Texas Capital Bancshares Report 104% Increase in Net Income
Report $2 Billion in Assets
August 14, 2003
Contact:
Tricia Linderman, 214.932.6798
tricia.linderman@texascapitalbank.com
Dallas - Texas Capital Bancshares, Inc. today reported net income for the second
quarter of 2003 of $3.9 million compared to $1.8 million for the second quarter
of 2002. On a fully diluted basis, earnings per share were $.18 for the three
months ended June 30, 2003 compared to $.08 for the same quarter last year,
which represents an increase of 125 percent. Net income for the six months
ended June 30, 2003 was $6.9 million compared to $3.4 million for the same
period in 2002. Earnings per share on a fully diluted basis for the six months
ended June 30, 2003 were $.32 versus $.15 for the same period in 2002.
Return on average equity was 12.03 percent and return on average assets was .80
percent for the quarter ended June 30, 2003, compared to 6.38 percent and .59
percent respectively for the second quarter of 2002. The increase in net income
in 2003 is attributed to asset and related net interest income growth, growth
in non-interest income, and the impact of reversing our deferred tax valuation
allowance of $5.9 million, offset by an increase in non-interest expense.
Non-interest expense for the quarter included approximately $250,000 in
separation expenses related to the resignation of a senior officer and $6.3
million in penalties related to unwinding repurchase agreements in June prior
to maturity to lower funding costs. We unwound approximately $139 million of
repurchase agreements and entered into new repurchase agreements with respect
to a significant portion of that amount, with the remainder replaced with
overnight funds. We expect that a significant portion of these overnight funds
will be replaced with deposits when we complete our planned acquisition of
deposit accounts of Bluebonnet Savings Bank FSB, which is expected to occur in
August 2003.
Net interest income was $12.7 million for the second quarter of 2003, compared
to $10.2 million for the second quarter of 2002. The increase was primarily due
to an increase in average earning assets of $653.3 million as compared to the
second quarter of 2002, which offset a 71 basis point decrease in net interest
margin. The increase in average earning assets included a $307.2 million
increase in average net loans and a $352.5 million increase in average
securities. Average interest-bearing liabilities increased $592.3 million from
the second quarter of 2002, which included a $245.8 million increase in
interest-bearing deposits and a $327.5 million increase in other borrowings.
The increase in average borrowings was primarily related to an increase in
federal funds purchased and securities sold under repurchase agreements, and
was used to supplement deposits in funding loan growth and securities
purchases. The average cost of interest-bearing liabilities decreased from 2.62
percent for the quarter ended June 30, 2002 to 2.24 percent for the same period
of 2003, reflecting the continuing decline in market interest rates.
The provision for loan losses was $1.6 million for the second quarter of 2003,
compared to $808,000 for the second quarter of 2002. The provision reflects
management's assessment of the risks in Texas Capital Bank's loan portfolio.
For the quarter ended June 30, 2003, the provision for loan losses to average
loans was .53 percent compared to .36 percent during the same quarter in 2002.
The reserve for loan losses totaled $17.3 million at June 30, 2003, which is
1.38 percent of total loans, compared to $12.1 million or 1.28 percent at June
30, 2002. The company's ratio of reserve for loan losses to non-performing
loans was 136.12 percent at June 30, 2003, compared to 178.88 percent at June
30, 2002. Texas Capital had net charge-offs of loans and leases previously
charged off of $219,000 in the quarter versus net losses of $1.5 million in the
second quarter of 2002.
Our non-performing loans and leases increased to $12.7 million, or 1.01% of
total loans from $6.8 million, or .72% of total loans at June 30, 2002, but
continue to be at what management considers to be an acceptable level. Our
non-performing assets include $11.5 million of non-accrual loans and $1.1
million of loans past due greater than 90 days and still accruing. Of the loans
past due greater than 90 days and still accruing, 96 percent are 100 percent
government guaranteed. Of the $11.5 million in nonaccrual loans and leases,
$4.3 million was in commercial loans, $4.0 in construction loans, $1.4 million
in real estate loans, $113,000 in consumer loans, and $1.7 million in leases.
Non-interest income increased $1.4 million, including securities gains of
$345,000, compared to the same quarter of 2002 when there were no securities
gains. Service charges on deposit accounts in the second quarter of 2003
increased $181,000 due to the higher level of deposits and transactions. Trust
fee income increased $61,000 due to continued growth of trust assets in 2003.
Income from bank owned life insurance totaled $428,000 for the second quarter
of 2003. Our bank owned life insurance investment originated in August 2002.
Cash processing fees in the second quarter of 2003 totaled $73,000, which was
related to a cash processing project that occurred primarily in the first
quarter of the year. Total cash processing fees for the six months ended June
30, 2003 were $973,000, which is comparable to the same period in 2002.
Non-interest income also included an increase in mortgage warehouse fees of
approximately $293,000 for the quarter ended June 30, 2003.
Non-interest expense for the second quarter of 2003 increased $8.5 million or
100.3 percent, compared to the second quarter of 2002. The increase is
primarily related to the $6.3 million in penalties related to the unwinding of
repurchase agreements. Additionally, salaries and employee benefits increased
$1.9 million to $5.9 million for the quarter ended June 30, 2003 from $4.0
million for the same period in 2002. The increase included the $250,000 in
separation expense for a senior officer and an increase in total employees from
201 at June 30, 2002 to 237 at June 30, 2003.
Management expects the balance sheet will continue to be asset-sensitive over
the next 12 months, resulting in more loans than deposits repricing over this
period. This is largely due to the concentration of assets in variable rate
loans, rather than fixed rate loans, which would position the company to
benefit from rising interest rates.
Total assets at June 30, 2003 were $2.003 billion, an increase of $210 million
from $1.793 billion at December 31, 2002, and an increase of $743 million from
$1.261 billion at June 30, 2002. The aggregate loan portfolio at June 30, 2003
was $1.252 billion, an increase of $129 million from $1.123 billion at December
31, 2002, and an increase of $307 million from $945 million at June 30, 2002.
Total deposits at June 30, 2003 were $1.340 billion, an increase of $143
million from $1.197 billion at December 31, 2002, and an increase of $360
million from $980 million at June 30, 2002.
About Texas Capital Bancshares
Texas Capital Bancshares, Inc. is a privately owned and operated bank holding
company, the principal subsidiary of which is Texas Capital Bank, N.A.,
headquartered in Dallas, Texas. Texas Capital Bank targets middle market
businesses, the executives of those businesses and affluent individuals. The
Bank has full-service locations in Austin, Dallas, Fort Worth, Plano 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 registration statement on Form S-3 as amended
relating to the initial public offering and other filings made by Texas Capital
Bancshares with the Securities and Exchange Commission.
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