Texas Capital Bancshares, Inc. Announces Third Quarter 2024 Results
Record level of income in fee areas of focus(1)
Quarterly strategic actions include acquisition of $332 million commercial loan portfolio and balance sheet repositioning of the proceeds from $1.2 billion sale of lower-yielding available-for-sale securities into higher yielding securities
Book Value and Tangible Book Value(2) per share both increased 14% year over year, reaching record levels
Capital ratios continue to be strong, including 11.2% CET1 and 15.2% Total Capital
DALLAS, Oct. 17, 2024 (GLOBE NEWSWIRE) -- Texas Capital Bancshares, Inc. (NASDAQ:TCBI), the parent company of Texas Capital Bank, announced operating results for the third quarter of 2024.
Net loss available to common stockholders was $65.6 million, or $1.41 net loss per diluted share, for the third quarter of 2024, compared to net income available to common stockholders of $37.4 million, or $0.80 net income per diluted share, and $57.4 million, or $1.18 per diluted share, for the for the second quarter of 2024 and third quarter of 2023, respectively.
The third quarter of 2024 included a $179.6 million loss on sale of available-for-sale debt securities ($2.92 net loss per diluted share) and restructuring expense of $5.9 million ($0.10 net loss per diluted share), partially offset by a $651,000 release of Federal Deposit Insurance Corporation ("FDIC") special assessment accrual ($0.01 net income per diluted share).
"We achieved significant financial milestones this quarter as our multi-year transformation is increasingly delivering financial outcomes consistent with realized success delivering our proven and differentiated strategy," said Rob C. Holmes, President and CEO. "Our current business momentum coupled with our sustained leading capital and liquidity levels positions us well to effectively drive execution through 2025."
FINANCIAL RESULTS
(dollars and shares in thousands)
3rd Quarter
2nd Quarter
3rd Quarter
2024
2024
2023
OPERATING RESULTS
Net income/(loss)
$
(61,319
)
$
41,662
$
61,679
Net income/(loss) available to common stockholders
$
(65,632
)
$
37,350
$
57,366
Diluted earnings/(loss) per common share
$
(1.41
)
$
0.80
$
1.18
Diluted common shares
46,609
46,872
48,529
Return on average assets
(0.78)%
0.56
%
0.81
%
Return on average common equity
(8.87)%
5.26
%
8.08
%
BALANCE SHEET
Loans held for investment
$
16,764,512
$
16,700,569
$
16,183,882
Loans held for investment, mortgage finance
5,529,659
5,078,161
4,429,489
Total loans held for investment
22,294,171
21,778,730
20,613,371
Loans held for sale
9,022
36,785
155,073
Total assets
31,629,299
29,854,994
29,628,249
Non-interest bearing deposits
9,070,804
7,987,715
9,352,883
Total deposits
25,865,255
23,818,327
23,878,978
Stockholders' equity
3,354,044
3,175,601
3,077,700
(1)
Fee areas of focus include service charges on deposit accounts, wealth managment and trust fee income, investment banking and advisory fees and trading income.
(2)
Stockholders' equity excluding preferred stock, less goodwill and intangibles, divided by shares outstanding at period end.
THIRD QUARTER 2024 COMPARED TO SECOND QUARTER 2024
For the third quarter of 2024, net loss available to common stockholders was $65.6 million, or $1.41 net loss per diluted share, compared to net income available to common stockholders of $37.4 million, or $0.80 net income per diluted share, for the second quarter of 2024. The net loss for the third quarter of 2024 resulted primarily from the $179.6 million loss on the sale of available-for-sale debt securities ($2.92 net loss per diluted share).
Provision for credit losses for the third quarter of 2024 was $10.0 million, compared to $20.0 million for the second quarter of 2024. The $10.0 million provision for credit losses recorded in the third quarter of 2024 resulted primarily from growth in total loans held for investment ("LHI") and $6.1 million in net charge-offs.
Net interest income was $240.1 million for the third quarter of 2024, compared to $216.6 million for the second quarter of 2024, as increases in average earning assets and yields on average earning assets were partially offset by an increase in average interest bearing deposits. Net interest margin for the third quarter of 2024 was 3.16%, an increase of 15 basis points from the second quarter of 2024. LHI, excluding mortgage finance, yields increased 1 basis point from the second quarter of 2024 and LHI, mortgage finance, yields increased 26 basis points from the second quarter of 2024. Total cost of deposits was 2.94% for the third quarter of 2024, a 5 basis point decrease from the second quarter of 2024.
Non-interest income for the third quarter of 2024 decreased $165.2 million compared to the second quarter of 2024, primarily due to the $179.6 million loss on sale of available-for-sale debt securities recognized during the third quarter of 2024, partially offset by increases in investment banking and advisory fees and other non-interest income.
Non-interest expense for the third quarter of 2024 increased $6.9 million, or 4%, compared to the second quarter of 2024, primarily due to increases in salaries and benefits, occupancy expense and communications and technology expense, partially offset by decreases in FDIC assessment expense and other non-interest expense. The third quarter of 2024 included restructuring expenses of $2.4 million recorded in salaries and benefits, $476,000 recorded in occupancy expense and $3.1 million recorded in communications and technology expense. The third quarter of 2024 also included a $651,000 release of FDIC special assessment accrual.
THIRD QUARTER 2024 COMPARED TO THIRD QUARTER 2023
Net loss available to common stockholders was $65.6 million, or $1.41 net loss per diluted share, for the third quarter of 2024, compared to net income available to common stockholders of $57.4 million, or $1.18 net income per diluted share, for the third quarter of 2023.
The third quarter of 2024 included a $10.0 million provision for credit losses, reflecting growth in total LHI and $6.1 million in net charge-offs, compared to an $18.0 million provision for the third quarter of 2023.
Net interest income increased to $240.1 million for the third quarter of 2024, compared to $232.1 million for the third quarter of 2023, primarily due to increases in average total LHI and yields on average earning assets, partially offset by an increase in average interest bearing liabilities. Net interest margin increased 3 basis points to 3.16% for the third quarter of 2024 compared to the third quarter of 2023. LHI, excluding mortgage finance, yields increased 12 basis points compared to the third quarter of 2023 and LHI, mortgage finance yields decreased 9 basis points from the third quarter of 2023. Total cost of deposits increased 32 basis points compared to the third quarter of 2023.
Non-interest income for the third quarter of 2024 decreased $161.6 million compared to the third quarter of 2023. The decrease was primarily due to the $179.6 million loss on sale of available-for-sale debt securities recognized during the third quarter of 2024, partially offset by increases in investment banking and advisory fees and other non-interest income.
Non-interest expense for the third quarter of 2024 increased $15.4 million, or 9%, compared to the third quarter of 2023, primarily due to increases in salaries and benefits, occupancy expense and communications and technology expense, partially offset by decreases in legal and professional expense.
CREDIT QUALITY
Net charge-offs of $6.1 million were recorded during the third quarter of 2024, compared to net charge-offs of $12.0 million and $8.9 million during the second quarter of 2024 and the third quarter of 2023, respectively. Criticized loans totaled $897.7 million at September 30, 2024, compared to $859.7 million at June 30, 2024 and $677.4 million at September 30, 2023. Non-accrual LHI totaled $89.0 million at September 30, 2024, compared to $85.0 million at June 30, 2024 and $63.1 million at September 30, 2023. The ratio of non-accrual LHI to total LHI for the third quarter of 2024 was 0.40%, compared to 0.39% for the second quarter of 2024 and 0.31% for the third quarter of 2023. The ratio of total allowance for credit losses to total LHI was 1.43% at September 30, 2024, compared to 1.44% and 1.41% at June 30, 2024 and September 30, 2023, respectively.
REGULATORY RATIOS AND CAPITAL
All regulatory ratios continue to be in excess of "well capitalized" requirements as of September 30, 2024. CET1, tier 1 capital, total capital and leverage ratios were 11.2%, 12.6%, 15.2% and 11.4%, respectively, at September 30, 2024, compared to 11.6%, 13.1%, 15.7% and 12.2%, respectively, at June 30, 2024 and 12.7%, 14.3%, 17.1% and 12.1%, respectively, at September 30, 2023. At September 30, 2024, our ratio of tangible common equity to total tangible assets was 9.7%, compared to 9.6% at June 30, 2024 and 9.4% at September 30, 2023.
About Texas Capital Bancshares, Inc.
Texas Capital Bancshares, Inc. (NASDAQ:TCBI), a member of the Russell 2000® Index and the S&P MidCap 400®, the parent company of Texas Capital Bank d/b/a Texas Capital, is a full-service financial services firm that delivers customized solutions to businesses, entrepreneurs and individual customers. Founded in 1998, the institution is headquartered in Dallas with offices in Austin, Houston, San Antonio, and Fort Worth, and has built a network of clients across the country. With the ability to service clients through their entire lifecycles, Texas Capital has established commercial banking, consumer banking, investment banking and wealth management capabilities.
Forward Looking Statements
This communication contains "forward-looking statements" within the meaning of and pursuant to the Private Securities Litigation Reform Act of 1995 regarding, among other things, TCBI's financial condition, results of operations, business plans and future performance. These statements are not historical in nature and may often be identified by the use of words such as "believes," "projects," "expects," "may," "estimates," "should," "plans," "targets," "intends" "could," "would," "anticipates," "potential," "confident," "optimistic" or the negative thereof, or other variations thereon, or comparable terminology, or by discussions of strategy, objectives, estimates, trends, guidance, expectations and future plans.
Because forward-looking statements relate to future results and occurrences, they are subject to inherent and various uncertainties, risks, and changes in circumstances that are difficult to predict, may change over time, are based on management's expectations and assumptions at the time the statements are made and are not guarantees of future results. Numerous risks and other factors, many of which are beyond management's control, could cause actual results to differ materially from future results expressed or implied by such forward-looking statements. While there can be no assurance that any list of risks is complete, important risks and other factors that could cause actual results to differ materially from those contemplated by forward-looking statements include, but are not limited to: economic or business conditions in Texas, the United States or globally that impact TCBI or its customers; negative credit quality developments arising from the foregoing or other factors; TCBI's ability to effectively manage its liquidity and maintain adequate regulatory capital to support its businesses; TCBI's ability to pursue and execute upon growth plans, whether as a function of capital, liquidity or other limitations; TCBI's ability to successfully execute its business strategy, including its strategic plan and developing and executing new lines of business and new products and services; the extensive regulations to which TCBI is subject and its ability to comply with applicable governmental regulations, including legislative and regulatory changes; TCBI's ability to effectively manage information technology systems, including third party vendors, cyber or data privacy incidents or other failures, disruptions or security breaches; elevated or further changes in interest rates, including the impact of interest rates on TCBI's securities portfolio and funding costs, as well as related balance sheet implications stemming from the fair value of our assets and liabilities; the effectiveness of TCBI's risk management processes strategies and monitoring; fluctuations in commercial and residential real estate values, especially as they relate to the value of collateral supporting TCBI's loans; the failure to identify, attract and retain key personnel and other employees; increased or expanded competition from banks and other financial service providers in TCBI's markets; adverse developments in the banking industry and the potential impact of such developments on customer confidence, liquidity and regulatory responses to these developments, including in the context of regulatory examinations and related findings and actions; negative press and social media attention with respect to the banking industry or TCBI, in particular; claims, litigation or regulatory investigations and actions that TCBI may become subject to; severe weather, natural disasters, climate change, acts of war, terrorism, global conflict (including those already reported by the media, as well as others that may arise), or other external events, as well as related legislative and regulatory initiatives; and the risks and factors more fully described in TCBI's most recent Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and other documents and filings with the SEC. The information contained in this communication speaks only as of its date. Except to the extent required by applicable law or regulation, we disclaim any obligation to update such factors or to publicly announce the results of any revisions to any of the forward-looking statements included herein to reflect future events or developments.
TEXAS CAPITAL BANCSHARES, INC.
SELECTED FINANCIAL HIGHLIGHTS (UNAUDITED)
(dollars in thousands except per share data)
3rd Quarter
2nd Quarter
1st Quarter
4th Quarter
3rd Quarter
2024
2024
2024
2023
2023
CONSOLIDATED STATEMENTS OF INCOME
Interest income
$
452,533
$
422,068
$
417,378
$
417,072
$
425,769
Interest expense
212,431
205,486
202,369
202,355
193,698
Net interest income
240,102
216,582
215,009
214,717
232,071
Provision for credit losses
10,000
20,000
19,000
19,000
18,000
Net interest income after provision for credit losses
230,102
196,582
196,009
195,717
214,071
Non-interest income
(114,771
)
50,424
41,319
31,133
46,872
Non-interest expense
195,324
188,409
202,393
201,385
179,891
Income/(loss) before income taxes
(79,993
)
58,597
34,935
25,465
81,052
Income tax expense/(benefit)
(18,674
)
16,935
8,793
5,315
19,373
Net income/(loss)
(61,319
)
41,662
26,142
20,150
61,679
Preferred stock dividends
4,313
4,312
4,313
4,312
4,313
Net income/(loss) available to common stockholders
$
(65,632
)
$
37,350
$
21,829
$
15,838
$
57,366
Diluted earnings/(loss) per common share
$
(1.41
)
$
0.80
$
0.46
$
0.33
$
1.18
Diluted common shares
46,608,742
46,872,498
47,711,192
48,097,517
48,528,698
CONSOLIDATED BALANCE SHEET DATA
Total assets
$
31,629,299
$
29,854,994
$
29,180,585
$
28,356,266
$
29,628,249
Loans held for investment
16,764,512
16,700,569
16,677,691
16,362,230
16,183,882
Loans held for investment, mortgage finance
5,529,659
5,078,161
4,153,313
3,978,328
4,429,489
Loans held for sale
9,022
36,785
37,750
44,105
155,073
Interest bearing cash and cash equivalents
3,894,537
2,691,352
3,148,157
3,042,357
3,975,860
Investment securities
4,405,520
4,388,976
4,414,280
4,143,194
4,069,717
Non-interest bearing deposits
9,070,804
7,987,715
8,478,215
7,328,276
9,352,883
Total deposits
25,865,255
23,818,327
23,954,037
22,371,839
23,878,978
Short-term borrowings
1,035,000
1,675,000
750,000
1,500,000
1,400,000
Long-term debt
660,172
659,997
859,823
859,147
858,471
Stockholders' equity
3,354,044
3,175,601
3,170,662
3,199,142
3,077,700
End of period shares outstanding
46,207,757
46,188,078
46,986,275
47,237,912
48,015,003
Book value per share
$
66.09
$
62.26
$
61.10
$
61.37
$
57.85
Tangible book value per share(1)
$
66.06
$
62.23
$
61.06
$
61.34
$
57.82
SELECTED FINANCIAL RATIOS
Net interest margin
3.16
%
3.01
%
3.03
%
2.93
%
3.13
%
Return on average assets
(0.78)%
0.56
%
0.36
%
0.27
%
0.81
%
Return on average common equity
(8.87)%
5.26
%
3.03
%
2.25
%
8.08
%
Non-interest income to average earning assets
(1.52)%
0.71
%
0.59
%
0.43
%
0.64
%
Efficiency ratio(2)
155.8
%
70.6
%
79.0
%
81.9
%
64.5
%
Non-interest expense to average earning assets
2.59
%
2.65
%
2.89
%
2.79
%
2.46
%
Common equity to total assets
9.7
%
9.6
%
9.8
%
10.2
%
9.4
%
Tangible common equity to total tangible assets(3)
9.7
%
9.6
%
9.8
%
10.2
%
9.4
%
Common Equity Tier 1
11.2
%
11.6
%
12.4
%
12.6
%
12.7
%
Tier 1 capital
12.6
%
13.1
%
13.9
%
14.2
%
14.3
%
Total capital
15.2
%
15.7
%
16.6
%
17.1
%
17.1
%
Leverage
11.4
%
12.2
%
12.4
%
12.2
%
12.1
%
(1)
Stockholders' equity excluding preferred stock, less goodwill and intangibles, divided by shares outstanding at period end.
(2)
Non-interest expense divided by the sum of net interest income and non-interest income.
(3)
Stockholders' equity excluding preferred stock, less goodwill and intangibles, divided by total assets, less goodwill and intangibles.
TEXAS CAPITAL BANCSHARES, INC.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(dollars in thousands)
September 30, 2024
September 30, 2023
% Change
Assets
Cash and due from banks
$
297,048
$
216,916
37
%
Interest bearing cash and cash equivalents
3,894,537
3,975,860
(2)%
Available-for-sale debt securities
3,518,662
3,147,865
12
%
Held-to-maturity debt securities
812,432
881,352
(8)%
Equity securities
74,426
40,500
84
%
Investment securities
4,405,520
4,069,717
8
%
Loans held for sale
9,022
155,073
(94)%
Loans held for investment, mortgage finance
