Texas Capital Bancshares Reports Increase in Net Income
March 19, 2003
Contact:
Tricia Linderman, 214.932.6798
tricia.linderman@texascapitalbank.com
DALLAS - March 19, 2003 - Texas Capital Bancshares, Inc. today reported financial results for the
fourth quarter and for the year ended December 31, 2002. For the year ended
December 31, 2002, net income increased 26 percent to $7.3 million from $5.8
million in 2001 and total assets increased 54 percent to $1.8 billion from $1.2
billion the prior year.
"Our results for 2002, our fourth full year of operation, were particularly
gratifying, considering that net income was reduced by the accrual of federal
income taxes for the first time and by a special charge for IPO expenses," said
Jody Grant, chairman and CEO of Texas Capital Bancshares, Inc. "We also are
very encouraged about the quality of our loan portfolio, given the weakness in
the economy. Our ratio of non-performing loans of .26 percent of total loans
outstanding at year-end was at its lowest level since the first quarter of
2001. Although the current economic environment continues to be challenging, we
believe we are well positioned to benefit when the economy improves, given that
interest rates on about 90 percent of our loans float with the market. In a
rising rate environment, we anticipate that our net interest margin will
improve significantly."
The Company reported net income of $1.9 million (net of $701,000 of income tax
expense) for the fourth quarter of 2002 compared to $2.1 million for the fourth
quarter of 2001. Pre-tax income was $2.6 million for the fourth quarter of 2002
compared to $2.1 million for the fourth quarter of 2001, which represents a 23
percent increase. Net income for the year ended December 31, 2002 was $7.3
million (net of $2.5 million of income tax expense) compared to $5.8 million
for the same period in 2001. Pre-tax income was $9.9 million for the year ended
December 31, 2002 compared to $5.8 million for the same period in 2001, which
represents a 69 percent increase.
Net income and pre-tax income for the fourth quarter and for the year ended
December 31, 2002 included a special charge of $1.2 million for expenses
incurred in preparation for an initial public offering of the Company's common
stock, which was postponed in October 2002 prior to its completion in response
to overall market conditions. Excluding the special charge, net income for the
fourth quarter of 2002 was $2.7 million compared to $2.1 million for the same
quarter in 2001. Pretax income, excluding the charge, for the comparable
quarters was $3.8 million in 2002 and $2.1 million in 2001, representing an 80
percent increase. Excluding the charge, net income for the year ended December
31, 2002, was $8.2 million versus $5.8 million for 2001, while pre-tax income
was $11.1 million in 2002 and $5.8 million in 2001, which is an increase of 89
percent.
Earnings per diluted common share for the quarter ended December 31, 2002 were
$.08 versus $.11 for the same quarter in 2001. For the year ended December 31,
2002, earnings per diluted common share were $.32 versus $.30 for 2001.
Earnings per diluted share were impacted by a reduction in income available to
common shareholders, due to the payment of preferred stock dividends beginning
in the first quarter of 2002 and the payment of taxes in 2002, the aggregate
effect of which was $.05 in the fourth quarter and $.19 for the year of 2002.
Texas Capital did not record any income tax expense in 2001. Earnings per
diluted common share for the fourth quarter and the year ended December 31,
2002 also were impacted by the special charge for IPO expenses, which was $.05
per diluted share for each period.
Return on average assets was .54 percent for 2002 compared to .58 percent for
2001. Return on average equity was 6.27 percent and 6.44 percent, for 2002 and
2001, respectively. The decreases in return on average assets and equity
resulted from the accrual of current income tax expense during 2002 and the
special IPO charge.
Net interest income was $11.8 million for the fourth quarter of 2002 compared to
$9.4 million for the fourth quarter of 2001. The increase was primarily due to
an increase in average earning assets of $505.3 million as compared to the
fourth quarter of 2001, which offset a 52 basis point decrease in net interest
margin. The increase in average earning assets included a $198.7 million
increase in average net loans. Average interest bearing liabilities increased
$446.9 million from the fourth quarter of 2001, which included a $172.4 million
increase in interest-bearing deposits and a $274.5 million increase in
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 3.11 percent for the quarter ended December 31, 2001 to 2.46
percent for the same period of 2002, reflecting the continuing decline in
market interest rates.
The provision for loan losses was $1.3 million for the fourth quarter of 2002
compared to $1.9 million for the fourth quarter of 2001. The provision reflects
management's assessment of the risk of loan losses, including risks associated
with the continued rapid growth in Texas Capital's loan portfolio. The
provision for loan losses to average loans for the quarter ended December 31,
2002 was .47 percent compared to .86 percent during the same quarter in 2001.
For the year ended December 31, 2002, the provision was .58 percent compared to
.73 percent for 2001. The reserve for loan losses totaled $14.5 million at
December 31, 2002, which is 1.30 percent of total loans compared to $12.6
million, or 1.39 percent at December 31, 2001. The Company's reserve ratio to
non-performing loans continues to be strong at 499 percent at December 31, 2002
compared to 110 percent at December 31, 2001. Net chargeoffs as a percent of
average loans remain at what management believes to be an acceptable level.
Texas Capital had non-performing loans of $2.9 million, or .26 percent of total
loans at December 31, 2002 compared to $8.2 million or .77 percent at September
30, 2002 and $6.4 million or .71 percent of total loans at December 31, 2001.
At December 31, 2002, nonaccrual loans and leases consisted of $641,000 in
commercial loans, $1,367,000 in real estate loans, $26,000 in consumer loans
and $742,000 in leases.
Non-interest income increased $198,000 compared to the same quarter of 2001.
Non-interest income for the fourth quarter of 2002 increased $765,000 compared
to the same quarter of 2001, excluding securities gains of $567,000 in the
fourth quarter of 2001 Service charges on deposit accounts increased $134,000.
This increase was due to the continued increase in deposits, which resulted in
a higher volume of transactions. Trust fee income increased $34,000, due to
continued growth of trust assets in 2002. Other non-interest income increased
by $597,000, primarily due to bank-owned life insurance (BOLI) income of
$591,000.
Non-interest expense for the fourth quarter of 2002 increased $2.8 million or 38
percent compared to the fourth quarter of 2001. The increase is primarily due
to higher salaries and employee benefits of $1.0 million, the purchase of miles
related to the American Airlines AAdvantage® program of $157,000, an increase
in legal and professional expenses of $227,000, and the IPO expense of $1.2
million.
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.
Total assets at December 31, 2002 were $1.793 billion, an increase of $176
million from $1.617 billion at September 30, 2002, and an increase of $628
million from $1.165 billion at December 31, 2001. The aggregate loan portfolio
at December 31, 2002 was $1.123 billion, an increase of $69 million from $1.054
billion at September 30, 2002, and an increase of $219 million from $904
million at December 31, 2001. Total deposits at December 31, 2002 were $1.197
billion, an increase of $77 million from $1.120 billion at September 30, 2002,
and an increase of $311 million from $886 million at December 31, 2001.
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. Additional 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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