,851       28,421       4.51 %
Demand deposits
    458,096                       439,071                       470,701                       464,645                       468,449                  
Other liabilities
    22,650                       26,494                       22,106                       21,633                       19,055                  
Stockholders’ equity
    267,228                       253,822                       244,207                       230,563                       223,346                  
                                                                                                     
Total liabilities and stockholders’ equity
  $ 3,841,661                     $ 3,651,928                     $ 3,521,053                     $ 3,386,121                     $ 3,240,701                  
                                                                                                     
Net interest income
          $ 34,704                     $ 31,901                     $ 32,065                     $ 30,334                     $ 29,247          
Net interest margin
                    3.83 %                     3.78 %                     3.86 %                     3.80 %                     3.87 %
 
                                                                                                                       
(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.
 
Additional information from discontinued operations:
 
Loans held for sale
  $ 4,155                     $ 12,068                     $ 22,763                     $ 27,422                     $ 33,806                  
Borrowed funds
    4,155                       12,068                       22,763                       27,422                       33,806                  
Net interest income
          $ 115                     $ 46                     $ 87                     $ 1,972                     $ 2,113          
Net interest margin — consolidated
                    3.84 %                     3.77 %                     3.84 %                     4.01 %                     4.10 %

9

 

Exhibit 99.2
Earnings Release July 18, 2007

 

Certain matters discussed on this call may contain forward-looking statements, which are subject to risks and uncertainties. A number of factors, many of which are beyond Texas Capital Bancshares' control, could cause actual results to differ materially from future results expressed or implied by such forward-looking statements. These risks and uncertainties include the risk of adverse impacts from general economic conditions, competition, interest rate sensitivity and exposure to regulatory and legislative changes. These and other factors that could cause results to differ materially from those described in the forward-looking statements can be found in our annual report on Form 10-K for the year ended December 31, 2006, and other filings made by Texas Capital Bancshares with the Securities and Exchange Commission.

 

Opening Comments Another successful quarter Texas economy remains strong Solid market position even with increased competition Results demonstrate success of strategy and increased focus Achieving growth organically

 

Financial Highlights EPS growth Increased 7% from Q1-2007 Increase of 29% compared to Q2-2006 Growth in loans Held for investment - 7% increase on linked-quarter basis; 26% growth over Q2-2006 Total loans - 8% increase on linked-quarter basis; 28% growth over Q2-2006 Growth in deposits Demand deposits - Increase of $19 million, or 4%, on linked-quarter basis; 2% decrease from Q2-2006 Total deposits - Decrease of 3% on linked-quarter basis; 17% growth over Q2-2006 Net interest margin at 3.83% Increase of 5 bps from Q1-2007; decrease of 4 bps from Q2-2006 Growth in DDA from Q1-2007 - DDA growth important element of NIM Improvement in cost structure and effective utilization of interest-bearing funds Earning asset composition improving with loan growth Credit quality Net charge-offs of $27,000 in Q2-2007 and net recoveries of $359,000 YTD Provision of $1.5 million related to growth in portfolio Comparisons based on average balances and results of continuing operations

 

FINANCIAL REVIEW

 

Performance Evaluation Performance Drivers Net income of $8.4 million, an increase of 11% on linked-quarter basis and 33% from Q2-2006 Net revenue growth of 8% from Q1-2007 and 20% from Q2-2006 9% growth in net interest income on linked-quarter basis; 19% increase from Q2-2006 Non-interest income up 3% on linked-quarter basis and up 33% from Q2-2006 Improved operating leverage with 5% linked-quarter growth in non-interest expense; 20% from Q2-2006 New FDIC assessment represents quarterly cost of $300,000, or $0.01 per quarter Salary and benefit costs - normal growth, including higher level of variable incentives NIM increased by 5 bps for linked quarter; decrease of 4 bps from Q2-2006 Loan growth, earning asset composition and earning asset yields remain positive Funding costs generally flat with some success in reducing/rationalizing costs in key categories DDA growth of 4% from Q1-2007 on an average basis; 2% decrease from Q2-2006 Growth in deposits limited by anticipated events (i.e., tax payments, transaction-specific deposits) Composition of funding to support growth limits NIM, not net interest income ROA, ROE and efficiency ratios improved on linked-quarter and year-over-year basis Note: All comparisons based on continuing operations

 

Income Statement (in thousands) Q2-07 Q1-07 Q4-06 Q3-06 Q2-06 Net interest income $ 34,471 $ 31,667 $ 31,832 $ 30,101 $ 29,013 Provision for loan losses 1,500 1,200 1,000 750 2,250 Net interest income after provision for loan losses 32,971 30,467 30,832 29,351 26,763 Non-interest income 5,288 5,136 4,833 4,478 3,989 Non-interest expense 25,411 24,095 23,993 21,635 21,156 Income before income taxes 12,848 11,508 11,672 12,194 9,596 Income tax expense 4,463 3,922 3,958 4,157 3,273 Net income $ 8,385 $ 7,586 $ 7,714 $ 8,037 $ 6,323 Diluted EPS $ .31 $ .29 $ .29 $ .30 $ .24 Net Interest Margin 3.83% 3.78% 3.86% 3.80% 3.87% ROA 0.88% 0.84% 0.87% 0.94% 0.78% ROE 12.59% 12.12% 12.53% 13.83% 11.36% Efficiency 63.9% 65.5% 65.4% 62.6% 64.1% Note: Above financial data and ratios based on continuing operations

 

Financial Summary (in thousands) QTD Averages QTD Averages QTD Averages Q2 2007 Q1 2007 Q2 2006 Q2/Q1 % Change YOY % Change Loans held for investment $2,964,863 $2,767,834 $2,360,189 7% 26% Loans held for sale 191,979 156,400 103,483 23% 86% Total loans 3,156,842 2,924,234 2,463,672 8% 28% Securities 500,409 515,768 586,548 (3)% (15)% Demand deposits 458,096 439,071 468,449 4% (2)% Total deposits 2,968,378 3,050,903 2,528,355 (3)% 17% Total assets 3,841,661 3,651,928 3,240,701 5% 19% Note: Above financial data based on continuing operations

 

Financial Summary (in thousands) Period End Period End Period End Q2 2007 Q1 2007 Q2 2006 Q2/Q1 % Change YOY % Change Loans held for investment $3,083,911 $2,885,963 $2,417,814 7% 28% Loans held for sale 183,768 208,074 133,112 (12)% 38% Total loans 3,267,679 3,094,037 2,550,926 6% 28% Securities 490,967 508,296 573,053 (3)% (14)% Demand deposits 495,010 507,686 532,130 (2)% (7)% Total deposits 3,112,560 3,086,737 2,922,494 1% 7% Total assets 3,943,518 3,807,232 3,381,099 4% 17% Note: Above financial data based on continuing operations

 

QTD Average Balances, Yields and Rates (in thousands) Q2 2007 Q2 2007 Q1 2007 Q1 2007 Q2 2006 Q2 2006 Avg. Bal. Yield / Rate Avg. Bal. Yield / Rate Avg. Bal. Yield / Rate Assets Securities $ 500,409 4.89% $ 515,768 4.88% $ 586,548 4.76% Fed funds sold & liquidity investments 2,032 4.93% 1,515 5.35% 1,108 5.79% Loans held for sale 191,979 7.19% 156,400 7.24% 103,483 6.79% Loans held for investment 2,964,863 8.53% 2,767,834 8.55% 2,360,189 8.32% Total loans, net of reserve 3,134,209 8.51% 2,903,233 8.55% 2,444,543 8.32% Total earning assets 3,636,650 8.01% 3,420,516 7.99% 3,032,199 7.63% Total assets $ 3,841,661 $ 3,651,928 $ 3,240,701 Liabilities and Stockholders' Equity Total interest bearing deposits $ 2,510,282 4.75% $ 2,611,832 4.80% $ 2,059,906 4.36% Other borrowings 469,999 5.25% 207,303 5.01% 405,424 4.83% Long-term debt 113,406 7.30% 113,406 7.32% 64,521 7.25% Total interest bearing liabilities 3,093,687 4.92% 2,932,541 4.91% 2,529,851 4.51% Demand deposits 458,096 439,071 468,449 Stockholders' equity 267,228 253,822 223,346 Total liabilities and stockholders' equity $ 3,841,661 3.96% $ 3,651,928 3.94% $ 3,046,393 3.52% Net interest margin 3.83% 3.78% 3.87% Note: Above financial data based on continuing operations

 

Deposit and Loan Growth Loans HFI* Interest Bearing Deposits Demand Deposits * Excludes loans held for sale. Demand Deposit CAGR: 18% Total Deposit CAGR: 24% Loans Held for Investment CAGR: 28% 2002 2003 2004 2005 2006 Q2-2007 Loans Held for Investment 1003 1230 1565 2076 2722 3084 2002 2003 2004 2005 2006 Q2-2007 Demand Deposits 239 302 398 512 514 495 Interest Bearing Deposits 858 1103 1392 1983 2555 2618 2002 2003 2004 2005 2006 ($ in millions) Q2-2007 1,197 1,445 1,790 2,495 3,069 3,113

 

Revenue and Expense Growth Operating Revenue CAGR: 28% Net Interest Income CAGR: 29% Non-interest Income CAGR: 22% Non-interest Expense CAGR: 26% Net Interest Income Non-interest Income Non-interest Expense 2002 2003 2004 2005 2006 Q2-2007 Non Interest Expense 35370 48430 57340 65344 86913 99012 2002 2003 2004 2005 2006 Q1-2007 Net Interest Income 42246 53155 74742 94130 117813 132276 Non Interest Income 8625 10892 13632 12001 17042 20848 2002 2003 2004 2005^ 2006^ ($ in thousands) Q2-2007*^ 50,871 64,047 88,374 106,131 134,855 153,124 ^ 2005, 2006 and Q2-2007 reflect continuing operations. * 2007 annualized through 6/30/2007.

 

Credit Quality Credit experience remains strong Net charge-offs of $27,000 in Q2-2007, 0 bps Net recoveries of $359,000 for YTD NCOs for last 12-month period of $34,000, 0 bps Total NCOs for last 2 years $1.4 million, 3 bps Provision of $1.5 million in Q2-2007 driven by growth in portfolio Improvements noted in key measures of credit quality during quarter Non-accrual loans Ratios of reserve to historical NCOs and NPAs remain very high and improving General outlook remains favorable

 

Credit Quality Reserve / Loans .78% .77% .91% 1.20% 1.44% Non-accrual loans + ORE to loans + ORE .28% .37% .27% .37% .83% Reserve to non-accruals 2.8x 2.3x 3.3x 3.2x 1.7x Reserve to NPL 2.3x 1.9x 2.2x 3.1x 1.7x Net Charge-offs / Average Loans YTD 2007 2006 2005 2004 2003

 

Earnings Guidance Earnings Guidance Q2-2007 results consistent with previous guidance with modest progression Previous guidance net income of $32 million to $33.5 million; revising guidance to net income of $33 million to $34 million Economic outlook remains positive Anticipate continued strong growth in loans and deposits Credit experience remains strong - provision driven by growth Margin essentially flat except for effects of strong growth on funding composition and DDA trends

 

Q & A