Texas Capital Bancshares, Inc. Announces Third Quarter 2022 Results

Third quarter 2022 net income of $41.4 million and net income available to common stockholders of $37.1 million, or $0.74 per diluted share

Achieved year-over-year operating leverage ahead of guidance

DALLAS, Oct. 19, 2022 (GLOBE NEWSWIRE) — Texas Capital Bancshares, Inc. (NASDAQ: TCBI), the parent company of Texas Capital Bank, announced operating results for the third quarter of 2022.

Net income available to common stockholders was $37.1 million, or $0.74 per diluted share, for the third quarter of 2022, compared to $29.8 million, or $0.59 per diluted share, for the second quarter of 2022 and $39.1 million, or $0.76 per diluted share, for the third quarter of 2021.

“The quarterly financial results demonstrate dedication towards our stated goals as we achieved year-over-year quarterly operating leverage,” said Rob C. Holmes, President and CEO. “Additionally, we calibrated our capital and expenses and built a financially resilient balance sheet with strong reserves and capital geared towards supporting our clients through market and rate driven cycles.”

FINANCIAL RESULTS
(dollars and shares in thousands)
	3rd Quarter				2nd Quarter				3rd Quarter
		2022				2022				2021
OPERATING RESULTS
Net income	$	41,418			$	34,159			$	43,390
Net income available to common stockholders	$	37,105			$	29,847			$	39,078
Diluted earnings per common share	$	0.74			$	0.59			$	0.76
Diluted common shares		50,418				50,802				51,140
Return on average assets		0.52	%			0.44	%			0.47	%
Return on average common equity		5.36	%			4.35	%			5.41	%
BALANCE SHEET
Loans held for investment	$	14,878,959			$	17,517,866			$	15,221,404
Loans held for investment, mortgage finance		4,908,822				6,549,507				8,528,313
Total loans held for investment		19,787,781				24,067,373				23,749,717
Loans held for sale		3,142,178				4,266				9,660
Total assets		30,408,513				32,338,963				36,404,320
Non-interest bearing deposits		11,494,685				12,555,367				14,970,462
Total deposits		24,498,563				25,440,021				29,813,668
Stockholders’ equity		2,885,775				3,006,832				3,147,752

THIRD QUARTER 2022 COMPARED TO SECOND QUARTER 2022

For the third quarter of 2022, net income available to common stockholders was $37.1 million, or $0.74 per diluted share, compared to $29.8 million, or $0.59 per diluted share, for the second quarter of 2022.

We recorded a $12.0 million provision for credit losses for the third quarter of 2022, compared to a $22.0 million provision for credit losses for the second quarter of 2022. The $12.0 million provision for credit losses recorded in the third quarter of 2022 resulted primarily from updated views on the downside risks to the economic forecast, partially offset by a decline in criticized loans.

Net interest income was $239.1 million for the third quarter of 2022, compared to $205.5 million for the second quarter of 2022. The increase in net interest income was primarily due to an increase in yields on earning assets, partially offset by an increase in funding costs. Net interest margin for the third quarter of 2022 was 3.05%, an increase of 37 basis points from the second quarter of 2022. Loans held for investment (“LHI”), excluding mortgage finance, yields increased 108 basis points from the second quarter of 2022 and LHI, mortgage finance yields increased 54 basis points from the second quarter of 2022. Total cost of deposits was 0.93% for the third quarter of 2022, a 60 basis point increase from the second quarter of 2022.

Non-interest income for the third quarter of 2022 decreased $909,000, or 3%, compared to the second quarter of 2022, primarily due to decreases in brokered loan fees and investment banking and trading income, partially offset by an increase in other non-interest income.

Non-interest expense for the third quarter of 2022 increased $32.7 million, or 20%, compared to the second quarter of 2022. The third quarter of 2022 included $13.7 million in salaries and benefits expense and $3.0 million in legal and professional expense related to the sale of our insurance premium finance subsidiary. The remaining increase in non-interest expense for the third quarter of 2022 was primarily due to an increase in salaries and benefits expense resulting from an increase in headcount.

THIRD QUARTER 2022 COMPARED TO THIRD QUARTER 2021

Net income available to common stockholders was $37.1 million, or $0.74 per diluted share, for the third quarter of 2022, compared to $39.1 million, or $0.76 per diluted share, for the third quarter of 2021.

The third quarter of 2022 included a $12.0 million provision for credit losses, resulting primarily from updated views on the downside risks to the economic forecast, partially offset by a decline in criticized loans, compared to a $5.0 million provision for credit losses for the third quarter of 2021.

Net interest income increased to $239.1 million for the third quarter of 2022, compared to $190.5 million for the third quarter of 2021, primarily due to an increase in yields on average earning assets, partially offset by an increase in funding costs. Net interest margin increased 94 basis points to 3.05% for the third quarter of 2022, as compared to the third quarter of 2021. LHI, excluding mortgage finance, yields increased 141 basis points compared to the third quarter of 2021 and LHI, mortgage finance yields increased 103 basis points from the third quarter of 2021. Total cost of deposits increased 74 basis points compared to the third quarter of 2021.

Non-interest income for the third quarter of 2022 increased $554,000, or 2%, compared to the third quarter of 2021. The increase was primarily due to increases in service charges on deposit accounts and investment banking and trading income, as well as the elimination of net losses recorded in the prior year on the sale of loans held for sale, partially offset by decreases in brokered loan fees and other non-interest income.

Non-interest expense for the third quarter of 2022 increased $44.1 million, or 29%, compared to the third quarter of 2021. The third quarter of 2022 included $13.7 million in salaries and benefits expense and $3.0 million in legal and professional expense related to the sale of our insurance premium finance subsidiary. Also contributing to the increase in non-interest expense were increases in salaries and benefits expense, resulting from an increase in headcount, and marketing expense, partially offset by a decrease in communications and technology expense related to the elimination of write-offs of certain software assets recorded in the prior year.

CREDIT QUALITY

We recorded $2.7 million in net charge-offs during the third quarter of 2022, compared to net charge-offs of $2.6 million and of $3.1 million during the second quarter of 2022 and the third quarter of 2021, respectively. Criticized loans totaled $484.0 million at September 30, 2022, compared to $603.5 million at June 30, 2022 and $728.9 million at September 30, 2021. Non-accrual LHI totaled $35.9 million at September 30, 2022, compared to $50.5 million at June 30, 2022 and $87.5 million at September 30, 2021. The ratio of non-accrual LHI to total LHI for the third quarter of 2022 was 0.18%, compared to 0.21% for the second quarter of 2022 and 0.37% for the third quarter of 2021.

REGULATORY RATIOS AND CAPITAL

All regulatory ratios continue to be in excess of “well capitalized” requirements as of September 30, 2022. Our CET 1, tier 1 capital, total capital and leverage ratios were 11.1%, 12.6%, 15.2% and 10.7%, respectively, at September 30, 2022, compared to 10.5%, 11.9%, 14.4% and 10.7%, respectively, at June 30, 2022 and 10.7%, 12.2%, 14.9% and 9.0% at September 30, 2021. At September 30, 2022, our ratio of tangible common equity to total tangible assets was 8.5%, compared to 8.3% at June 30, 2022 and 7.8% at September 30, 2021.

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 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 Bank 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 “expect,” “estimate,” “anticipate,” “plan,” “may,” “will,” “forecast,” “could,” “should,” “projects,” “targeted,” “continue,” “become,” “intend” and similar expressions.

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. Several 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. These factors include, but are not limited to, credit quality and risk, the COVID-19 pandemic, industry and technological changes, uncertainties related to our sale of BankDirect Capital Finance, LLC, cyber incidents or other failures, disruptions or security breaches, interest rates, commercial and residential real estate values, economic conditions, including inflation, recession, the threat of recession, and market conditions in Texas, the United States or globally, including governmental and consumer responses to those economic and market conditions, fund availability, accounting estimates and risk management processes, the transition away from the London Interbank Offered Rate (LIBOR), legislative and regulatory changes, ratings or interpretations, business strategy execution, key personnel, competition, mortgage markets, fraud, environmental liability and severe weather, natural disasters, acts of war, terrorism, global conflict or other external events.

These and other factors that could cause actual results for TCBI on a consolidated basis to differ materially from those described in the forward-looking statements, including a discussion of the risks and uncertainties that may affect TCBI’s business, can be found in TCBI’s most recent Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and in 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
		2022			2022			2022			2021			2021
CONSOLIDATED STATEMENTS OF INCOME
Interest income	$	322,071		$	242,349		$	208,530		$	219,892		$	216,589
Interest expense		82,991			36,818			24,983			25,860			26,053
Net interest income		239,080			205,531			183,547			194,032			190,536
Provision for credit losses		12,000			22,000			(2,000	)		(10,000	)		5,000
Net interest income after provision for credit losses		227,080			183,531			185,547			204,032			185,536
Non-interest income		25,333			26,242			20,282			31,459			24,779
Non-interest expense		197,047			164,303			153,092			146,649			152,987
Income before income taxes		55,366			45,470			52,737			88,842			57,328
Income tax expense		13,948			11,311			13,087			23,712			13,938
Net income		41,418			34,159			39,650			65,130			43,390
Preferred stock dividends		4,313			4,312			4,313			4,313			4,312
Net income available to common stockholders	$	37,105		$	29,847		$	35,337		$	60,817		$	39,078
Diluted earnings per common share	$	0.74		$	0.59		$	0.69		$	1.19		$	0.76
Diluted common shares		50,417,884			50,801,628			51,324,027			51,208,161			51,139,555
CONSOLIDATED BALANCE SHEET DATA
Total assets	$	30,408,513		$	32,338,963		$	31,085,377		$	34,731,738		$	36,404,320
Loans held for investment		14,878,959			17,517,866			15,849,434			15,331,457			15,221,404
Loans held for investment, mortgage finance		4,908,822			6,549,507			5,827,965			7,475,497			8,528,313
Loans held for sale		3,142,178			4,266			8,085			8,123			9,660
Interest bearing cash and cash equivalents		3,399,638			4,032,931			5,136,680			7,765,996			8,317,926
Investment securities		3,369,622			3,552.699			3,642,015			3,583,808			3,663,874
Non-interest bearing deposits		11,494,685			12,555,367			13,434,723			13,390,370			14,970,462
Total deposits		24,498,563			25,440,021			25,377,938			28,109,365			29,813,668
Short-term borrowings		1,701,480			2,651,536			1,427,033			2,202,832			2,203,470
Long-term debt		930,766			917,098			929,414			928,738			928,062
Stockholders’ equity		2,885,775			3,006,832			3,090,038			3,209,616			3,147,752
End of period shares outstanding		49,897,726			49,878,041			50,710,441			50,618,494			50,605,626
Book value	$	51.82		$	54.27		$	55.02		$	57.48		$	56.27
Tangible book value(1)	$	51.48		$	53.93		$	54.68		$	57.14		$	55.93
SELECTED FINANCIAL RATIOS
Net interest margin		3.05	%		2.68	%		2.23	%		2.12	%		2.11	%
Return on average assets		0.52	%		0.44	%		0.47	%		0.69	%		0.47	%
Return on average common equity		5.36	%		4.35	%		4.97	%		8.36	%		5.41	%
Non-interest income to average earning assets		0.33	%		0.34	%		0.25	%		0.34	%		0.27	%
Efficiency ratio(2)		74.5	%		70.9	%		75.1	%		65.0	%		71.1	%
Non-interest expense to average earning assets		2.53	%		2.16	%		1.86	%		1.60	%		1.69	%
Tangible common equity to total tangible assets(3)		8.5	%		8.3	%		8.9	%		8.3	%		7.8	%
Common Equity Tier 1		11.1	%		10.5	%		11.5	%		11.1	%		10.7	%
Tier 1 capital		12.6	%		11.9	%		13.0	%		12.6	%		12.2	%
Total capital		15.2	%		14.4	%		15.7	%		15.3	%		14.9	%
Leverage		10.7	%		10.7	%		9.9	%		9.0	%		9.0	%

(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, 2022			September 30, 2021			% Change
Assets
Cash and due from banks	$	240,609		$	217,125		11	%
Interest bearing cash and cash equivalents		3,399,638			8,317,926		(59)%
Available-for-sale debt securities		2,380,774			3,623,266		(34)%
Held-to-maturity debt securities		955,875			—		100	%
Equity securities		32,973			40,608		(19)%
Investment securities		3,369,622			3,663,874		(8)%
Loans held for sale		3,142,178			9,660		N/M
Loans held for investment, mortgage finance		4,908,822			8,528,313		(42)%
Loans held for investment		14,878,959			15,221,404		(2)%
Less: Allowance for credit losses on loans		234,613			221,957		6	%
Loans held for investment, net		19,553,168			23,527,760		(17)%
Mortgage servicing rights, net		—			1,158		(100)%
Premises and equipment, net		27,180			21,119		29	%
Accrued interest receivable and other assets		648,172			628,335		3	%
Other assets held for sale		26,450			—		100	%
Goodwill and intangibles, net		1,496			17,363		(91)%
Total assets	$	30,408,513		$	36,404,320		(16)%
Liabilities and Stockholders’ Equity
Liabilities:
Non-interest bearing deposits	$	11,494,685		$	14,970,462		(23)%
Interest bearing deposits		13,003,878			14,843,206		(12)%
Total deposits		24,498,563			29,813,668		(18)%
Accrued interest payable		18,465			8,920		107	%
Other liabilities		297,900			302,448		(2)%
Other liabilities held for sale		75,564			—		100	%
Short-term borrowings		1,701,480			2,203,470		(23)%
Long-term debt		930,766			928,062		—	%
Total liabilities		27,522,738			33,256,568		(17)%
Stockholders’ equity:
Preferred stock, $.01 par value, $1,000 liquidation value:
Authorized shares – 10,000,000
Issued shares – 300,000 shares issued at September 30, 2022 and 2021		300,000			300,000		—	%
Common stock, $.01 par value:
Authorized shares – 100,000,000
Issued shares – 50,840,022 and 50,606,043 at September 30, 2022 and 2021, respectively		509			506		1	%
Additional paid-in capital		1,020,153			1,000,509		2	%
Retained earnings		2,050,563			1,887,457		9	%
Treasury stock – 942,296 and 417 shares at cost at September 30, 2022 and 2021, respectively		(50,031	)		(8	)	N/M
Accumulated other comprehensive loss, net of taxes		(435,419	)		(40,712	)	N/M
Total stockholders’ equity		2,885,775			3,147,752		(8)%
Total liabilities and stockholders’ equity	$	30,408,513		$	36,404,320		(16)%

TEXAS CAPITAL BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(dollars in thousands except per share data)
	Three Months Ended September 30,					Nine Months Ended September 30,
		2022		2021			2022		2021
Interest income
Interest and fees on loans	$	282,473	$	202,748		$	688,420	$	616,153
Investment securities		15,002		10,235			46,969		31,040
Interest bearing cash and cash equivalents		24,596		3,606			37,561		9,500
Total interest income		322,071		216,589			772,950		656,693
Interest expense
Deposits		60,317		14,719			94,513		50,994
Short-term borrowings		10,011		748			15,628		3,842
Long-term debt		12,663		10,586			34,651		27,052
Total interest expense		82,991		26,053			144,792		81,888
Net interest income		239,080		190,536			628,158		574,805
Provision for credit losses		12,000		5,000			32,000		(20,000	)
Net interest income after provision for credit losses		227,080		185,536			596,158		594,805
Non-interest income
Service charges on deposit accounts		5,701		4,622			17,726		13,972
Wealth management and trust fee income		3,631		3,382			11,594		9,380
Brokered loan fees		3,401		6,032			11,504		22,276
Servicing income		212		292			677		15,236
Investment banking and trading income		7,812		4,127			23,117		17,985
Net gain/(loss) on sale of loans held for sale		—		(1,185	)		—		1,317
Other		4,576		7,509			7,239		26,605
Total non-interest income		25,333		24,779			71,857		106,771
Non-interest expense
Salaries and benefits		129,336		87,503			333,319		261,855
Occupancy expense		9,433		8,324			27,192		24,463
Marketing		8,282		2,123			21,765		5,720
Legal and professional		16,775		11,055			38,365		28,479
Communications and technology		18,470		28,374			48,819		58,695
Federal Deposit Insurance Corporation insurance assessment		3,953		4,500			11,252		16,339
Servicing-related expenses		—		2,396			—		27,740
Other		10,798		8,712			33,730		29,072
Total non-interest expense		197,047		152,987			514,442		452,363
Income before income taxes		55,366		57,328			153,573		249,213
Income tax expense		13,948		13,938			38,346		60,404
Net income		41,418		43,390			115,227		188,809
Preferred stock dividends		4,313		4,312			12,938		14,408
Net income available to common stockholders	$	37,105	$	39,078		$	102,289	$	174,401
Basic earnings per common share	$	0.74	$	0.77		$	2.03	$	3.45
Diluted earnings per common share	$	0.74	$	0.76		$	2.00	$	3.41

TEXAS CAPITAL BANCSHARES, INC.
SUMMARY OF CREDIT LOSS EXPERIENCE
(dollars in thousands)
	3rd Quarter			2nd Quarter			1st Quarter			4th Quarter			3rd Quarter
		2022			2022			2022			2021			2021
Allowance for credit losses on loans:
Beginning balance	$	229,013		$	211,151		$	211,866		$	221,957		$	221,511
Loans charged-off:
Commercial		232			2,868			110			3,776			4,348
Energy		2,903			—			—			—			—
Real estate		—			—			350			—			—
Total charge-offs		3,135			2,868			460			3,776			4,348
Recoveries:
Commercial		113			219			217			1,933			1,104
Energy		289			—			755			601			42
Real estate		—			—			—			205			112
Total recoveries		402			219			972			2,739			1,258
Net charge-offs		2,733			2,649			(512	)		1,037			3,090
Provision for credit losses on loans		8,333			20,511			(1,227	)		(9,054	)		3,536
Ending balance	$	234,613		$	229,013		$	211,151		$	211,866		$	221,957
Allowance for off-balance sheet credit losses:
Beginning balance	$	17,981		$	16,492		$	17,265		$	18,211		$	16,747
Provision for off-balance sheet credit losses		3,667			1,489			(773	)		(946	)		1,464
Ending balance	$	21,648		$	17,981		$	16,492		$	17,265		$	18,211
Total allowance for credit losses	$	256,261		$	246,994		$	227,643		$	229,131		$	240,168
Total provision for credit losses	$	12,000		$	22,000		$	(2,000	)	$	(10,000	)	$	5,000
Allowance for credit losses on loans to total loans held for investment		1.19	%		0.95	%		0.97	%		0.93	%		0.93	%
Allowance for credit losses on loans to average total loans held for investment		1.06	%		1.02	%		0.99	%		0.91	%		0.95	%
Net charge-offs to average total loans held for investment(1)		0.05	%		0.05	%	(0.01)%				0.02	%		0.05	%
Net charge-offs to average total loans held for investment for last 12 months(1)		0.03	%		0.03	%		0.03	%		0.06	%		0.33	%
Total provision for credit losses to average total loans held for investment(1)		0.22	%		0.39	%	(0.04)%			(0.17)%				0.09	%
Total allowance for credit losses to total loans held for investment		1.30	%		1.03	%		1.05	%		1.00	%		1.01	%

(1) Interim period ratios are annualized.

TEXAS CAPITAL BANCSHARES, INC.
SUMMARY OF NON-PERFORMING ASSETS AND PAST DUE LOANS
(dollars in thousands)
	3rd Quarter			2nd Quarter			1st Quarter			4th Quarter			3rd Quarter
		2022			2022			2022			2021			2021
Non-accrual loans held for investment	$	35,864		$	50,526		$	59,327		$	72,502		$	87,532
Non-accrual loans held for sale(1)		1,340			—			—			—			—
Other real estate owned		—			—			—			—			—
Total non-performing assets	$	37,204		$	50,526		$	59,327		$	72,502		$	87,532
Non-accrual loans held for investment to total loans held for investment		0.18	%		0.21	%		0.27	%		0.32	%		0.37	%
Total non-performing assets to total assets		0.12	%		0.16	%		0.19	%		0.21	%		0.24	%
Allowance for credit losses on loans to non-accrual loans held for investment	6.5x			4.5x			3.6x			2.9x			2.5x
Loans held for investment past due 90 days and still accruing	$	30,664		$	3,206		$	6,031		$	3,467		$	3,405
Loans held for investment past due 90 days to total loans held for investment		0.15	%		0.01	%		0.03	%		0.02	%		0.01	%
Loans held for sale past due 90 days and still accruing(1)(2)	$	4,877		$	1,602		$	3,865		$	3,986		$	3,808

(1) Third quarter 2022 includes $1.3 million in non-accrual loans and $3.1 million in loans past due 90 days and still accruing associated to our insurance premium finance subsidiary that were transferred from loans held for investment to loans held for sale as of September 30, 2022.
(2) Includes loans guaranteed by U.S. government agencies that were repurchased out of Ginnie Mae securities. Loans are recorded as loans held for sale 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.

TEXAS CAPITAL BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(dollars in thousands)
	3rd Quarter		2nd Quarter		1st Quarter			4th Quarter			3rd Quarter
		2022		2022		2022			2021			2021
Interest income
Interest and fees on loans	$	282,473	$	218,290	$	187,657		$	204,379		$	202,748
Investment securities		15,002		14,665		17,302			11,780			10,235
Interest bearing deposits in other banks		24,596		9,394		3,571		$	3,733		$	3,606
Total interest income		322,071		242,349		208,530			219,892			216,589
Interest expense
Deposits		60,317		20,566		13,630			14,513			14,719
Short-term borrowings		10,011		4,859		758			771			748
Long-term debt		12,663		11,393		10,595			10,576			10,586
Total interest expense		82,991		36,818		24,983			25,860			26,053
Net interest income		239,080		205,531		183,547			194,032			190,536
Provision for credit losses		12,000		22,000		(2,000	)		(10,000	)		5,000
Net interest income after provision for credit losses		227,080		183,531		185,547			204,032			185,536
Non-interest income
Service charges on deposit accounts		5,701		6,003		6,022			4,702			4,622
Wealth management and trust fee income		3,631		4,051		3,912			3,793			3,382
Brokered loan fees		3,401		4,133		3,970			5,678			6,032
Servicing income		212		228		237			277			292
Investment banking and trading income		7,812		11,126		4,179			6,456			4,127
Net gain/(loss) on sale of loans held for sale		—		—		—			—			(1,185	)
Other		4,576		701		1,962			10,553			7,509
Total non-interest income		25,333		26,242		20,282			31,459			24,779
Non-interest expense
Salaries and benefits		129,336		103,885		100,098			89,075			87,503
Occupancy expense		9,433		8,874		8,885			8,769			8,324
Marketing		8,282		8,506		4,977			4,286			2,123
Legal and professional		16,775		11,288		10,302			12,673			11,055
Communications and technology		18,470		15,649		14,700			16,490			28,374
Federal Deposit Insurance Corporation insurance assessment		3,953		3,318		3,981			4,688			4,500
Servicing-related expenses		—		—		—			25			2,396
Other		10,798		12,783		10,149			10,643			8,712
Total non-interest expense		197,047		164,303		153,092			146,649			152,987
Income before income taxes		55,366		45,470		52,737			88,842			57,328
Income tax expense		13,948		11,311		13,087			23,712			13,938
Net income		41,418		34,159		39,650			65,130			43,390
Preferred stock dividends		4,313		4,312		4,313			4,313			4,312
Net income available to common shareholders	$	37,105	$	29,847	$	35,337		$	60,817		$	39,078

TEXAS CAPITAL BANCSHARES, INC.
TAXABLE EQUIVALENT NET INTEREST INCOME ANALYSIS (UNAUDITED)(1)
(dollars in thousands)
	3rd Quarter 2022							2nd Quarter 2022							1st Quarter 2022							4th Quarter 2021							3rd Quarter 2021
	Average Balance		Income/ Expense		Yield/ Rate			Average Balance		Income/ Expense		Yield/ Rate			Average Balance		Income/ Expense		Yield/ Rate			Average Balance		Income/ Expense		Yield/ Rate			Average Balance		Income/ Expense		Yield/ Rate
Assets
Investment securities(2)	$	3,509,044	$	15,002	1.58	%		$	3,543,576	$	15,065	1.60	%		$	3,669.257	$	17,743	1.91	%		$	3,608,503	$	12,225	1.34	%		$	3,775,812	$	10,684	1.12	%
Interest bearing cash and cash equivalents		4,453,806		24,596	2.19	%			4,747,377		9,394	0.79	%			8,552,300		3,571	0.17	%			9,760,735		3,733	0.15	%			9,046,095		3,606	0.16	%
Loans held for sale		1,029,983		11,316	4.36	%			8,123		62	3.07	%			7,633		113	6.01	%			8,348		51	2.41	%			18,791		54	1.14	%
Loans held for investment, mortgage finance		5,287,531		52,756	3.96	%			5,858,599		49,914	3.42	%			5,732,901		43,466	3.07	%			7,901,534		57,949	2.91	%			7,987,521		58,913	2.93	%
Loans held for investment(3)		16,843,922		218,512	5.15	%			16,616,234		168,407	4.07	%			15,686.319		144,134	3.73	%			15,348,322		146,436	3.79	%			15,266,167		143,864	3.74	%
Less: Allowance for credit losses on loans		229,005		—	—				211,385		—	—				212,612		—	—				223,034		—	—				220,984		—	—
Loans held for investment, net		21,902,448		271,268	4.91	%			22,263,448		218,321	3.93	%			21,206,608		187,600	3.59	%			23,026,822		204,385	3.52	%			23,032,704		202,777	3.49	%
Total earning assets		30,895,281		322,182	4.10	%			30,562,524		242,842	3.16	%			33,435,798		209,027	2.54	%			36,404,408		220,394	2.40	%			35,873,402		217,121	2.40	%
Cash and other assets		918,630							870,396							819,486							835,293							855,555
Total assets	$	31,813,911						$	31,432,920						$	34,255,284						$	37,239,701						$	36,728,957
Liabilities and Stockholders’ Equity
Transaction deposits	$	1,444,964	$	5,239	1.44	%		$	1,671,729	$	3,920	0.94	%		$	2,432,687	$	3,962	0.66	%		$	3,007,337	$	4,664	0.62	%		$	3,012,547	$	4,737	0.62	%
Savings deposits		10,249,387		46,555	1.80	%			8,696,819		15,462	0.71	%			10,420,545		8,583	0.33	%			10,529,645		8,419	0.32	%			10,044,995		8,262	0.33	%
Time deposits		1,701,238		8,523	1.99	%			877,399		1,184	0.54	%			1,038,722		1,085	0.42	%			1,276,800		1,430	0.44	%			1,640,562		1,720	0.42	%
Total interest bearing deposits		13,395,589		60,317	1.79	%			11,245,947		20,566	0.73	%			13,891,954		13,630	0.40	%			14,813,782		14,513	0.39	%			14,698,104		14,719	0.40	%
Short-term borrowings		1,931,537		10,011	2.06	%			2,232,119		4,859	0.87	%			1,770,781		758	0.17	%			2,267,013		771	0.13	%			2,299,692		748	0.13	%
Long-term debt		921,707		12,663	5.45	%			929,616		11,393	4.92	%			929,005		10,595	4.63	%			928,307		10,576	4.52	%			927,626		10,586	4.53	%
Total interest bearing liabilities		16,248,833		82,991	2.03	%			14,407,682		36,818	1.02	%			16,591,740		24,983	0.61	%			18,009,102		25,860	0.57	%			17,925,422		26,053	0.58	%
Non-interest bearing deposits		12,214,531							13,747,876							14,235,749							15,804,061							15,363,568
Other liabilities		305,554							227,701							243,141							238,833							275,317
Stockholders’ equity		3,044,993							3,049,661							3,184,654							3,187,705							3,164,650
Total liabilities and stockholders’ equity	$	31,813,911						$	31,432,920						$	34,255,284						$	37,239,701						$	36,728,957
Net interest income			$	239,191						$	206,024						$	184,044						$	194,534						$	191,068
Net interest margin					3.05	%						2.68	%						2.23	%						2.12	%						2.11	%

(1) Taxable equivalent rates used where applicable.
(2) Yields on investment securities are calculated using available-for-sale securities at amortized cost.
(3) Average balances include non-accrual loans.